The Aussies are concerned yet they already have some restrictions on what residential property foreign investors can buy. NZ is asleep at the wheel.
Printable View
OCR down and banks follow with mortgage rates ...and no doubt start fighting for every loan
That'll keep things bubbling along for even longer
The amount of rubbish that a property would produce depends on how many people live at the address, the amount of recycing they do etc. So a one-bedroom place occupied by a greenie would not produce much trash. I agree rubbish collection should be on a user pays basis.
Charging rates evenly across all residential properties - if I understand you correctly that would mean charging a one-bedroom apartment or house the same as a multi-bedroom Remuera mansion? I am not sure that would be fair or user-pays. It would end up being a regressive tax with poor pensioners subsidising wealthy large families!
Auckland owner-occupied housing have provided their owners handsome tax-free capital returns over the years, with the benefit of ownership, namely accommodation, not having any imputed income tax levied. Why shouldn't those of us who have more valuable properties in highly sought after areas which have seen greater capital appreciation pay more in the way of rates. There is always HER. Renters have to find their rent out of tax-paid income. Rates are a small price to pay and already have uniform charge components regardless of the value of the property.
Some alternatives for local government funding:
1. A local sales tax - would hit the poor as they do not have much discretionary spending / cannot save.
2. Wealth tax (on each resident's wealth, both financial and real estate). those who complain about high rates, would be unlikely to like this option!
3. Poll tax - a uniform tax on each resident (either over the age of 5 or 18). Would hit the poor. Anyone remember the riots in Britain when they tried to introduce this type of tax?
4. A local income tax. The income-poor pensioner in an expensive house would like this one. However just imagine the objections to another income tax from high income earners. There would be another argument over whether it should be flat or progressive.
Finance Minister Bill English this morning raised the spectre of Auckland house prices possibly dropping.
Surely some mistake! lol
Fell by $20,000 in July
https://www.reinz.co.nz/shadomx/apps...siteName=reinz
Well,its looking like NZ property is now going to cost the Chinese more(since devaluation)--the knock on affect could effect house prices in other ways.(China housing bubble)
Rental prices are down in Auckland(I have found)---Im seeing the property market looking a bit vulnerable atm--If China has a crash in property-and Oz--you can bet you will see one here as well(housing shortage or not)--at best Im picking the market taking a breather(and Im a property owner)
I cant really think of an ideal place to park money atm
Skid,
I don't mean to alarm
But unfortunately the property market has crashed in China (earlier this year).
This happened about the time the construction industry in China ran out of new high rises to build (hence the massive slump in iron ore price that has hit AUS so hard)
At the time the Chinese government told investors to start investing in the stock market. Which has since crashed (mid July and has wiped out half the wealth of most Chinese millionares).
Tho some companies listed on the Chinese stock exchange were close to 400 times their worth and had not turned a profit in years.. it was pretty obvious a crash was going to happen..perhaps obvious to everyone but the Chinese
Now China is trying to kick start their exports again (which dropped 8% in the last year) by dropping the value of their currency. This took everyone by surprise... basically china has said it was moving away from exports to a domestic driven economy (This may mean a number of Chinese start selling foreign properties to pay back debt or for the return)
On top of all this..Now oil, gold, and milk prices are all crashing globally ..So yeah the world is in real bad shape.. all the traditional methods of wealth generation are failing and Europe is still panicking about the possibility of the Euro zone breaking up..
I think New Zealand will be ok tho. We are geared for exports and with the falling NZ dollar our economy will keep ticking over at about 3% growth so a property crash is unlikely.. but a cooling definitely if driven by foreign demand
(Young Aucklander desperate to get his first home)
I think Chinese prices have fallen but not crashed. For one thing you need to have a 30% deposit to buy a property in China. Maybe we should have that here too - or higher - for investors. Interesting article from the FT "What next? A China housing crash?" http://www.ft.com/intl/cms/s/0/8d3c2...#axzz3iYIQDN00
I think there will be continued demand for NZ property by Chinese investors. Chinese capital controls are loosening, so any cooling in their economy and reduced purchasing power of their currency may be off-set by that. NZ also has a weak currency at the moment because of commodity price uncertainty. Plus, NZ will still be regarded as a safe haven for Chinese investors. I think NZ should still introduce Australian-style measures restricting foreign buyers to new properties.
30% deposit is only ever going to cut out more first time buyers.. good luck saving $135,000 for a modest $450,000 property (Average price in Auckland is 550,000 btw)
Plus your only targeting 1/3 of the market by doing this. Remember property investors can use capitol from their portfolio as security and foreigners will have access to cheaper credit
(I've given up on Auckland.. Making plans to move to Wellington early next year)
I'm calling it. I think Auckland house prices have ht their peak and we will not see these prices for at least another 5 years. I think the Dec 15 average price will be less that today's.
