By Bernard Hickey
Real Estate Institute figures out this week confirmed the Auckland housing market is running hot through the winter and that the heat from that 'halo' is now spreading around the country.
Queenstown house prices, for example, were up 40% from year ago in May. Auckland's craziness is erupting in the strangest places. Prices in Levin are up 36%, while Upper Hutt rose 23%. The median price in Wellington rose 21.6% in the single month of May and there are anecdotes galore in the capital of agents fighting over listings and houses being sold within days.
The immediate reaction is that this can't last and eventually sanity will prevail, but it's worth carrying through with a thought experiment that looks at some of the key drivers of the housing market right now - interest rates, migration and housing supply.
Just imagine if interest rates kept falling, migration stayed at record high levels and Auckland's housing shortage continued to grow at a rate of 5,000-10,000 per year, as it has done for the last four years.
The Reserve Bank included a scenario in its Monetary Policy Statement last week that would see it cut the Official Cash Rate from 2.25% to 0.75% by 2018 if the New Zealand dollar stayed at its early June levels. The currency has actually risen another 3% since then, increasing the chances the Reserve Bank will have to slash interest rates to meet its inflation targets.
An OCR at 0.75% would push fixed mortgage rates much closer to 3% from just over 4% at the moment. In Auckland, for example, home buyers could then afford to pay close to $1.5 million for a median priced house without increasing the share of their income that they have to pay out in interest costs. That's up from just under $1 million now.
Everyone is forecasting that net migration will drop from its current record highs over the next couple of years, but what if it doesn't? It hasn't over the last couple of years when both the Reserve Bank and Treasury have forecast falls. Australia's jobs market needs to improve, the flow of foreign students needs to slow and the surge in working holidaymakers needs to stop for net migration to drop back. There are few signs of those things happening at the moment.
There are also few signs that Auckland's house-building shortfall is about to improve any time soon. Building consents have stagnated at an annual rate of just over 9,000 since October and there is enormous uncertainty over the zoning rules for house-building while the Unitary Plan is being finalised and the Government and Council cannot agree on how to fund Auckland's infrastructure. Auckland needs to be building at least 15,000 houses a year to eat into its shortage, which may already be well over 50,000 houses.
Those scenarios could easily power Auckland house prices another 50% higher over the next two years without debt stress rising, which would further brighten the 'halo effect' through the rest of the country.
So what could Governments and voters do to stop that happening?
1. Tighten the lending rules - The Reserve Bank could lower the current 70% loan to value limit for Auckland rental property investors to 60% and extend the 70% limit for Auckland investors to the rest of the country. It could also limit new lending to rental property investors to no more than six times the rental property's income from rent and exempt new buildings from that rule. That would stop the leveraged buying of existing homes by landlords overnight.
2. Unleash the building - The Auckland Council could agree to a new Unitary Plan that allows a lot more building outside the Rural Urban Boundary and a lot more building of affordable one and two bedroom apartments in three storey apartment buildings close to the CBD. The Government could kick-start the building of these homes by commissioning dozens of these buildings in Auckland from developers and builders and pledging to sell them on Kiwibuild-style to first home buyers and investors, who would be exempt from the lending restrictions. They could be built on Crown land. There is plenty of this land in Auckland.
3. Remove the tax incentives for landlords - As Treasury has previously proposed, the Government could remove the tax deductibility of interest payments by rental property investors and/or extend the two year bright line test for taxing the capital gains of property traders out to five or ten years. As the Tax Working Group also recommended, the Government could signal a new tax switch where revenues from a 1% land tax would be used to cut GST or income taxes.
4. Tax the non-resident buyers - As has been done in the last couple of years by the Australian states of New South Wales, Victoria and Queensland, New Zealand could impose a stamp duty of 3-5% for non-residents buying property here, and impose an ongoing annual land tax of 1-2% on these non-resident investors. This would not breach our trade agreements and simply bring us into line with Australian practice. It would also remove our current 'outlier' status of being the only destination in the developed world without a capital gains tax, a stamp duty, a land tax or restrictions on foreign buyers.
5. Incentivise local infrastructure investment - The Government could make it much more attractive for Councils to invest in the infrastructure needed to underpin growth in housing supply and cities generally. It could allow congestion charging on Auckland's motorways that increases the revenues needed to invest in public transport. It could also pledge to allocate some of the extra GST and income taxes from population growth to service the debt on infrastructure bonds it issued to pay for Council infrastructure.
All of these proposals are within the policy mainstream. They have already been recommended by the Government's own Tax Working Group, The Treasury or the Productivity Commission, or have already been adopted in Australia. The Reserve Bank is already planning the first option.
