By Alex Tarrant
A capital gains tax will be an important issue for the Green Party in any post-election coalition bargaining, Greens co-leader Russel Norman says.
Prime Minister John Key last week fixed the general election date for November 26 this year, effectively kicking off re-election campaigns for a poll likely to be centred on savings, government spending, revenue and the economy.
It was inevitable that sooner or later New Zealand would implement a capital gains tax, Norman told interest.co.nz, saying it was the central element missing from the Saving Working Group’s prescription for how to improve the nation’s savings rate.
The Savings Working Group’s diagnosis was “pretty good, but its prescription for what to do was “pretty weak,” Norman said.
“Probably the central element that’s missing from it is a capital gains tax, excluding the family home,” he said.
“When you look at [the Group’s] concerns around housing – they say the tax system is the cause of half the increase in house prices in the last decade – clearly the thing that’s missing is the capital gains tax, excluding the family home,” Norman said.
“When you look at their concerns around the Government’s fiscal position going forward, again, a capital gains tax, excluding the family home, would raise about NZ$4.5 billion a year, and that’s probably a conservative estimate.
“So I do think that’s one of the missing elements. Now obviously that’s part of their terms of reference [to not look at a capital gains tax], but I just think if you look at the changes you need to make it’s clearly one of the things you need to change,” he said.
In what was perhaps a surprising move, ASB advocated for a "targeted" capital gains tax in a submission to the Savings Working Group.
Certain logic to soft KiwiSaver compulsion
The Greens were not opposed to the Savings Working Group’s soft compulsion recommendation for KiwiSaver, where everyone in the workforce would be automatically enrolled in the saving scheme, but with the chance to opt out, Norman said.
“It’s still a voluntary scheme in the sense that everyone can opt out. It just basically moves a few more people in that direction, so there is a certain logic to it,” he said.
“The real issue for New Zealand will be to what extent do these kind of schemes redirect savings from one area to another, and to what extent do they result in new savings?
“There’s some evidence that the Australian scheme – it’s compulsory over there – has resulted in an increase in savings. But there’s also a lot of evidence from elsewhere that some of these schemes don’t have a huge impact,” Norman said.
“Looking at moving what savings there are into the productive sector, by changing the rules around investment properties, would make a significant difference. It would also make more productive capital available to New Zealand businesses,” he said.
“Some of the [proposed new] KiwiSaver rules I think will make a pretty marginal diference, but might make some difference.”
Capital gains tax important
The issue of a capital gains tax in any coalition bargaining was “quite important” for a couple of reasons, Norman said. Both Labour - the Greens' most likely coalition partner - and National are currently ruling out the implimentation of a capital gains tax.
“We’re very concerned about going into further government debt, and so our approach is if you’re going to talk about spending, then you also need to talk about revenue and where you intend to get it,” he said.
“Labour’s identified some sources of revenue – tax avoidance, perhaps doing some ring-fencing, and some cutting of spending, for example this missile project the navy wants to do – but they haven’t identified any significant areas of new revenue.”
It was inevitable New Zealand “will eventually do what just about every other country does and that is have some form of a capital gains tax,” Norman said.
“Whether it’s National or Labour, sooner or later we’re going to go there, because it’s obviously missing and it’s obviously needed,” he said.
Indexation of inflation component of interest
On the Savings Working Group’s recommendation to not tax the inflation component of interest on savings products such as term deposits, Norman said that would introduce a revenue cost and further layer of complication into the tax system.
“But on the other hand it might result in an increased incentive. We’ve had a bit of a look at it, we haven’t reached an absolute final conclusion about it, but clearly there are complications with it,” Norman said.
“It’s like, how do you implement a capital gains tax – there’s more of less complicated ways you could do it. Does the complication really justify the benefit? I think that’s the debate we need to have,” he said.
Goff will have discussion when the time comes
Meanwhile Labour leader Phil Goff said this morning that his party had not considered a capital gains tax as part of its tax policy.
“Labour will be the majority party in a coalition government for the future, and it won’t be a case of anybody demanding something, it will be finding policies that we can find agreement on that will work for all New Zealanders,” Goff said.
“You’re asking hypothetical questions. I’ll have those negotiations when the time comes,” he said when asked whether Labour would not enter government with the Greens if the minority party were to demand a capital gains tax in coalition bargaining.
(Update adds video of Goff, Goff comments)
* This article was first published in our email for paid subscribers earlier today. See here for more details and to subscribe.
154 Comments
Wow , this guy is nuts , are we not already taxed enough ?
A vote for the Greens is like a Turkey voting for Christmas
The country is desperately short of capital , and now he wants to tax the gains made by the little Capital resources we do have.
Taxing savings, investments and nest eggs is just plain crazy.
If anything , New Zealand should become a TAX HAVEN , zero tax on foreign investment, and we should be allowed tax deductions on our mortgages , like America .