Reasons:
-Foreign investors needing IRD numbers
-LVR rules
-Change of sentiment. Even my most bullish banking friend reckons house prices will just level out now
I may not have made it clear, I wondered whether NZ should apply a 30% deposit rule for investors.
Basically, I think if you want to buy a holiday home or a property as an investment to rent out, you should have to provide a bigger deposit than someone buying their primary or only residence. In addition, I think there should be comprehensive restrictions on non-residents buying residential property.
We should see next stage of property cycle in the property market especially in overvalued Auckland housing market.
A massive delay in increasing the housing supply is now leading to higher prices in the Auckland apartment space. - (Remember It took 15 months after the announcement to build a single house in the Auckland special housing areas )
Hence first home buyers are now fighting each other over anything in the 250K - 400K
With the OCR drop this situation is only going to get worse
My prediction for the next year is that we will see a massive jump in the average house price in Auckland due to the following
1. Home owners will continue to purchase more houses for their retirements plans (Cheaper loans leads to refinancing and more funds issued by banks for purchasing additional property)
2. First Home Buyers will see they can now get bigger loans for their low deposits which in turn leads to bidding wars that push the price higher.
3. More delays in Special housing areas as building companies start going under and the prices increase above and beyond affordable ( Building companies are struggling to keep the prices down and debt levels of these companies is becoming a concern )
4. Delays in building in and out of the special housing areas will make it more profitable for building companies (Slowing down production leads to bigger profits.. Do you honestly think they care about the shortage? If you do then you must also think National are trying everything they can to fix this issue )
You could be right actually
This was posted on the National Business review today
http://www.nbr.co.nz/article/propert...rket-nr-180007
So If this whole situation is being caused by an influx of money from China then it will be pretty obviously in a few months
Interestingly I went to a few Auctions this week... there was a lot of desperate people if body language is anything to go by.
We watched in disappointment at one house listed in the 400 K search range that had a reserve of 600 K... unsurprisingly no bids!
To make matters worse when the place didn't sell and the Auctioneer was pretty condescending about it... I feel sorry for those who's dreams had been crushed
Looks like this starting to become an issue across other Auctions too
http://www.nzherald.co.nz/property/n...ectid=11528636
Some years ago I missed out on a property despite placing the highest bid in a range that the real estate agent had assured me would be acceptable to the vendor and which was about 15% above the professional market valuation I had been naive to get prior to the auction. That house was sold over a year later so the vendors had basically been just "testing the water". One of the reasons why Auctions can be bad for both vendor and prospective purchaser. It is unethical for an agent, who should have an idea as to what price range the vendor wants for a property, to market the property in a price range that is too low for the vendors. It is a waste of time for prospective serious bidders who will need to undertake due diligence prior to bidding. Auctions should be reserved for the unusual or very expensive properties imo.
An Australian development that may have relevance for NZ.
http://www.theage.com.au/business/in...14-gk8n3d.html
Might be some cheap units in this development
http://www.nzherald.co.nz/business/n...ectid=11529885
Also, never heard of pouring concrete straight onto the ground like that!
The developers must be in such a hurry to take your money that they are cutting as many corners as possible!
I guess for $520,000 - $700,000 + dollars you shouldn't be expecting much!
It is a sign of the times in Auckland when that price range is considered cheap for a new home. With the current inflated land prices, I guess some developers try to cut corners in the quality of building. Let's hope Auckland City use some of their large levies and fees to bolster their compliance checks.
I believe we are closer to next cycle in Auckland housing market.
We're not the only country that's not building enough houses.
http://www.theguardian.com/business/...dical-solution
I believe Auckland and Sydney housing market will follow both AUD and NZD. We could expect massive fall in properly prices in overvalued markets such as Auckland and Sydney etc. Sooner than later, we should see end of property boom surprise to many. Chinese factor will push down property market further.
Just read this
http://www.nzherald.co.nz/business/n...ectid=11571162
I don't mean to rant much but the following made me a little upset being locked out of the market
- The optimist says he isn't worried by talk of a slump in property prices, saying that would only enable him to buy more places.
- he says he'll be putting his rents up soon.
- started buying property in June 2010 with a $200,000 wedding gift from his father.
- He and his wife Cindy bought one place for as little as $173,000.
- And he reckons that property investment is within everyone's reach.
Honestly good on him for making good investment decisions!
But I don't agree with property below $300,000 being snapped up by investors
We are in a housing crisis in Auckland.. Shouldn't we put restrictions on this as well??