So what's stopping Governments and voters except for the current addiction to unending tax-free capital gains on rental property?
A version of this article was also published in the Herald on Sunday. It is here with permission.
87 Comments
Capital Gain. Read article
http://www.nbr.co.nz/article/book-extract-home-truths-–-confronting-new-zealand’s-housing-crisis-183320
Government will they ever act.
http://www.nbr.co.nz/article/book-extract-home-truths-–-confronting-new-zealand’s-housing-crisis-183320
Missed a crucial one Bernard, although it is not mainstream policy it still fits - regulate to cap the maximum rent charged for a house at $200 per week. Kick the legs out from under investors completely, make houses affordable for a kiwi on the average wage, and stop this virus spreading to the regions. And lets not forget saving the tax payers as much as $2 billion, dealing to poverty and homelessness, which none of your other suggestions will do.
He likely didn't mention it because it is not a viable policy tool, in the Auckland context.
The Auckland housing market contains so much systematic variation that a fair universal ceiling price would be impossible. Differentiating prices would be even more chaotic for the market.
Don't agree. Your thinking is locked into the "free Market" concept which is screwing this country big time. If you want to persist with the "not a viable policy tool" say why. There is nowhere where private investors or speculators should be able to expect that their risk be socialised. To be able to expect a return on their investment at the expense of the tax payer is just greedy BS. The answer to that is simple, don't pay stupid prices for a rental investment. If landlords want to maintain the pretence that they are providing a social service, then they absolutely must consider the tenant's ability to afford the rent (no more than 25 - 30% of their take home pay) and not expect the tax payer to make up the shortfall through accommodation supplements. If their is a property value crash who gets hurt? The banks suffer somewhat, but that's private money, and they are a part of the problem, because they keep lending into this mess, the investors/speculators - tough titties, where's my tissues, first home buyers - it'll be cheaper for the Government to create some sort of timebased net for these than the current mess.
Key word "VIABLE". I did say why - there is too much variation in property characteristics to propose standard ceilings. Sure, it can be done in other places - I know it is in effect in Baden-Württember, Germany. However it only applies to apartment residences which maintain little characteristic variation between each other. Auckland doesn't have this luxury being a market of predominantly low density housing.
Some would say a multiple of the rates bill, the CV, as benchmark ceilings. Again, this would not work due to the significant flaws in the valuations associated with these.
I'm not saying anyone other than the investor should be burdened with the risk, I'm merely saying that this isn't a viable solution in the Auckland context. The solution is in addressing fundamental supply and/or demand issues, not introducing further market distortion.
The variation of property characteristics is IMHO, just smoke. Investors/speculators are making a business decision to invest in property to make money. They need to consider the property characteristics when they make that decision, not expect any variation to protect them from regulation. Again this is just another way to socialise the risks.
This policy has some merit, with a rent cap set at $200 pw there would be immense pressure to permit the construction of 3m x 3m windowless studio apartments because the cap would also become an effective minimum price and lots of existing housing would be way to low density for $200 pw and as such are likely to get bowled in favor of the 3m x 3m units.
With enough 3x3m units we'd be able to cover most of the backlog!
Even though the housing price is insane at the moment but I would also blaming the fact that the banks' interest rates are way too high comparing to overseas. I have never heard their profit margin declined. If these banks aren't greedy and to lower their rates, the NZ house owners could service their mortgage better and at least the first home buyers might have a chance to compete against the overseas buyers.
Free flow of overseas money has to be stopped. It is them while chanelising black money do not mind paying a million to 700s house as any amount of premium us too little to convert unofficial money to offical and getting it out of the home country.
Result is that house prices are rising everyday by percentage which is bound to play havoc with NZ ecenomy and social fabric of the nation.
Only if govt cared.
Australia and now Canada has accepted that it is Chinese money that is playing havoc and it all started world over after 2012 when Chinese govt went after illegal money and is than that people started transfering money overseas and the best place to park was property.
Still our govt is in denial but for how long.
Cheap money, yes but still Kiwi will not pay a million for 700000 unit as is hard earned money and the prices of property do and should go up but over the years and not on a daily basis.
It is only when channelizing black money and want to get it out of the country like China that the local will pay any amount of premium and it is that which is distorting the market, which in the long run is not sustainable and when the bubble burst local Kiwis will be hard hit.
Stop foreign investment in housing and land. currently anyone anywhere in the World can purchase up to 5 hectares with no restrictions.
Cap immigration at 10,000 useful people.
Don't come up with hair brained schemes that punish NZ'ers when the problem is foreign money.