Fortunately , with idiots like this running the Greens we wont need to get rid of MMP , it will become redundant when all the lunatic fringe parties, dont get the 5% threshold
Domestic Savings should have NO tax at all. Business Investments should have very little tax to pay. This alone would mean more kiwis can borrow from Kiwi owned banks or even NEW kiwi owned banks. Borrowing form Local savers is the best kickstart a new business venture or local economy can get. Borrowing from overseas just means more interest is needed to pay another middle man (normally a foreign bank). HSBC etc
Unfortunately investment properties (in my opinion do need more taxing) unless purely commercial (an actual business producing a product) The residential ponzi scheme must end and never come back. But........Bill English and the clowns at RBNZ will never let that happen will they
The country is desperately short of capital
Um.
Capital used to earn interest, and was issued out of thin fiat air.
Both the capital issuance and the usury charged were expectations that the future could increasingly underwrite.
It couldn't.
Your attitude is from a bygone era - but don't worry, you're not alone.
Sitting on the sidelines, purposely debt-free and self-sufficient, I just about weep to hear such - so many are so short-sighted, think that what they are experiencing NOW is forever.
Chris Martenson and Stuart Staniford both put it more clearly that I do - on the basis that you've nothing to lose and that you may well become more informed, give them a read.
Norman has been counting flying pigs again....he seems unaware of the fact that we already have a cgt applied where the IRD considers the peasant to be earning an income with the gains.
I thought the greens were into the environment and saving the bees and stuff. Or is that no longer their thing.
Im thinking of jumping ship. Im debating it with my wife daily. Im thinking that when the US$ hits the fan Im out of here, enough QE it should get us to parity. We are soo farrr behind the 8 ball that its better to look to other options rather than a business here. Ive 5 children 3 left in NZ, be 2 soon, then 0 so the wife and I are thinking ahead. If the greens and Goofy get in and increase taxes count me out, gone.
Same, but for different reasons. It's National that's the cause of our concern. Kiwis are being expected to work harder, longer and for less, even though we already "Live to work" as it is. Kiwi pay is crap, but I could stomach it if we had a good lifestyle, but TPTB's dream is of a NZ where the serfs toil away with no hopes or futures while the lords and masters cream it. Labour may not improve things, but National will certainly make it all even worse.
I am usually pretty liberal, but after reading the female co leader, I sort of vomited in my mouth.
http://tvnz.co.nz/politics-news/green-party-response-key-speech-in-full…
What the heck is wrong with these people? All they want to do is increase entitlements, instead of decreasing them?
If they are all about being green, why are they not forwarding the green revolution by investing in these new industry?
Give people Jobs!!!!!not benefits
Well said,,, its hard enought trying to plan for my families future without having to worry about lazy rs mo fo on the dole,DPB and acc iligitimately. And when you dob them in ,,,,nothing happens,,,the burocracy falls for the same pack of lies and dragging of feet. Grrrr
You guys are being harsh on muzza : His point is accurate , the Greens appear to have positioned themselves to the left of Labour , alongside Jim Anderton's Progressive Party .
............. And it is a debate worth having , what is the current core message of the Greens , as they could be in the " kingmaker " role after the next election .
Norman is more politically astute now , than 2008 . I doubt that he'll reject National before the election , this time .
Yeah right...........nothing like trying to put a ring in a horses nose eh?
like duh........
He'll make his own mind up as usual...neither Labour or National are green....they both have a shock coming within the decade....if they had listened we'd be in better shape but no short sighted, mypoic even as usual.
regards
It's not Norman who worries me. Its Metiria Turei who does. She's more good-hearted old Labour, to me. Yes, she gets the traditional green/environment, but we've moved on from that now.
Without proving that the embedded, once-off fossil energy represented by those wished-for state houses, is better than retro-fitting the existing stock, it's a silly sally. Alle same Hugh P. Still has to stop somewhere, and it's always better early than late.
There again, the Maori demographic is on the rise, and soon it will be impossible to govern without taking it on board. She's better positioned to do that, than the whole Maori Party combined.
National look like imploding to me. If the best they can come up with, after three years, is "shock horror there's TOO MUCH GOVERNMENT", they're bankrupt of real answers.
As is Goff. But maybe not Parker.
Interesting times.
Ergo99 - and is your glib 'savings' comment accounting for natural capital?
There's a fundamentally-flawed problem there, and I'd dither too, trying to point it out to someone who thinks in conventional terms
If the draw-down of natural capital (climate change is one such, oil depletion another) is not being accounted, your'savings' aren't real.
Just like running a savings account alongside a larger mortgage - you're in overall debt.
So your 'savings' are self-deception.
I Am the Man, yes, I do appear to say stupid things when the comments are read by a stupid person. And doubt there's anything stupid about raising the concerns that the Green Party is way to the left of the Labour Party, who will need their support if they want to form a government.