He started with a $200,000 handout from his folks in 2010 and now has 11 properties. Gross rental $275k Asset Value $6.5mill (4.2% gross yield). I can't imagine his rental income would be providing him with enough cashflow to be purchasing this many properties. Obviously the 10-20% annual gain in prices over this time would have seen his equity grow but he must be pretty heavily leveraged. He could be taking a big risk with leverage so it is hard to begrudge him his success. No worries as long as interest rates stay low. He is only investing as per world central banks policy. Inflation will save him and he would have been much worse off leaving $200,000 in the bank.
It's difficult to see how he could be making a profit if initial input was only $200,000. But even if his borrowings now are only around $3,500,000 he won't be showing a surplus. Not enough detail to know the full picture but certainly not as rosy as painted in the article I read.
I get the feeling he purchased a few flat units.
Sure they will give a good rental income but poor capital gain.
Portfolio valuation of 6.5 million means average of $590,000. Assuming his purchase price was half that (started in 2010 so unlikely many will have doubled in value) he will have mortgage of 3.25 million which will not be showing a profit on 275,000 income. Looks like his rental income has been capitalised at 4% to produce 6.5 million over 275,000 income. There's something wrong with this story OR he has another substantial income source, OR he's heading for trouble. It's easy to buy loads of residential property, but keeping the whole thing running is far from easy without substantial cash input in initial years. There's plenty of burnt fingers from those who have grown too fast.
Regarding the comment about property investment being within everyones grasp...
Because of my job, I am privileged to have access to a lot of NZ property data. Last month I pulled a report that told me that over a 3rd of people who own at least part of a house, own a share in more than one house. The number drops by 5-10% for each house you add to peoples portfolios. for example, 30% of people with an investment in a house will have an investment in more than 2 houses; 25% will have an investment in more than 3 houses... Etc.
Personally, I would argue that property investment is within everyone's grasp. I earn about what the average couple earn, and (despite paying more tax than the average couple) I am able to do property investment. It's a case of deciding to save money for a few years instead of spending it on fun things like nice cars and holidays, in order to save a deposit. You then wait a few years (saving or not) and leverage the debt to buy another. Done! It's not hard by the time you factor in Kiwi saver. compare this to when I lived in Englandistan, at age 26 I couldn't even afford to buy a house in a pretty bad area.
What I do think is hard (but not something people are concerned about), is building a reliable, decent retirement without investing in property in NZ.
That's why the NZ govt has to be very careful around curbing house prices with it's policies - they could do a lot of damage here.
The story is well documented and discussed over here http://www.propertytalk.com/forum/sh...urney-Gary-Lin for those that are interested.
Thanks jmsnz it doesn't sound so glamorous when you look at his strategy. Good on him for his success, the only thing first home buyers could get upset at is that his Dad gave him the head start most others won't get. He is pouring his own money back into it. He is not really keeping first home buyers out of the market as I guess they would be looking at a minimum of three bedrooms. Amazing how little balanced information newspapers provide. I should cancel my herald subscription as I only really read it for entertainment and to make me worry about a lot of things that probably aren't all that bad once you know the full picture.
For those who think R.E. always goes up.
https://www.youtube.com/watch?v=kUldGc06S3U
https://www.youtube.com/watch?v=hqOn5XEm86A
So in the last few days things have gotten a little interesting
http://www.realestate.co.nz/resident...000/regions/35
If you look you will see a number of Auctions but most list a price or are listed as Negotiation
Not sure if I am reading too much into this but...
But this wasn't the case a few months ago... market turning? becoming a buyers market?
https://www.bloomberg.com/news/artic...nsurance-curbs
Before the Chinese regulator stepped in this week with measures against the insurance industry aimed at curbing the country’s $1 trillion worth of capital outflows in 2015, hundreds of thousands of mainland Chinese had been flocking to Hong Kong to buy policies using their China-issued UnionPay credit or debit cards.
Using the cards enabled them to get around China’s controls that officially limit citizens from converting no more than $50,000 per year and sending it abroad. By swiping the cards at insurers such as AIA Group Ltd., Prudential Plc, and Manulife Financial Corp. in Hong Kong, mainland residents bought policies denominated in Hong Kong dollars and U.S. dollars -- averaging $50,000 but reaching as much as $1 million or more -- with the equivalent amount of yuan deducted from their bank accounts back home.
The money could then be cashed out and sent anywhere in the world as a clean source of funds from an insurance policy. Such policies, in addition to providing better health care, beneficiary payments and returns than those on the mainland, are also popular because they’re shielded from seizure in the event of bankruptcy in China or criminal proceedings, which have been intensifying under President Xi Jinping’s anti-corruption campaign. Thus, Hong Kong’s insurance policies have been turned into actual insurance for billions in Chinese cash.