Northland - Absolutely Major cause of Housing Crisis is Non Resident/overseas money and one does not need data or genius to know that.
Government too knows and should know as that is what our salesmens(govt) is selling to the world and they have been very successful in bring speculator to New Zealand and playing havoc to our small beautiful island.
I think we should blame ourselves as we are the people who voted National and not once but thrice. We and generation to come will have to pay for our sins of electing such a government.
I totally agree Tomalteruk. If Kiwis were competing with Kiwis then the property market would be sustainable and remain affordable for working class Kiwis. The fact that foreign countries banks are paying no interest on clients savings means that their clients purchase NZ property to make capital gains and we even pay them rent. Its a no brainer for them.
I like Bernard's thinking. Assume the present trend will continue until something changes. So more house price rises; more verbal investor bashing ("it's all the fault of those greedy landlords"); more incentives to build; more political grandstanding and weak, ineffective action; and more verbal anti-foreign buyer/immigrant bashing ("too many immigrants", "ban foreign buyers").
Eventually these things burn themselves out ("the cure for high prices is ... high prices"). So barring a significant government reform of something (I know that's laughable, I know it isn't likely, but sometimes we do get snow at Christmas) we will have Bernard's 1.5 million house prices and a whole heap of ugly, micro apartments (can't we just call them flats, it's what they are) sometime in the next two to three years.
Then what happens? Presumably, everything turns to custard, the currency falls, causing inflation to go up, causing interest rates to go up, just at the same time as lots and lots of new shonky flats hit the market and the (new?) government does something really stupid to "fix" the problem (ie stuff up the housing market big time) and the Auckland Council finds itself "unable to re-finance its debts at an acceptable rate" (ie, unofficially it's bankrupt, but don't tell anyone) resulting in a 50% rate rise (spread over three years with a bunch of special provisions to pretend that it won't hurt). Did I mention unemployment rises as a lot of builders, real estate agents and lawyers find themselves no longer needed?
"Someone should do something about it", I hear you say. Better to assume that they won't, until it's the wrong thing to do.
Roger W, why do you think its all right for our property market to be awash with foreign money?
why do you think its okay for a NZ'er on $18 to $30 dollars an hr to have to compete with foreign capitol when buying a home or land or a farm, or have i misunderstood the first paragraph of your very good post.
I don't, I think it is all a complete mess. The foreign money is probably the heart of the problem. We have a sort of low level corruption in the realm of ideas. The discussion in central and local government is about the wrong things. Therefore I doubt anything will change in a timely manner and things will take their natural course, getting steadily worse until something breaks. My suggestion was to plan accordingly.
For one of the few respected commentators who has been brave enough to look at immigration with a bit of common sense, I'm surprised it didn't even get a mention here Bernard? What happened?
Also brilliant article, but we still end up with the same problem, Government need to do "something" to "fix" this disaster and in their eyes getting nearly half of the Kiwi vote is not a disaster. So we carry on with quarter measures and pretending to do something but not actually wanting to "fix" anything, because they know if they fixed it they would get hammered in the polls.
I think we truly need to accept that Kiwi's (for whatever reason) are increasingly thinking of themselves and their assets only, and not the country as a whole. The real question is how the hell do you reverse this kind of destructive thinking?
Immigration is the difficult one. With Europe falling apart and taxes on the up NZ becomes an increasingly attractive proposition. The wealthy French have flooded into London(over 400,000)over the past few years. If BREXIT does happen then many will up sticks and move. Where will they move to? Here and there I'm starting to hear French speakers in the AKL suburbs.
The rich have started leaving Paris, Rome, London etc once it became clear that due to the EU opening its borders to uncontrolled illegal immigration, IS-type fanatics would use the golden opportunity the EU has handed them.
The exodus has nothing to do with a possible Brexit.
But dont worry. Given that AUS and NZ are these days expediting the importation of terror risk, the juggernaut will move on to safer shores.
Actually it depends on who you talk to. Most of my UK friends are thinking of going back or else where in the world partly due to the crazy house prices, as they worry that their children will never be able to afford a home. This is also due to lack of decent salaries and opportunities most feel that they are regressing career wise (Even in the larger cities).
So we figure the best thing might be to sell up and take advantage of the crazy high house prices and high NZD before it all turns to custard. Because things can't continue at the pace they are going any fool can see that.
England is a hole, we moved here in 1974 and it was bad then and has only got worse. Its like anywhere however, if your rich you have a great lifestyle so its driven by work and money. My relatives are loaded so they always go overseas a couple of times a year for every holiday period so its all relative, they probably think the UK is great. Cannot change the weather there though or the outside lifestyle NZ has in the beaches, the clean air and the food so it depends on whats important to you.