The NZ green party has always been a mix of parties, true red, no a true red has no green of care for the environment its just not compatible....
"consequences" Any more than Whinnie Peters? or the maori party? uh no, in fact generally the greens come out before hand and say how they want it.....and stick to it.
regards
Crikey you lot have short memories - it was only Jan last year that the Tax Working Group reported and while it didn't fully endorse a CGT it did go a long way down that track...
Fact is that a CGT is an integral part of any tax system, but with the Greens picking it up as an idea it has about as much chance of becoming policy as I have of winning Powerball...
So Norman is effectively consigning himself to a very long stay in the opposition benches... mind you he hardly seems the type to succeed in Government either...
Other commentators are right here - we already have a 'sort of' CGT but it is a mismash of various tax policies...
I see the issue of CGT going the same way as sales tax and GST - at some point the obvious decision will be made to reform the taxation of gains and reform what is in place and introduce a CGT that is hopefully efficient in terms of revenue generation... but it won't happen in the next 5 years...
Look at the Maori party Horace they managed to pass an increase in tobacco tax and they still have support from their people who all smoke. Go figure.
All I'm saying is anything is possible and a protest vote for the Greens if they are serious about CGT is a good option.
The only things that I don't like about the Greens is their lack of ambition and failure to negotiate with National - as the Maori party has found out you can't help the poor by being poor and their relationship with National has certainly blossomed fruit.
Sell their souls? at the end of the day they didnt and dont need to........sit quietly for 3 or 6 years, no matter, think long game.....the blindingly obvious AGW and peak oil will dawn on the voter eventually....When the so called stimulus's fail to bolster the sagging economy time and time again, and when petrol continues to rise and rise and even become in short supply....as will the unemployment % rise....then National's blinkers and lack of policy will be seen for what it is............its going to be a tough 2 or 3 decades especially for those in debt....
regards
I'm glad I don't have much debt Steven.
It's not about selling there soul for the Greens or the Maori, it's about having the maturity to stand on there own two feet and negotiate with a team member.
I never liked everybody I played rugby with but I never let a personal grudge get in the way of our team scoring a try either.
Some insights from the Australian system;
http://www.cato-at-liberty.org/an-australian-lesson-about-capital-gains-tax-rates-and-revenues/
They really do get so many things right over there in terms of legislation.
No they are anti-pillage.......they see the longer game.....and at the end of the day a decent % of NZers have voted for them....3 times ACT?
In terms of "damage" no I dont agree....more damage would be caused by National this term alone until they realised it was a vote loser......ppl dont want to live in a cesspit like a typical coal town in china....thats not progress, that's destruction....
regards
Population is actually the key to the problem....
Yes its hypocritical but mineral deplaetion only works with cheap energy, using cheap labour 1/2 way around the world only works with cheap transport that era is ending..Jobs, jobs will change, there will be high un-employment and a lot more manual labour....
regards
Gavin, you bad, bad man! Are you just stirring having seen the poll above that shows 40% of interest.co.nz readers would vote for the Greens?!
The funny thing is, for all the greenies here moaning about house prices, if the Greens ever lead parliament you can expect house prices to go a whole lot higher thanks to all the restrictions they would enforce.
"No, you can't mill that timber" - "No, you can't subdivide that land" - "All homes must have $30k worth of solar panels and solar hot water" etc etc!
Actually, I'm all for green houses - solar panels, rain water tanks etc - but you have to realise it comes at a price.....
Price, you are assuming cheap energy........
you are assuming the greens would be draconian in the extreme which is simply unfair........yet when market forces make electrical energy 40+cents a kwh (and within this decade) and we see the same result thats OK.........the problem will be the time lag to adjust when you rely on market forces. Some legislation now with some pain or truly draconian measures later with major pain that could really kill our economy, thats the two options....do nothing and suffer or plan and mitigate the worst....we seem to be on the suffer path......
The Green's wont ever lead parliment, but if they were to at least 51% of the voting population would have put them there with a mandate to say yes add $30,000 to a house, that's democracy....
regards
Hello NZ
You could turn around NZ in a week,Do you think that China will muck around when they want all this money back.They will have full employment an no welfare,everybody will be growing food an looking after there old people.
This is reality for NZ if they keep pandering to the bottom feeders who take everything an give nothing back.
Start looking after people who do get out of bed in the morning,every country needs can do people.
Working people need to be treated like kings.
Capital gains an more tax would only incourage more people to live in Australia.
Go NZ, we need a reason to stay in this country
Bollocks, not having CGT on property reduces the tax take of the wealthy who tie up their money in what is essentially a non productive asset class while at the same time driving property prices for our youth which as you know leads to more overseas borrowing.
"Almost every other country in the world", cannot be wrong.
Good come-back Murray.