Finally, it is time to avoid property in places such as Singapore, Hong Kong, Major cities in China, major cities in Australia which include Sydney and Auckland etc. I expect one of the biggest drops in property prices especially in Auckland and Sydney. Both Auckland and Sydney house prices are overvalued by more than 40%. They are more vulnerable now. No asset will go straight up continuously for number of years. Any further rise is property prices could lead to another crisis. Still some market players have not learnt lessons. They think this time is different. Some Japanese investors also thought like that in the past.
There are people they can get jobs in Auckland but they cannot afford to rent. Higher rent is slowing down the economic growth as well. Properly investments along with gold are two of the most unproductive investments in the world. These types of investment have bought different types of crisis such as credit crisis and banking crisis in the past. We are going to repeat that by thinking this time is different. Just like stocks and commodities there will be time everybody will try to dump properties in the market. History will repeat in a different manner. It is time to become big bear on Auckland housing market. Easy money will not last for ever.
http://www.stuff.co.nz/business/7594...ice-comparison
Kiwi house prices are the highest in the world compared to incomes, Fitch says
NZ tops world in Fitch house price comparison
My ideas are not a recommendation to either buy or sell any property, security, commodity or currency. Please do your own research prior to making any investment decisions.
The obvious question is then "how do I short the Auckland property market"? Does anyone or any institutions have any instruments like they do in the states with Securitised mortgages where that is possible here? Would love to be able to make a bet against Auckland housing but what would be the mechanics? (Aside from borrowing a mates house and selling it, promising that you will give him/her their house back at some time in the future :P)
Market indicators are always so compelling but apparently someone forgot the common sense....why would houses prices go down when constant flow of new immigrants into Auckland and lack of housing offset "indicators"? As long as there are more buyers than sellers it isn't going to happen. Overseas investors may slow down but still far too many buyers in the market. I cannot see that changing and that is the major cause of high and rising prices. People buy overvalued things all the time...think about all the luxury brands out there...doesn't stop them buying either because they want them or need them. Also it doesn't make sense to compare Auckland to those other places. Building consents are much more onerous and time consuming in NZ than most other places.
So far Easy credit has supported many assets globally.
China’s stock market collapse is also causing wealth destruction. Hopefully we will not have another global crisis as a result of easy credit. It is better to have some sort of credit control in some countries to cool off their properly market.
As long as we see easy credit, government bailouts and demand from Chinese investors etc, there will be some support for Auckland housing market. However, those are temporarily solutions taken by global policy markets to prevent another great depression. China has a massive credit bubble. It is actually unsustainable and will eventually burst.
We are seeing end of commodity bubble and they are plummeting now. It will follow over valued property market next. The most dangerous bubbles are housing bubbles fuelled by credit booms. The least troublesome are equity bubbles that do not rely on debt. We are closer to another housing burst in overpriced hot property markets which include Auckland and Sydney. It is time to stay away from over valued assets and it is time to identify undervalued assets globally. This is time is not different. It will come in a different manner. New Zealand had some of the worst collapses such as housing market and stock market crash in 1987.
http://www.nzherald.co.nz/business/n...ectid=11573823
Auckland housing and the Wall Street blockbuster
http://m.nzherald.co.nz/business/new...ectid=11578353
Fran O'Sullivan: Crackdown threat to property boom
http://www.scoop.co.nz/stories/BU1601/S00105/auckland-59-less-affordable-than-rest-of-new
Auckland 59% less affordable than rest of New Zealand
http://www.stuff.co.nz/business/6837...shades-of-1987
The Auckland housing bubble and shades of 1987
My ideas are not a recommendation to either buy or sell any property, security, commodity or currency. Please do your own research prior to making any investment decisions.
Average property price fell for the 2nd quarter in a row in Auckland. I'm not reading too much into it as there are lots of dips in the graph, but my gut tells me that it's levelling off a bit. Can't say where I got the data from, but it's 100% reliable.
Spoke to a real estate friend in Nelson over the weekend. He said the local market has gone gangbusters for last couple of months and big shortage of properties for sale. Said many buyers are investors from Auckland, both looking for rental properties and retirement properties.
SO the Auckland effect is now stretching to the South Island as well as BOP, Waikato and Northland !!
Southern lakes also really hit it's straps this year .....been a few properties down our street that have been on the market for 2-4yrs both just sold within weeks breaking new highs for the area ...pure madness for the lower 400k-1mill price range here for couple years now
looks very Bubble like ...so much leverage ..interest only loans ...negative geared investments ...the world is awash with Debt ...Growth outside Property near stagnate to crashing won't be long IMHO
Glad to be wiping 500k in debt next few weeks...and finally be living in a debt free house
JbMurch, you don't need to answer, but if you are wiping $500k in debt, where does money come from. Selling shares , bonds, rental property ?
The biggest contributors to New Zealand's gross external debt are the registered banks which now account for $117.9 billion, or 48 per cent, of the country's gross overseas borrowings.