Well moving from the UK to NZ in the 1970's would have been a far different story. So what was it $4 or $5 NZD to £1 back then? As so many of my UK elderly neighbours like to fondly recall. When you could buy sections in Auckland quite cheaply and build cheaply too!
Well sadly those days are gone and lucky you. But it's a much different story now and if the property prices and exchange rates where at the currently levels they are today, there's no way I would have moved from the UK to here.
I moved to Auckland five years ago and I'm starting to regret it. Plus NZ has more rainfall then the UK and far higher living expenses including food.
Bernards ideas show no idea of economics and even less of logic.
In order:
1. Tighten lending rules etc will result in fewer and fewer rentals being available thereby pushing up rents. Besides these rules would be a doddle to avoid.
2. Unleash building etc. You would think that houses can grow like mushrooms over night. Can't be done. From woe to go to build new "affordable" houses takes around 5 years. By then houses will be $3M if you believe Bernards nonsense.
3. Remove tax incentives. As soon as costs are imposed on landlords they will passed on into rents. Brilliant-really brilliant.
4. Tax non residents. No chance it would work. Non residents will continue to pile in so long as capital gain can be made.
5. Incentivise local government. Yeah right. Total waffle.
The trouble with Bernard is that he has a deep hatred for wealth, especially if his neighbour has it.
I like Bernard, he is a good spokesman for the up and coming fashionable ideas of our time. Clearly there will be more investor bashing like National's removal of depreciation as an expense. Highly irrational, but suited the fashionable ideas of blaming the speculators and investors. The government, bureaucrats and intellectuals who make and legitimise the mess desperately need someone else to blame.
Here is the point, there is no one to blame and everyone to blame, that's what a free market is...except for point 3 I actually agree with what a lot of what BH is saying...for me point 3 should read, include interest deductions for all housing including owner occupied
I think Bernard is, unlike some here, intelligent enough to understand the destructive effects of unearned the income from the rentier class gone out of control. If you think that what you own is wealth that you have generated, then you are just a giant arsehole that doesn't understand anything. it is you that doesn't understand wealth, In particular the effects of your own destructive behaviour on the real wealth of the nation.
You were doing well there for a while Big Daddy, why the change in rhetoric from you.
And all of bigdaddys points are based on the illogical conclusion that tenants can simply keep paying the increasing rents from landlords passing these costs on in a time of zero wage inflation.
There is a ceiling to what can be charged - and paid for any product or service in EVERY market.
I would suggest no one on this site has a hatred for wealth in itself but many have a hatred for the pursuit of it by reaming the vulnerable and rorting what has been a very loose system that has benefited residential property speculators and these poor landlords...ppfffttt - give me a break.
Also - why would lending rules limit the amount of rentals? Bollocks.....its not like landlords are building properties to rent - they are simply hoovering up existing stock and turning it into rentals.
What a load of self serving BS............
5 its ok JK says let the Chinese build and own the infrastructure, talk about sell everything he can, that seems to be his solution to every problem.
I guess once a salesman always a salesman
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116…
Immigration is the key factor when it comes to house price increases and right now the Chinese would not be impacted by any of the 5 points made in this item.
Regarding those points:
1) Altering the LVR for Auckland investors has made no difference - has actually made it easier for investors with high equity across a portfolio to buy more as it has wiped out the typical kiwi who owns their own home and wants to buy one investment
2) The government initiatives have failed - SHA's have produced few homes and the chances of ever catching up with the rampant immigration currently adding to the problem are very slim. Don't have enough tradesman to build them either.
3) This will never happen under a National government. The bright line test also a failure as house price growth so strong that people are happy to pay the tax.
4) Stamp duty and land tax only increase prices further and our govt thinks we only have 4% foreign resident buyers.
5) Neither govt nor council keen on paying for infrastructure and a roadblock in this area.
Stopping foreign students from buying homes on behalf of parents offshore would make a difference!
It's a very good thought provoking article. A good piece of journalism. We need immigration but we do need some form on controls so we match the growth of the required infrastructure.
Despite all the negatives we chat about on here there are still some major positives about NZ that we don't talk about.
Is Bernard simply calling the top. Such divergent and extreme views . The fear of missing out , continued expectations of future house price gains. The RBNZ can stop everything by restricting credit today , there will be no miracle outcome, when Dr Creosote goes it will engulf New Zealand.
Scary. Very scary.
Well, that's what the economist in me says.
