Originally Posted by
SBQ
I completely agree! The rational person is always going to pick houses over any other asset class for investment:
1) Tax free capital gain (when held 10+ years)
2) Limited housing supply due to restrictions such as the RMA, treaty issues, lack of gov't funded developments and infrastructure.
3) A banking system that allows lenders to prioritise lending to those who have more assets (hence less risk of default).
The fools are:
1) Those in Kiwi Saver where their funds attract RWT on paper gains and dividends EVERY year which greatly reduced the compound returns of the investment (no bigger critic against this than Vanguard founder Jack Bogel).
2) Fixed term deposits such as bonds and bank interest rates attracts RWT
3) Starting a new business is very risky that banks rarely lend under favourable terms. Their core market is always mortgages for houses.
Now if you think any of the above is a market for "Laissez-faire" capitalism, you're wrong. Real capitalism does not allow distortions in investment where the rational person will be pushed into owning multiple houses. The only reason why Kiwi Saver exists is simply, the working class can't save enough or borrow to buy another house.
The real question is what will the NZ gov't do to make houses more affordable? Not many levels left for them to try...