The banks steadily increased their overseas borrowings from $55.2 billion in 2001 to a high of $139.4 billion in 2008. A high percentage of this foreign-sourced debt was on-lent to house purchasers. The banks had to borrow overseas because there were insufficient domestic deposits to meet the borrowing demands of house buyers.
...
Wonder how high it is now esp with NZD falling hard against the USD (aka the leader of last resort!)
An Interesting article this morning
http://www.nzherald.co.nz/business/n...ectid=11615870
I tend to agree.. It is a little hard to believe that anyone in Parliament cares about sky rocketing prices in Auckland
Surely they are making a killing like the rest of those lucky enough to have property in Auckland
Personally hoping my shares pay-off just to get the deposit together to secure a property
smpl, why the ASX? blue chip? or spec mining stock?
Yes never the best at me english ....have got better over the years ..just never applied myself at school ...think I only got school cert in metal tech ....started work after 6 form ....
.... still haven't done too bad for unqualified investor ...been busy interior painting our debt free central otago lakeside property .... paid for by investment returns
How do young new zealanders get into this market. I have a daughter who rents in mount eden but as you could imagine cannot afford to buy anything there. 2 bedroom units around $700000. So the strategy is to buy something for up to 500000, rent it, pay it off and then use this as a deposit to gain access to a property where she wants to live. So, looking for something that is hands off, as a vehicle that will keep up with capital gain in Auckland. Units in better areas is this where the focus should be?
thanks winner69, hope not to go that way, would a unit always be better than an apartment to start with. I feel a unit you have more control over, no body corp etc but lower yield
I agree with you.
yes there is demand. Demand from migration, and demand from low interest rates and easy credit. But 1 in 3 houses is going for 1mil - That's $50k per annum interest, and if they go up 10%, next year its $55k per annum interest and $60k the year after. That is what, 1.5x the average after tax take home pay?
You can only play pass the parcel for so long among investors before it gets out of reach, and all you need is a couple short interest rate rises and its all over - And lets face it, migrants and first home buyers won't save it, because they can't afford to play - This is now into the range of pure speculators
Herald editorial about housing costs in Auckland. Where and when will it all end?
http://www.nzherald.co.nz/business/n...ectid=11627212
Brit settlers used to come here to increase their chances of owning real estate.
I see Graheme Wheeler is pleased with his LVR restrictions
"The existing loan-to-valuation ratio (LVR) restrictions “have substantially reduced the proportion of risky housing loans on bank balance sheets,” the central bank says."
He and his cronies must be sitting back and poping the champagne on what to them seems like a successful stratergy.. But what he has effectively done is make it that much harder for those who depend on the 10% loan deposit to make it into their first home..
Easy if your parents have a bit of cash saved up or locked away in a property... but if you happen to not be so privliaged then the goal is more unobtainable than ever.. with the introduction of the LVRs there was an addition of a hard limit of how many Home loans banks can issued to the public at 10% deposit.. so if your lucky enough to find that property and have the deposit for only 10%... you now have have a bit of a fight on your hands to secure the loan to make that happen... Lets knock out the bottom level of the property market! What a great idea!!!
It is the opinion of this citizen that we need to put a stop to massive investment in housing if your so worried about this sector! Not to allow people to continue to buy more and more investment properties and with less competition now you have effectively elminated first home buyers!
Source : http://www.nbr.co.nz/article/reserve...ased-jr-188812
Isn't it curious that the govt won't take a first step by following Australia in restricting non-resident property investors to new developments? It hasn't been a "silver bullet" for Oz but it should give supply a boost and stop overseas investors from helping to inflate existing house prices. Naturally, real estate agents, mortgage loan brokers, property investors' organisations and property management companies will tell us that it wouldn't work, but the problem needs a multi-faceted approach if first home buyers are to have a chance of ever owning their own homes.
The problem in NZ is the supply of land. Can you imagine the howls of protest if finding somewhere to build became a competition with foreign buyers? Anyone can get a house built, we're not short of materials - but it's where to put it. There's consequences to this sort of policy that the Brits discovered years ago and Australia is about to. That is developments and sub-divisions quickly become undesirable areas without resident owners in the mix. Having whole subdivisions snapped up by foreign investors would lead to tenant dominated areas - not a good thing. I can't think of one good thing restricting foreign buyers to build new would achieve. After all, wouldn't NZ'ers leap into new building if land was available?
