SNAP. I obviously type too slow.
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SNAP. I obviously type too slow.
LOL, thanks FP, and Halebop,
In this case I am pleased to be wrong.
(I think i was confusing the issue of trading versus investing, which is about cap gains, with this issue of claiming on costs of LT equity investing.)
Again, many thanks for clearing that up.
Interesting real estate agent comment in the article:
Tony Ebert, owner of Milford Real Estate, says sales volumes on the North Shore are down by more than half, because vendors are not selling under pressure, but prices have held up. That is because the North Shore has held its desirability, he says.
Ebert predicts sales will pick up in spring. Despite being about 20,000 transactions down since January, his company has noticed sales and interest increased last week.
"I think the interest rate drops in the past week and the Reserve Bank saying it will reduce the cash figure in September is a signal that things may be starting to return to normal."
The last official comment from the Reseve Bank was that interest rates are on hold for a time yet. If they do drop rates it will because the economy is slowing rapidly, hardly a positive situation for the housing market, despite what real estate agents are saying.
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Muldoon's misguided effort was known as clawback tax. If selling an investment property under 10 years of ownership the vendor had the choice of paying tax on the lesser of interest claimed or capital gained. Like silly Rowling's speculation tax it acheived the opposite of what it was intended to do, by drying up the market sending prices upward. The beauty of the clawback tax was if you simply ignored it, nobody came looking for it. It did not apply to shares, and still doesn't as long as the shares are purchased for the income and not simply for a profit on sale. Intention is the key.
Muldoon wanted to take the heat out of the property market as all politicians seem to want to do in a busy market rather than just let it cycle through the peaks and troughs. Remember - Muldoon was a socialist in drag.
As far as payment of the tax: on selling a property on which interest had been claimed, you had to complete and submit a form showing both calculations, interest claimed and capital gained, and stating which one you wished to pay. Once submitted the IRD checked the calculations and if satisfied, simply sent you a bill for the amount. They seldom bothered to send the bill. As I said, they didn't come looking for it.
But interest cannot be claimed where there is no intention of receiving rent as where rents are not being charged. Income tax is incurred where properties are bought and sold for profit, or spec. built. There is no real problem. IRD have been known to decline interest claims where properties have no chance of making a rental profit in the foreseeable future. They have also put considerable effort into policing sales in hotspots like Queenstown. Anyone buying a section simply for resale and not declaring the profit is liable for a knock on the door.
It will be interesting to see the IRD's view on sales of section over the next few years, and whether they will allow claims on losses. There will be so much burnt flesh over some of the delayed settlement deals - particularly in Wanaka, that there will udoubtedly be claims.
Would any of you first-home buyers consider the shared-equity scheme to get on the property ladder? Or would any of you property investors consider abusing the scheme as suggested?
Property investors could target shared-equity scheme
Thursday's Budget confirmed $35 million in new capital will be spent in the next two years to help families with a shared equity pilot scheme to get about 700 households into starter homes.
But Alastair Helm, chief executive of realestate.co.nz - owned by large agencies and the Real Estate Institute - says landlords might take advantage of the scheme.
Housing Minister Maryan Street wants to target people who had saved a deposit for a home but who cannot get on the property ladder in the area where they live and work because prices are too far ahead of the maximum mortgage they can afford. Shared equity involves the Government taking an equity share in a house to reduce the size of an aspiring home owners' mortgage.
Well, what do I know. Had a property on my watch list which I reckoned would go for around $790 - $820k but sold for $900. I’m going to have to watch the market closer as other properties I’ve been watching haven’t been going at reduced prices.