Of-course London has a population density of 4761 people per square Klm
Honolulu has a population density of 4336 people per square Klm
Sydney has a population density of 4023 people per square Klm
Hong Kong has a population density of 6339 people per square Klm
Auckland has a population density of ? maybe 2000 people per square Klm, the numbers are so small they are not mentioned in wikipedia.
The point is relative to population density (demand), at 6.4 our house prices are high and by having a CGT this would reduce the benefits of property as a tax haven for rich investors.
...... or just forget the added bureaucracy that a CGT requires , and level the playing field by ring-fencing property losses from income tax off-setting .
Keep it simple ... Keep it even-steven across all asset classes ..... Reduce the need for the introduction of more bloody civil servants or government departments .
Roger - how about, unify all rates, abolish intent rule, so all capital gains (losses) levied at the unified rate, BUT, land based assets are exempt, BECAUSE, a land (property) tax is levied on them, and varied per asset type, eg. ag., comm, residential. Thoughts?
Les.
Why do people take 'jobs' as given?
40 hours per week doing something, is a recent (post steam-engine) development.
Raising money is also a short-term phenomenon - money is a promise that the future will allow you redeem - but sooner of later that had to not be the case.
Folk like me argue that '08 the point where the chewing-gum snapped.
So it needs a full reappraisal about what constitutes work, wealth, sustainability, wtither debt, etc.
I suspect there will be a lack of fiat capital, and that real incomes will reduce (doctors paid less, lecturers paid less, so Govt owes less - while acknowledging the need for their services).
Hope this helps:
http://www.realeconomy.co.nz/144-capital_gains_tax_pros_and_con.aspx
(Just a round up of some useful articles in The Herald.)
I'm keen to see the 'economic apartheid' end, BUT, if such taxation was implemented, it MUST come with reduction in other taxes and ideally unified to one flat rate. To assist those in the lower income deciles, an appropriate 'tax free zone' as Phil Goff has coined it. Plus, no need for a higher rate 'envy tax', because the higher deciles pay more by volume proportion, even in a flat rate system, as Phil Goff and co. seemed to have ignored. As well as the fact that a higher 'envy tax' rate will only incentivise avoidance. Say whatever about clamping down on that, but better not to create the incentive in the first place and not waste resources on policing people who are smarter than thou.
Oink, oink, flutter, flutter.
Cheers, Les.
Oh yes, another commie (i.e., Russell) who's tried to make himself look respectable by dolling himself up in a Green frock and liberal coatings of organic rouge. What happened to all the Marxists’ when communism failed? They suddenly became Green, that’s what happened!
Wake up people, Green politics is a continuance of the desire to control capital (and by definition people) by another means. The leopard hasn't changed; it's just changed its spots.
Thank God New Zealand doesn’t have a capital gains tax. Because if it did, and if property prices had of collapsed by 30% as some predicted, can you imagine what that would have done to the size of the tax take in New Zealand? The Government would have bled dollars in huge tax refunds to property investors, who probably would have sold their properties at a loss to gain the tax benefit. We wouldn’t just be borrowing $300 million a week to pay for the Clarke-Cullen electoral bribes; we would be borrowing $500 million a week! Gotta hand it to the Left, they sure know how to make a bad situation worse, and make the poor poorer.
DB : Under CGT the gumnut can immediately tax you on a profit made from the sale of an asset ........... But if you make a loss ( intended or otherwise ) , they only give you a credit against future profits , ...... if you make them .
........ It's a horrid little tax . And so unnecessary .......... Just ring-fence property losses from off-setting against income tax ..........
Simplify the bloody system , not add more shit and bureaucrats to it !
Oh dear.
Wake up yourself.
The left and the right were about who got to sit on what deckchairs.
The environmental/physics/reality message is that the ship is going down. First it was just a warning that it would go down, now it is reporting the rate of sinking.
Those who don't get it yet, either suffer from denial (my kids grew out of hiding behind their hands by the time they were 3 years old) or stupidity.
You could have a wee think about which category applies - but I guess if it's the latter, maybe you couldn't.
:)
The problem with 'capital gain's, is that they are a draw-down from the future. The future cannot physically supply. Therefore they're not underwritable. Interestingly, the Govt is already not underwriting our societal demands (the Govt is just us, but you won't get that) so whether taxing something not underwritable is good (if it curtails the process) or bad (if it socialises the debt) is the debate.
Unfortunately, we just get the same old same old from the BAU left and right.
Going down.
Would their bubbles have been much worse?
SWG just reported that our tax treatement of property, or lack of it, accounted for about 50% of the price increase in the upswing.
In an article on here in last few days Bernard was quoting some Westpac analysis that attributed about 17% of that increase to the 39% tax rate change, I think I recall. (Something like that.)