The National Party scoundrel rhetoric tells me "You're nominally wealthy! Go forth and spend. The good times will never end."
Seems oddly familiar to some other past significant market events that I read about once. What were those, again..
Their is only way to Stop and does not even need 5 Ways.
The government only need WILL to solve the crisis. If their is no will, any number of solution will not be enough and everyone knows about the current national Government.
They are exposing themselves on a daily basis. More they delay more the anguish they will have to face.
Loosing the next election is for sure but with action now, may be they have a hope or they will not only lose but will be wiped out as the only support they have is from Non resident Speculators and they do not vote.
If only the media was raising the concern instead of you scratch my back and I scratch yours attitude. Most of the media in NZ is too dependent on Government that cannot afford to annoy them and Media is suppoes to be the fourth strong and most powerful pillar of Democracy.
6) Shove up commercial rents by 50 - 80% by sticking to our incredibly slow construction rate. Whilst at the same time our contemporary cities (Brisbane, Melbourne, Sydney, Tauranga, Hamilton) hit record construction boom highs. This will create a future where rents are falling everywhere in region except Auckland, Auckland will have rents going through the roof. Corporate business will relocate jobs out of Auckland.
I accept that Bernard is not addressing the immigration fiasco here.
I also think that the proposals on a stamp duty and following with an annual land tax as suggested by Bernard are a bit limp. Also the definition of overseas ownership should be defined as elsewhere as 24.9% maximum owner holding and also define arms length restrictions on permanent resident owner level are needed. What about the so-called students buying property using family money?
As to level of tax an initial 20% would be needed to overpass Singapore and Hong Kong for a start.
Follow that with a 5% annual land tax - land tax ignores the value of above ground asset.
Bring it on.
Bernard I am sick of the miss-reporting going on by YOU and the rest of the NZ media.
The new Australian (NSW) Stamp Duty applies to "foreign persons" not "Non Residents" as your article incorrectly states.
Foreign Students and Residents on Temporary Visas are classified as "foreign Persons" in Australia. The Stamp Duty would apply to them.
Your article implies it only relates to "Non Residents" there. Can you please clarify for the readers as I believe you are miss reporting the facts. To help you out I have provided some links below from the SMH and Australian Govt websites.
Is the tax in NSW for "foreign persons" or "Non Residents". Huge difference as in NZ Foreign Persons purchase 39% of property versus non Residents of only 4%. Nearly 10 times more property.
In NZ Non Residents buy 4%
In NZ Foreign Persons buy 39% (35% temp & foreign students + 4% non resident)
Per your article:
"Tax the non-resident buyers - As has been done in the last couple of years by the Australian states of New South Wales, Victoria and Queensland, New Zealand could impose a stamp duty of 3-5% for non-residents buying property here, "
Per SMH:
http://www.smh.com.au/nsw/nsw-budget-2016-foreign-property-buyers-in-ns…
"The surcharges will not apply to Australian citizens, permanent residents of Australia or New Zealanders who have stayed in Australia at least 200 days in the last 12 months."
Additional Guidance
The term ‘foreign person’ is central to the Foreign Acquisitions and Takeovers Act 1975 (Act) and the Register of Foreign Ownership of Agricultural Land Act 2015 (Agricultural Land Register Act).
https://firb.gov.au/resources/guidance/gn31/
Who is a ‘foreign person’? [GN31]
Example 2
"Chak is a Chinese citizen and has been in Australia for 257 days in the past 12 month period. He proposes to acquire shares in an Australian company. Chak is currently in Australia, working as a visiting professor at an Australian university, participating in an Australian research project. Chak’s temporary visa only allows him to stay in Australia for the 18 month duration of the research project. Chak will not be ordinarily resident in Australia because, at the time he proposes to acquire the shares, his continued presence in Australia is subject to a limitation as to time imposed by law. Chak is an individual not ordinarily resident in Australia and, therefore, a ‘foreign person’ as defined in the Act."
Benard you either don't know the facts regarding the new foreign person stamp duty in Australia or you do know the facts and are miss-reporting it. As you are a journalist I really don't know which is worse. It took me all of two minutes on google to find out who is being taxed. Please confirm and amend your article accordingly.
Cheers for including Stamp Duty as an option !!!
No but I can see the big picture. Cannot pick the Lotto numbers but I can pick the property market. Houses have always been expensive, I freaked out at the prices 10 years ago when I bought but since then they have doubled. Really its just a game and your in or your out. What is clear is the longer you leave it the greater chance you going to be out .......forever. Mentally have to get you head around borrowing a large sum of money and then just pretend your still renting and nothing has changed, worked for me anyway.