Exactly had this be enacted years ago along with a strong Capital Gains tax structure 28% (IMHO even covering the family home if sold within 3yrs etc)... then instead of young and first home buyers being pushed out of the market by speculators ..those funds from esp overseas investors would have flooded into new developments
It is too late - as it is, (relatively) cheap housing in South Auckland is increasingly being bought by investors, increasingly buying houses that would have been starter homes for first home buyers. There are already many areas increasingly dominated by tenanted houses. Unaffordable deposits for a first home in a (comparatively) cheap area are converting the younger residents into long-term tenants. For a start, the purchase of NZ residential land and housing should be restricted to NZ residents.
well yes completely banning non residents from owning residential property ,, would be to the next level ...but I'm thinking there could be issues round the free trade deals etc...
I personally wouldn't have as much an issue if these overseas investors buy off the plan for a new unit / apartment,house available 6months-2yrs into the future(which most the time they will rent out) etc ....(that if sold for a profit would be taxed 28% etc ) I do also agree now on no land banking for overseas investors etc
why... well it's investment in growing our housing stock ....
If both NZ citizens and other citizens were subject to NZ residency requirements would there would be an FTA issue? After all citizens of FTA partner countries and NZ citizens would be subject to the same requirements. Do any of NZ's FTA partner countries have residential requirements on residential property ownership?
Answering my question: The Singapore Residential Property Act contains this restriction: For restricted property such as vacant land, landed properties such as bungalows, semi-detached and terrace houses, prior approval is still needed if foreigners wish to buy. Landed properties is a special class of residential property that Singaporeans aspire to own, and should remain restricted. Foreigners need to apply for approval from Singapore Land Authority before buying. Singapore also has stamp duties, with foreigners paying the highest rate of 15%, followed by those who own multiple properties, with those buying their only property paying no stamp duty.
http://www.singaporeexpats.com/guides-for-expats/procedure-for-purchase.htm
Singapore is one of NZ's closest partners and a Commonwealth country with whom we have an FTA. Like NZ, it has a small population (5.4m) compared with NZ's 4.4m. Like NZ, its people, looking to buy a home, can easily be outbid by foreigners deciding it is a good residential real estate market to invest in. The Singapore Residential Property Act also distinguishes between permanent residents and citizens, with citizens paying lower stamp duty rates than permanent residents who are not citizens. Presumably they wanted to give some small advantage in buying a home to those who are committed to the country as citizens.
Loan to income ratios for bank lending? If getting a big deposit wasn't enough now you have to have a well paid job. I guess in a way you are saving the younger generation from worrying about home ownership (unless their parents can give them a leg up). I guess Australians with an average income 25% higher than NZ can invest in NZ if their own markets get too overheated. Any country with a GDP higher than NZs I suppose. Good one baby boomers and your national party, make NZ a nice place for wealthy foreigners and f**k the next generation of Kiwis unless Mum and Dad are already well off. Mind you it seems NZ is not alone in this hope there will never be another recession ever and inflation will take care of all our problems. All MPs on both sides of the house with their high home ownership rates must be rubbing their hands while the next generation gets screwed over. Mind you maybe it is time for the next generations to wake up and think about their future and make your voice heard at the polling booth at the next election.
Central bank easy money and low interest rates are designed to rob savers through inflation. They have rampant inflation in house prices but can't raise interest rates until the rest of the world does or else run the risk of destroying our export competitiveness. What's the solution... I don't know but trying to save speculators and rob savers with easy money and low interest rates doesn't seem right to me. The fact that negative interest rates are a reality is mind blowing. I guess as long as no one has savings it is a vote winner and I am an idiot for not joining in.
There was an interesting graph in the RBNZ financial stability report the other day showing the debt-to-income ratios (and proportion of interest only loans, which is scary enough on its own) for investors and owner-occupiers. Clearly investors will be harder hit by any new regulation, and if it has a genuine effect on house prices then it'll be fantastic for first home buyers. Investors who still are able to borrow should be somewhat more reluctant to invest once prices stabilize or start to fall. I agree it'd be good to see more regulation of foreign buyers, but I'm hopeful debt-to-income ratios will help.
Attachment 8038
Thanks for that mfd.
Took awhile to work out the other half of the graph but if I read it right just over 50% of borrowers have debt over 5 times their income. The home-owner occupiers on interest only loans are probably mostly bulls**t artists not wanting to pay tax when they sell. But to be fair with tax free capital gains over 10% annually I guess I am just upset I haven't joined in. I wouldn't be so upset if I was mortgaged to the hilt and held real assets rather than sitting in cash hoping the world central banks don't totally wipe me out before they allow some price deflation.
Yep...the rental property investor with negative gearing (with their losses being deducted from their other income) has been effectively subsidised. The government also pays accommodation supplements so that the tenant can afford the rent on investment properties! In addition the geared up property investor has been enjoying non-taxable capital appreciation. In the meantime the fixed interest investor is even taxed on the effect of inflation on their money! The Financial Service Council have interesting research - especially their Taxation and Savings Paper. http://fsc.org.nz/
Some fixed interest investors cannot afford to buy housing so they are denied the opportunity to enjoy the "tax efficiency" of rental property investment.