So it would appear CGT, some form of property taxation, does have an effect on property prices. However, changing those dynamics would not be the sole purpose of implementing these kind of asset wealth taxes and property bubbles could be more sensibly arrested with other means, eg. see Hugh P's work, ie. land-supply, SWG also attribute immigration as a cause, consider the effect of prudential lending regs, such as an LVR regime (Texas, again see Hugh's work) and RBNZ's capital adequacy rules for rural lending.
Other than helping to smooth property prices and being able to reduce other taxes, what other benefits might eventuate?
Cheers, Les.
So it would appear CGT, some form of property taxation, does have an effect on property prices.
So how did a cgt affect the property bubbles of those countries that have not only cgt, but also stamp duty Les? My understanding is that Australia, UK, Canada, USA are all countries who have a cgt and some of them also stamp duty, but they all have had a property bubble.
It was easy credit that caused the bubbles, pure and simple. Look what has happened in the UK now that you have to have a 20% deposit to buy a house. Prices are continuing to fall in most places there. It has also being reported that for the first time in decades in the UK over 80% of first home buyers are now using family support to get their 20% deposit.
Hi Marie - if you accept the thrust of SWG and Westpac analyses on this area it seems very possible the bubbles you refer to might (would) have been worse. However, if you wanted to ignore their analyses and conclude CGT, similar, has no impact on property price bubbles, fine, but there are still good reasons to implement such tax. As I opined (referring to some evidence, that you also have contributed to) property bubbles could be arrested by other means, credit throttling being one that I also believe would have a very strong influence - because the OCR doesn't work effectively in this regard. See above my comments, concerns, questions about benefits, implementation, reducing other taxes, a flatter tax structure.
Cheers, Les.
So SWG have obviously never heard of the Resource Management Act (the act that protects existing environmentaly destructive land use practices).
Town Planning has accounted for most of the upswing. In 2006 you could buy a 2 bed CBD apartment for $250K so Auckland City changed the town planning rules so that no new 2 bed apartment could be built and sold for less than $500,000 (through a combination of minimum sizes, minimum outlooks and big increase in development tax). Not a single apartment has been built in the CBD since. Similar anti density rules have been brought in throughout Auckland City like PM196 which requires 20% of a Newmarket apartment building to be $1,000,000 units, the removal of 1/300 density option in Res 6A etc. etc. That's nothing to do with tax treatment - it's rules in the District Plan.
No amount of CGT will fix the problem of lack of houses and will therefore just make them even more expensive meaning even bigger mortgages and less money available for saving.
bob - as you say, CGT will not fix lack of houses. As for making what is available more expensive, maybe not:
'Brian Fallow: No easy way to shake off our debt burden'
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10703737"In much of the housing market property investors are the marginal buyers who set the price. "
The last Budget introduced two changes that make highly geared property investment less attractive: dropping the top income tax rate and denying depreciation deductions on buildings.
A further move to significantly reduce deductions for interest costs could be the last straw for some highly geared investors and induce a wave of selling into a fragile housing market."
Which implies ....
Cheers, Les.
Only if you belive the "property investors are the marginal buyers who set the price" myth.
If this was true how come the areas with the least property investors have been the areas with the greatest capital gains and the ares with the most property investors have had the least capital gains?
Increasing the number of houses will make them more affordable. CGT will not.
Because property investors in NZ are generally borrowing all or most of the purchase price and to try and make it work they have to buy houses in the less desireable areas of town and these areas go up in value slower than the more desireable areas of town which are more expensive to get into and you therefore need more borrowing. So less investors.
My point exactly - if property investors were responsible for escalating prices then the areas where they invest would have been going up at a faster rate than the areas where there are NO property investors, however the opposite is true therefore all these taxing/targeting PI strategies will not help house prices. As Bernard has finally started to admit "...He's thinking housing affordability is a finance issue when it's a valuation and supply problem"
Sorry Bob your line of thinking is not convincing. The PI's have definitely pushed up the values of housing in the less desireable areas of NZ and put them beyond the reach of the families on low incomes. While those areas have not gone up as much as the nicer areas they have still gone up and far more than if there had not been the drive by PI's encouraged by Richmastery and alike to buy houses with certain income yields on them and to do that they were competing for houses in the not so nice areas. This competition has forced up prices inevitably.
So you agree that most capital gain is occuring where PIs are not active - therefore PIs are not be responsible for most price invcreases. Sure you may surmise PI's are responsible for pushing up some values in "less desirable" areas but so what? I don't want to live in "less desirable" areas and trying to reduce house prices by focusing on PI's (whom you admit are not the cause of most price rises) is futile.
I don't care if there is or isn't CGT. I just want to be ablre to live in a "nicer" area without having a massive mortgage. Introducing CGT is not going to assist me in this. Increasing densities will. Increasing GST didn't make my essential groceries any cheaper so why would making housing more expensive through CGT, ringfencing or some other tax make housing cheaper?
The Greens are supposed to be championing environmental issues. They should be campaining on density so we can have public transport, less reliance on cars and cheaper housing rather than jumping on the incredibly boring "blame PI's for everything" bandwagon.