People are going to have to be strategic to get onto the property ladder in NZ....they will have to become a landlord first unless of course they work in legal, accounting, financial, Dr/Dentist, some IT or working as a public servant - these jobs are well protected and heavily geared for easy income and don't have normal market mechanisms that impede/regulate income opportunity.
If BH and interest.co.nz were really concerned over property prices they would start at the start and find out more information on who these investors are and what they are doing......the word investor gets bandied around and it is easy to think all investors work full-time in the private sector but all too frequently I find many investors are public servants so I would suggest you might want to consider undertaking something along the lines of the following questionnaire: If public servants are highly represented as property investors there will be many impacts that are far reaching across every area of the NZ economy.
Do you work part-time or full-time in the public services?
Do you work part-time or full-time in private enterprise?
Do you receive PAYE/Salary/Contractor income from public services?
Do you receive PAYE/ Salary/ Contractor income from private enterprise?
Do you receive income from both of the above? If so is this in your own name or that of another entity? And what percentage of total income comes from the public system and what percentage from private?
If you work in the public services area and receive income from private enterprise investments you hold or an entity holds or trades on your behalf - Do you receive any tax deductible benefits from this investment?
If you work in the public services and receive income from private enterprise investments you hold or an entity holds or trades on your behalf - Do you have a Look Through Company (LTC)?
Do you have a Trust?
Were you the Settlor of this Trust?
Are you a Trustee of this Trust?
Are you a beneficiary of this Trust?
Are you a combination of the above or all three?
If you work in the Public Services - Are you also a Director and/or Shareholder of any Limited Liability Company that provides income or tax benefits to you?
Do you receive any direct Government assistance type help from Accommodation supplements/WFF etc?
Do you own the house you live in?
Do you rent the house you live in?
Do you own any other property ? Separate out those who are renting but own their own home elsewhere and those who live in their own home but also have other property?
Do you own property or control property that is in another name/entity?
Do you have a mortgage?
Do you have sole or shared responsibility for the mortgage repayments?
Have you paid down any of the mortgage? And Have you used any capital value increases to buy more property in either your own name or another name/entity?
Do you pay rent? Is this rent payment the full market rent ? Is this rent paid to an independent landlord (not your own property manager)?
Do you directly receive rent payments or the proceeds from rent payments ??
Do you indirectly derive income from rents via an entity/structure either directly or indirectly controlled by you?
This is just a small sample of questions but you get my gist the goal is to find out how many public servants are directly or indirectly involved with property........no one seems to look at the transactions that
are the same as insider trading by our public servants !!!
But property is the sole source of wealth/ income that most in NZ need or want. It's easy street material.
For the future of NZ, well they don't really care.
So long as they can get a mortgage / flip a house. Sell it on to whoever arrives off the latest boat. So what.
Easy money. For a while.
Hi Moa Man
I have noticed that NZ has a large percentage of public servants living the life of Riley.........how can this be? How can they afford all their travel and holidays, eating out and good restaurants and wine, designer clothes and homes etc? Something in the system is terribly wrong and the finger always gets pointed at private enterprise but I think that is a side show!!
Maybe DC, BH or someone else could answer these - Does the IRD ever undertake random tax audits across the public servant sector? If not why not? How many public servants have been caught evading tax or not declaring income?
Vic Crone has a great idea ..... Peeps in Auckland who own a Bach or Holiday home that sit empty will have to use them to house the people who are living in Cars! Collect $5000 from Pullah Benefit and hey presto, no more housing problems in Auckland! I think she better txt her old boss and see if he's got any vacancies come October? She's gonna need her old job back after the elections' over with a policy like this one! More Bright ideas like this ones are bound to be winners with her constituents! The Minister Pullah Benefit would appreciate the support for housing the poor with $5000. Kai Pai. Goff's odds to win Auckland Mayoralty have just gone up 2 to 1. If Banksey throws his hat in the ring it'll be all over!
Actually talking of empty property and here's another one you could add to your list Bernard (Plus I do agree with your other 5 points by the way).
How about, further taxing empty homes? So once a home has been purchased the owner needs to either rent out or occupy within four months or show that they're in the process or refurbishment and than needs to be completed within a year. If they fail these points, then they are charge double rates for leaving the property empty.
And I agree with Takere, that Bach and Holiday homes should also have more punitive measures introduced to deter owners from just leaving them empty with we can not afford to do.
According to a recent article in the Herald "Rise of the ghost homes". We currently have More than 33,000 Auckland dwellings are officially classified empty as the city grapples with a crisis of affordable housing and homelessness.