In addition, owner occupiers are effectively subsidised by renters as rent has to be paid out of taxed income whereas the imputed rental benefit derived from owner occupation is not taxed. As more renters (compared with owner occupiers) tend to be younger and/or poorer, from both an income and wealth point of view, that is another inter-generational and regressive effect of the current tax system. It all adds to real estate being a preferred asset class in NZ.
Tax is always based on cumulative income. Real estate is no different in any way from other businesses or investments. And do not assume it provides automatic gains in value.
This roller coaster graph has been around for a while but it's a good reminder that it's not all beer and skittles.
https://www.youtube.com/watch?v=kUldGc06S3U
Look for the years as you ride.
Your marginal rate of income tax is certainly dependent on your total income. Like investments in real estate, investment in bonds and other financial arrangements are indeed taxed on their "income" but, for the fixed interest financial arrangement investment, income includes capital gain as well as interest! There are many tax consequence differences between investing in shares, fixed interest and real estate. The tax take as a percent of gains (capital and income) differs markedly between these asset classes.
Of course, both shares and property have had their down times and periods of angst for investors. So indeed has fixed interest - the Credit crunch and NZ finance company woes are well known. Is today's money in the big Aussie bank as safe as it used to be, when so much is lent out on mortgage to people buying in the current highly priced housing market?Quote:
And do not assume it provides automatic gains in value.
This roller coaster graph has been around for a while but it's a good reminder that it's not all beer and skittles.
https://www.youtube.com/watch?v=kUldGc06S3U
Look for the years as you ride.
Could Brexit spell doom for the Auckland property market? With Trillions of dollars wiped off the world markets will overseas banks start pulling in loans with other banks causing our local banks to start asking for money back?
Or will this lead to further cuts and the next stop for the Auckland property market as 2 million, and the affordable price in Nick Smiths head being 1 million for first home buyers?
I'm sure the Government will say young New Zealanders need to stop asking for handouts.. but in reality I don't want a handout I just want it to be a fair chance to own a home.. I have 40 K ready to go but good luck finding a place in that range..
It is still an unknown at the moment. If Brexit causes international investors to pull in their horns, then maybe the international investors (the ones the government claims have little effect) will reduce their involvement in the market. UK-based Kiwis will have fewer NZ dollars to invest in NZ. So there could possibly be demand-side cooling as well.
[QUOTEI'm sure the Government will say young New Zealanders need to stop asking for handouts.. but in reality I don't want a handout I just want it to be a fair chance to own a home.. I have 40 K ready to go but good luck finding a place in that range.. ][/QUOTE]
Surely it's not beyond the wit of a team of bright, young civil servants - all double-degrees these days - to devise a scheme to utilise some of this surplus state land to build modest, 3 bedroom homes, one livingroom, one bathroom, no en-suite or home theatre; cluster/cross-lease/ duplex or whatever utilises the land most efficiently. Sale restricted to first home occupants, sales embargoed for say 3 years, unless back to the state at original purchase price. Ask Rymans how it's done, if necessary!
UK Based Kiwis are such a small percentage % that it wont affect NZ economy - even our exports are not that big however with GB leaving the EU we have more opportunity to negotiate and a chance to beefing up our exports (trade deals) to the UK as does the UK free from the constraints of the EU and their control on UK govt spendng, fishing and border control so as nigel Ferage says , the UK will be much better off leaving the EU and taking control back as an Independant sovereign country to have there own government and people within the UK make decisions that best affect the growth of the nation , much like NZ Australia etc ...
EU is a shambles and has not worked for most of those countries in the EU - just have to look at Greece / Portugal 300% debt to GDP (laughable) Spain also high debt to GDP ratios showing that the European Union spanningn 3 decades has not functioned as intended - the EU have done nothing but take money from these countries and to be fair i think its more a dictatorship than democracy - so effectively the UK have fought for freedom and democracy - here here !! i say jolly good show ol' chap lol Finally someone took on the "establishment " which was sucking them dry anyway - there is another discussion to be had around this and that is "Quantitative easing " money printing fiasco - thats what will inevitably happen for those countries in strife like Spain and Portugal - So its fair to say the Euro will continue to devalue as they turn on the money printing machines to try and stimulate the economy as times get tough
P.S there has been far too much scaremongering in the media around the world and the reality is that trade agreements wont disappear anyway as it would hurt the EU as much as GB even though GB can explore other wider and bigger markets :)
P.P.S Brexit cant and wont spell doom for NZ property market! the thing that is driving out property market are low interest rates and demand for NZ property -
ive always said for years that we are quite different than other countries in terms of property investment and its always been a safe bet for last 80 years to put money into property in this country - sure raising deposit requirements will slow it down for NZers but not for cashed up Asians, Indians, and europeans who have alot more riches than us !!