If there is a CGT and/or a Stamp Duty, they both restrict the amount of money that you would have to buy that next house in the nicer area with. Say you made an assessable CG $1,000,000 on the sale of your last nice house, and had to pay 10% CGT and 5% Stamp Duty on your next purchase, say done at $2,000,000, it only gives you $800,000 capital appreciation to bid on that next house with ( That is the bit the vendor is really only going to get and see in the bid ). It is about limiting maximum gross expenditure. That's how prices move lower, and adds tax revenue to the Government to pay down our debt, or whatever.
bob - following on from ex-agent's reasoning, maybe another reason is because PIs might tend to live in the less invested areas and can chase up prices with the tax-free proceeds from their investments in the more invested areas? (Not as strong reasoning as ex-agent's, but might have some influence.)
As for the, ".. marginal buyers who set the price," myth, I thought marginal sellers and buyers setting prices is a core premise of economics theory and in this space marginal buyers are attracted by various tax benefits property investment affords, eg. gains are not taxed, effectively. Otherwise how do you rationalise the analysis made by Brian Fallow, which does result in one implication to be wary of, that is, implement anything that makes property investment less attractive, very carefully - " ... could be the last straw for some highly geared investors and induce a wave of selling into a fragile housing market."
I agree with you, housing could be made more affordable by appropriately de-constraining supply, and imprudent credit growth has also been a major root cause of the recent bubble, see my comments above. However, even if CGT, similar, were to have no effect on house prices, it's not a good reason to reject it, see comments thoughts above, in particular about creating a more balanced tax structure and reducing other taxes, plus:http://www.realeconomy.co.nz/144-capital_gains_tax_pros_and_con.aspx
Would South Africa have been able to implement a CGT if a property holding elite minority was still running the show?
I wonder what's stopping NZ?*
Cheers, Les.
* I might be imprecise on this, but isn't it that we have about 60% of parliamentarians and 4 to 6% of the population involved in land, property investment. Couldn't be some conflicts of interest floating around in The Hive, could there? Plus, one has to say, what minorirty party in our MMP system wouldn't be very pleased with that kind of representation leverage .... Funny that.
Actually they didnt utterly fail, the research done suggested CGT took "some" of the worst out.....wht caused to huge bubble was cheap, easy to get credit.....when you pump a massive stimulus into a scenario "normal" checks on the outlandish excesses cannot cope....
If you will, imagine a 1.5litre car going down a steep twisty hill road, the CGT are the brakes...now throw 2 tonnes of trailer on the back, that's cheap credit (aka Alan Greenspan darling of the right and dispile of Anne Rand, so actually its failed right/liberaian economies and not the left)......you are going to crash at the bottom and that 2 tonne trailer is going to crush your economy aka Ireland, GCT will slow you down a bit....its not going to save you.....take away that cheap credit before you are too late and the CGT might....if its not to late....AKA Ireland.
regards
It is interesting to read the PI's moan and groan over the thought of capital gains tax. It is an inevitable tax that will come into play one day when the government is forced to look for more tax. The way our economy is going at present it might be sooner than later. In the Dominion this morning NZIER mention that property prices are going to continue to drop as a result of people leaving the sinking ship and the rising cost of living expenses affecting people's ability to borrow. Capital Gains Tax will therefore reduce for many as they sell into a dropping market.
Correct me if I am wrong. Russel Norman used to own (may be still owning) a number of investment properties in Dunedin. So if he's pushing for CGT, he could be:
A. Very noble
B. Very stupid for aming to shoot himself in the foot!
C. Smart dude and found some loopholes if f he's still owning those properties!
You missed d) Sell them quick.
I guess if he owns several properties he's accepting a CGT is needed....he's thinking shock horror of the good of NZ, unlike National and Labour MPs....
Funny thing but the Green's tend to be like that....
I'd be interested to know if he did and if he still does....selling them in the last year or so would be informative.....ie he's acting because he can see the outcome on this path.
regards
I have not your knowledge of his investments - not a member of the Party nor anywhere near it.
But
It would have to be A.
You only think financial gains are 'good', if you think the system will continue to function, and the thinking end of the Green movement have long come to the conclusion that it is doomed.
Exponential growth within a finite sphere of operations, is not permanent. In case you haven't gotten it yet, exponential growth is expressed in terms of 'doubling time'. The last three 'doublings' take you from 1/8 of a finite resource (developable land for instance) to 'all gone'.
1/8-1/4, 1/4-1/2, 1/2-gone.
There are greens of the 'save the -------' kind, who maybe don't get that big picture, but I doubt Norman is from that echelon.
Powerdownkiwi.
Reading your comment, I nearly choked on that green, inorganic, non chemical treated piece of salad that I am having for breakfast!