So just to check: -
1) Are they owners of empty home actually paying any rates on these properties when they're left empty?
2) When properties are vandalised and squatted in. Should the Owners be charged more due to leaving them in such a bad state, which causes more risk of higher crime rates via drug use etc.. in that area?
3) When properties have to be demolished due to being left empty and abandoned, could the Owner forfeit their property and land to the Government to make reuse of? And if so how long?
I know in the UK if you leave a property abandoned for 12 years and someone else occupies it and turns it back in to a home, they are entitled legally to transfer ownership free of charge to the occupier.
This has happened a few times particularly in London when non-resident investors have left their properties to rot.
Quotes from the Herald article below:-
Labour's Housing spokesman Phil Twyford said it was not surprising that the super-rich were happy to leave houses empty when Auckland prices were rising so fast.
"It's madness, and says a lot about the housing crisis, that we've got thousands of homes deliberately left vacant by their owners while in South Auckland there are kids sleeping under bushes."
He said Labour would crack down on property speculators, starting with a ban on non-resident foreigners buying existing homes.
http://m.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11654…
Have experienced the difficulty of getting hold of an owner in a property that's been vacant over 18 months now - Trying to get permission for a social housing development next door!
If even 25,000 of these properties were tenanted - pretty sure the logical conclusion would be a drop in rents followed by a drop in investor demand and a drop in property prices -
if you multiply the cost - maybe 10 times rates for properties empty for over year - would stop a lot of the speculators
BH, re #2, there's a win-win-win proposition possible. I've harped on aboot this for so many years that the words just write themselves. And there are of course, Trade-offs - this is a real-world deal after all.
First things first:
- Gubmint is best at setting overall parameters, and a small amount of pump priming So the single overall parameter of note is multi-proof consented house designs, and the pump priming is getting one or more housing factories manufacturing those designs, at volume.
- Multi-proofing the designs side-lines the stupid TLA's and their interminable and expensive consenting processes.
- Getting a few House Factories up and running means some development incentives, and some volume: the former possible via e.g. tax or depreciation breaks, the latter via letting social-housing contracts for hundreds of houses to achieve short break-even times for aforesaid factories.
- My personal favourite: staff these factories with re-trained and now unemployable TLA consenting wallahs. Instant productivity increase, This is, of course, not a compulsory feature. But oooh, wouldn't it be nice (to mis-use a Beach Boys lyric...)
- Finance all of this via a combination of Stamp Duty, CGT and swingeing differential rates on buildable but bare land - could even be relatively small net cost compared to the increase in social utility via warm, snug (of which more later) and cheap houses.
Ah, those trade-offs:
- Accept that small, highly modular designs are all there is. Small = less cost, modular = able to be cranked out by automated machinery in factories.
- 'All there is' means abandon architects, consultants and the plethora of ticket-clippers who infest the building industry as currently constituted. If any of these types find themselves unemployed, into the Factories with 'em...
- Alter district plans top-down, by building into the NPS the requirement that houses produced this way override district plans, NIMBY's and BANANA's and the production thereof would constitute Compliance with the NPS. This accords with the rising realisation that Awkland could well sink the rest of us if left in the bumbling hands of ACC i.e. it's an issue of national significance
The target would be not less than 15-20,000 such houses per annum, over the next five years. As Christchurch demonstrates in spades, flooding the market with lotsa land and building lotsa houses (and, BTW, doing it the old-fashioned way, with occasionally drug-tested hammer-hands clonking frames together out in the weather) has screwed house prices to affordable (barely) levels through the Magic of Markets. Doubters can consult http://mikegreerhomes.co.nz/home-and-land/search/ and try Faringdon: house plus land start at $419K.
I've no doubt that this is doable. It just takes the will (and the cojones and vertebrae amongst politicians of all stripes). Aye, there's the rub........(Awkland Unitary Plan pun included for your delectation)....
What is 'loyalty' worth to your bank?
http://www.stuff.co.nz/business/money/81232174/nab-tracks-disloyal-busi…
The bad stuff is always in the fine print. That's where the consumer gets it in the neck.
i.e. Sign here, all's good. And above all, don't worry about the pages of dross that the average consumer is remotely qualified to comprehend but they are then bound to comply with
It's a rigged system.
Tax, tax, tax. Great idea. Lets tax the cashed up foreign buyers and expect it to make a difference. They have already doubled the price in 3 years, so cost must be something that slows them down. Oh wait.... they don't care.
Only one answer required. But no party willing to apply it. - Ban on non-citizens owning residential property.