At worst we could enter a recession and a housing cooling or correction of say 10% which wouldnt hurt in the bigger scheme of things - right throughout property investment history in NZ we have seen cooling off periods and flattening of property prices but as always it will slowly move up over time - even a period where property stagnates for 10 years is ok with me
but for any of this to happen there would have to be rising interest rates and pressure on existing home owners with mortgages and job insecurity for that to happen IMO
][/QUOTE]
Surely it's not beyond the wit of a team of bright, young civil servants - all double-degrees these days - to devise a scheme to utilise some of this surplus state land to build modest, 3 bedroom homes, one livingroom, one bathroom, no en-suite or home theatre; cluster/cross-lease/ duplex or whatever utilises the land most efficiently. Sale restricted to first home occupants, sales embargoed for say 3 years, unless back to the state at original purchase price. Ask Rymans how it's done, if necessary![/QUOTE]
Who, in the Labour party do I complain to for pinching my cunning plan to provide more housing for first time Auckland home buyers?
http://www.nzherald.co.nz/business/n...ectid=11671740
Surely it's not beyond the wit of a team of bright, young civil servants - all double-degrees these days - to devise a scheme to utilise some of this surplus state land to build modest, 3 bedroom homes, one livingroom, one bathroom, no en-suite or home theatre; cluster/cross-lease/ duplex or whatever utilises the land most efficiently. Sale restricted to first home occupants, sales embargoed for say 3 years, unless back to the state at original purchase price. Ask Rymans how it's done, if necessary![/QUOTE]
Who, in the Labour party do I complain to for pinching my cunning plan to provide more housing for first time Auckland home buyers?
http://www.nzherald.co.nz/business/n...ectid=11671740[/QUOTE]
Perhaps they should make it that First Home Buyers mean people who have lived in NZ for 3 years at least
At the moment you have people coming into NZ and getting residency because they have X amount in their bank account
Buying a house cheap and selling it for a massive profit because they are concided "First Home Buyer" by National
Also they need to build apartments 50m2 or over otherwise you can't get the loan without 50% deposit
Here's an nteresting dissertation on the Australian housing market. Worth reading.
https://dpsi7pmz5b6vt.cloudfront.net...-_May_2016.pdf
NZ property market is still in full swing as its a simple case of Supply verses demand and until this changes it will remain strong unless the government rstrict the immigrant numbers or make it so hard to buy a house ( cant see the latter happening, as it defies logic)
We need to build at a faster rate output to curb demand - simple i would have thought
P.S I read an article somewhere where Americans are SERIOUSLY considering coming to live in NZ - quick shut the gates , ESPECIALLY if they are ex Wall Street Bankers LOL
U r def right, went to an auction yesterday in mount Eden, ghost house, sold for 1.55million. There were a lot of bidders, he not slowed down. Still has at least a year to go or whatever.
Talking with one of the Guys at work around the housing situation in Auckland.
He was saying that he is moving because the landlord is trying to sell up.
So he decided to go to the action and see how much it went for.
According to him the place didn't sell and alot of the other places didn't either.
Talking with one of the officals at the Auction room apparently sales are down 80%.
Ever since the new LVR was applied to investors a few weeks back :mellow:
Auckland houses will still sell at "reasonable" prices. It sounds as though expectations have yet to adjust downwards - but they will!
Reserve bank this morning "House price inflation remains excessive, posing concerns for financial stability. There are indications that recent macro-prudential measures and tighter credit conditions in recent weeks are having a moderating influence."
Fundamentals don't mean anything when the credit taps are turned off.
This time is not different. By 2019/20 we could see the next trend and real picture.
Thing is, without the ability to borrow, people need more money to push up prices. Otherwise, sellers could push up prices if are disinclined to sell.
Since the LVR has increased, it's possible for prices to continue to rise (even with less sales occurring) if sellers don't believe there's going to be a drop.
Of course, there's speculation (described above) and market factors. I doubt that there are going to be any market factors causing a drop in house prices, as these would need to be things like recessions or a reduction in immigration.
To summarise the above, I think the only way that prices would drop is if the media caused fear of a drop (possibly by publishing results of a lack of sales). However, the thing to remember is that demand is still there due to immigration and lack of choice in terms of investments in NZ AND every time the LVR has been increased these past few years, sales have taken about a 3 month pause, then started up again. Obviously the higher the LVR goes, the less leverage bonus investors get, which is worth noting.
Personally, I'm expecting a pause, possibly with a bit of a drop, OR a pause then continue to increase.
... Well, it looks like the property market has had it's pause and is starting up again :)