I guess if I was a wealthly PI, I would cash up all my investment props - buy a big V10 American ute, fill it up with chinese made diesel and turn up to the next Greens party annual meeting!
and do what? prove you are a dinosaur?
You obviously dont get it....we produce 84~86mbpd of oil, that's about it. Even the big oil companies say 95mbpd is about the max and then they dont say how long they can produce it for....I dont think we will see 90+ ever.....so that means prices will rise.
Second point a study is the in-elasticisity of goods, example to wheat, the evidence is that to alter the demand (decrease) 1% takes a 25% change (increase) in price........ oil is similar or worse.
The most realistic drop we have in oil production is 4%.....that suggests 100% change in the price of petrol....
So how does it look running a gas guzzler when petrol is $4 a litre and deisel is $2.70 a litre?
Who's the fool, the one who invested their cash in 3 tonnes of junk steel? or the one running a Toyota Prius?
I use 1 tank of gas in 4~6weeks....if pushed I could probably make that 8 weeks+ per tank....right now that is $70 a tank.....
People around me are doing 1 1/2 tanks of gas a week...with their SUVs....so my cost per week in petrol is $15.....so say it doubles....$30 a week, affordable for me....no biggie....
SUVS have bigger tanks....say $100 a tank....$150 a week in gas, they say they are hurting financially....$600 per month....watch that doubling to $300 a week or $1200 a month.....what will happen to the value of a SUV? good luck selling one.....
Chinese deisel, china has a shortage....I think they have even banned deisel exports....so you will be pushing your SUV to the Green's conference.....that will be funny to watch, let me know.
regards
steven, i think you need to go outside and play a bit more. It's not that bad outside ;o)
Also, I wish the Greens supporters are going for the Prius ! I often spotted them driving clapped down jap imports blowing a huge cloud of black smoke and dripping engine oil (which would normally washed down to the sea).
lastly "greed is good"
How do you know the driver(s) are green supporters?
Usually I see green's on push bikes...aka our mayor....
I actually drive a small and fairly old japanese car....but its in good nick, uses no oil etc....I couldnt justify a Prius based on its total life energy cost....let alone pay its actual asking price....if I had the $ I'd buy a MIEV....no petrol, no petrol stations, no shortage risk and a fraction of the cost to run...You only need a prius if you need the range....I dont.
I am looking at a 3kw electric bike though......when the SUV owners cotton on to the fuel price, public transport will be too full to use..........
Greed is dead........the greedy forget they are parasites on society....the changes coming mean parasites wont be needed or tolerated....
regards
steven
Normally the bumper sticker gave it away (and their lack of personal hygiene !)
I am an ex-wellingtonian in Auckland but the dont be fooled by politician - Wellington's mayor is driving an Audi turbo charged. Auckland mayor is driving a V6 Holden (god blesses him)
For me I have a modern V6 car with free-flow exhaust... the noise... it's just haven! I will keep an eye out for you in case you need a tow.
@ powerdownkiwi “the thinking end of the Green movement”
Now that’s an oxymoron if ever I saw one!
We (NZ) don’t have and never have had exponential growth rates of the type that you imply. If our rate of GDP growth is say a steady 2.5%pa, it would take approx. 28 years for the economy to double in size. If we convert the economy to a factor of 100 as at today then in 12 months time our economy would be equal to 100 x 2.5% =102.5, Year 2, 102.5 x 2.5%= 105.6, year 3, 105.6 x 2.5% = 108.24, etc., etc., etc. Our growth rates are not 100 X 2 = 200, Year 2, 200 x 2 = 400, Year 3, 400 x 2 = 800, etc., etc., etc as you imply. Kapeesh? While all ‘growth’ is exponential if you count if for long enough, what’s important is, is its continuance sustainable over the time frame that you’re counting.
You see that’s the problem with you greenies, you never tell us anything that we don’t already know or that isn’t as obvious as a light on in a dark room. But you just always seem to screw it up in the telling.
David B.
Careful who you take on.
And what tripe you blurt.
And don't say 'as I imply' . I imply nothing, ever. I state.
3% growth doubled in 24 years. And doubles that in the next 24. 10% growth (as claimed for China).
Yes, lower exponential numbers take longer to double, but we're already chewing into the planet at 3x the sustainable rate - bit late to rely on a slower rate.
And like a lot of folk, you talk of 'the economy' as something real.
I'm talking the physical world, without which (maybe you've not noticed) there is no 'economy'. It's the doubling of the extraction, depletion and pollution, that is the real issue.
Physical resources, when attacked exponentially, absolutely correspont to doubling-times, on the up-side of the Gaussian. Naturally, beyond the peak, the process becomes somewhat compromised. This is exascerbated by the fact that the first half was inevitably the cherry-picked best.
The problem with your type, is obviously - from you final statement - that you think it's OK to count on some short time-frame.
Then what?
Hope you don't have kids.