BH - you are doing a good job of "investor bashing". All the investor is doing is investing in res. property. what does the investor do with it- rent it out. what does this do - creates a big pool of houses which keeps rent under control.
The investor keeps investing and none of the above happens. Why not? not enough houses to buy. The removal of depreciation (which is only deferred taxation) was suggested (and later was made into law). As soon as it was suggested, the guys knowing property investment (Newland, amongst others) immediately came out and said it will do the opposite--prices kept going up. When it did--when it did, guess who got the blame-- the investors.
Is is no rocket science that the current problem is a direct result of / restriction planning rules to allow intensification to get in builders to get motivated to dish out whats needed. Who would one to invest in a single home on a large site. Build a multi family on that site (anywhere from 2-10, 2-50, 2-75 etc) you will get investors interested in buying in bulk lots and solve the current problem----there will be no shortage. there will be choices for home buyers especially FHB. Only problem is some investors might invest in these and grow again--if we can handle this, no issue. Otherwise, block the investors and bring in removal of interest deduction and and other artificial blocks like 1.restricting overseas buyers (even though they cannot pack their investment in a luggage bag and fly off). 2. raise interest rates and wreck the economy. 3. bring in stamp duty to ensure we do not have as many people buying houses. 4. remove interest deduction (for your information USA allows interest deduction not only on investment but on family homes and up to 2-3 of them--think why). We already know what removal of depreciation (which was only deferred taxation anyway) did to house prices and yet we are wanting to extend this further by suggesting 4 above. Frankly its Madness.
Stop investor bashing and look at the "heavy and ridiculous" stumbling blocks put at the front of AUP, the most comprehensive proposed planning rules to allow developers to get on with it the job needed and to get this investors and FHB to come out and join the play and to alleviate this current housing shortage/issue.
I wonder why the previous permitted depreciation on houses brought in in the first place before it was thwarted in 2012. May be it was to encourage investors to buy and grow rich. Why else would an investor invest. May be the investors got too high and needed to be pulled back. BH- your thoughts??????
We have the same issue here, as they are dealing with in the UK and US - and leading to Trump and Brexit thinking. Elites talking down to the masses and the masses starting to see through it. Immigration isn't doing anything for the low paid - just job, school and house competition. It may drive GDP but that doesn't help if you are in $18 an hour. What will tip the scale is more people not on $18 starting to vote with them - and that is coming. I don't want NZ to become riven with class tensions, the haves and have nots, and will vote for a government that looks after its people.
Goodness people are screaming and asking for miracles. No deductibility on mortgage interest payments? Lets extend that to non deductibility on machinery, hirer purchase, vehicles, and in fact any credit. Come to think of it lets smash the banks. They are the cause of all the problems. This all sounds like a futuristic movie or dare I say a Greek tragedy. Really Bernard, John, Bill, Nick, Paula and so on need to stop and smell the roses. You can not stop world events that New Zealand is caught up in. Just who is the appointed or anointed one who can change our fate. Come join me and celebrate for tomorrow we may be dead.
Pocket Aces wants more rules--allow them investors to only buy new. investors invest to make money. if new makes sense, they will buy new--where from though--may be from the AUP machinery-- which we just do not want to talk very favourably about just yet. may be wait 5-10 years and when no other rules are left then may be we might look at AUP. Mind you. AUP, in its original form before it was watered down by the NIMBY'S, did only go so far---it (AUP) should be made "braver" by allowing 1 unit per 100-150 sq. m of land regardless of which res. zoning you are in, as long as it complies with side, rear yard clearances and height in relation to boundaries--finer details like max hts--go back and ask the original planners of AUP without any interference from our very powerful but minority NIMBY'.
For once Bernard I have to disagree with most of the remedy(s) you're suggesting in this article. It's probably a fair comment for me to say that its designed to appease the speculator community and the well healed, to try to convince them that a change is needed? However, more "tinkering and pulling of the levers" which you have accused the government of many times is what I think you're proposing here? Cut the crap. Stamp Duty, CGT, IRD to chase up private individuals for buying & selling houses, the 2 year rule. There is no way that we can dodge this Bubble/Bullet. Re-read Hyman Minsky. It's on the cards no matter what you do looking at Global Economic & Political shenanigans playing out. Our little slither of the Global GDP, 0.35%, dependent of which figure you believe it is, $81t, $78t, $71t ect ... RM's latest Poll puts the Nat's at 43% a drop of 4.5% & the "Love-n" between the Lab/Greens has them at 42%. Winnie at 9%. A Game is On. Some say its too early but I think with whats coming it'll be an early election which is one you wouldn't want to win?
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