Sloganeering, powerdownkiwi, is not a substitute for facts. Nor is grabbing disparate concepts and themes and running them altogether and regurgitating them in some sort of rambling stream of consciousness make for meaningful statements or even ones that are remotely correct about the world in which we live.
I understand from what you have posted on this blog that you have held your position that the world is on the cusp of collapse for over 30 years. You must be a very patient man, because dude, the world hasn’t ended and it hasn’t collapsed. And I predict that you will be long since dead and buried before it gets even close.
By the way, don’t threaten me; I have zero tolerance for bullies.
Would be interesting to know the asets of MP's , they are supposed to declare them aren't they, but would bet that Russel Norman will have trusts set up, and to be fair, why wouldn't he?
If they ever do insist on bringing in a CGT, they better change the law back on recent change to gifting 100% in a given year because there might be some family members suddenly being gifted their own residential properties
CGT!? Forget it! The writing is on the wall for NZ property regardless. A GCT anytime in the next few years would simply create an Ireland situation in NZ. The global fallout since 08 is entering a new and painful phase. The huge amounts of private debt amassed during the property boom cannot be inflated away as many hoped - that much is obvious. Unemployment is rising again, wage growth is almost zero….but critically commodity prices are rising…and fast - it's textbook stagflation and cheque mate for many western governments. Commodity prices (particularly oil) will mean interest rate rises to maintain a high dollar to shelter crude prices from kiwis at the pump. Problem is, with no wage growth and massive private debt many households will not cope with their mortgages.
CGT or not, property debt is now REAL debt and people are starting to realise that capital gains won't pay the mortgage…their pay-packet will. JK should do nothing regarding property tax, as even the best case scenario looks like stagnant prices for many years. However, my opinion is that NZ won't get off that easy - having private debt similar to Greece and Spain is a horrible situation to be in and puts NZ are the mercy of global markets. Watch this space.
Asset price inflation is a symptom of too much money supply. CGT or any other ill conceived idea will do nothing to address the root cause, which by the way, is also causing many other problems such as cost-price inflation (ie rising cost of living), high commodity prices, stagnating "growth" etc.
Its a well recognised linkage, the solution to which is to constrain the supply of money (aka credit aka debt). Focus needs to be on controlling the supply of money, anything else is about as pointless as a game of whack-a-mole.
Yes and no.
Constraining money supply (by removing the fiat part, and also the usury part) might indeed reflect reality - for a while.
But nothing happens without energy, and that has topped out. Therefore - efficiencies aside - you've still got a problem.
Clearly there will be less work done, and less to purchase. Does that mean you have to keep reducing the money-supply? I'm assuming so.
There's going to be a widening gap between desire and delivery - but I guess that was always going to be the case.
google: Club of Rome 1992 jif.
Have a good look at the oil peak, the longevity peak (both happened as predicted) and check out the rest.
Makes one think!
@PDK, The problem I have with using the Peak Oil "trump card", is that it is a bit of a conversation killer don't you think?
Its like if I was responding to arguement X, and I said, well hang on there's no point in discussing that because in 500 years from now NZ will be 100m underwater due to climate change.
Being 100m under the Hauraki gulf too would have an impact on money supply, and whether capital gains tax might be introduced I'm sure. Might also give new meaning to leaky building.
Matt.
No.
This is now and the next five years.
You may indeed discuss the left (or right) hand rear wing-nut on the red (or blue) deckchair. I will, however, point out that the imminent sinking, renders the discussion somewhat irrelevant.
Now discussions of lifejackets, lifeboats and hypothermia-dodging tricks.......
I'm in.
You have to realise, I've been thinking and doing just that for over 30 years, watching this unfold. I communicate now, because there is no time left.
And sometimes I get short on tolerance. For which I apopogise. But not for the message.
:)
Cheers, yes I'd seen it.
Time left?
The problem is that if you have peaked your energy flow-rate, just to maintain BAU, then you've nothing left over to adapt your infrastructure to something else. None of the 'something elses so far identified, are as portable and as compact as liquid fossil fuel.
Listen the the nine-to-noon John French interview for that.
It takes oil, for instance, to build an electric car, transport its materials to factory, then it to you. And that still doesn't address the fact that it woulfd run - globally - 70% on coal.
Your food is 10 calories of oil to one of food in your mouth (grain) and 27 calories of oil to one in your mouth (meat). You're eating oil.
As is the global population, which will be 3 times its 1965 total, by 2050.
Clearly TSWHTF rapidly.
Take a look at that 'club of rome 1992 jif'.
We have to establish the public transport, food system, and sustainability of other systems (water, sewerage, roading, buildings) while it is still available.
I reckon that means: within 5 years. Perhaps less. I've gone a long way down the track - and I share the knowledge for free. Not that the majority are there yet.
cheers
Matt you are right the mess we have today is a result of far too much liquidity.
A very interesting piece by Andy Xie
http://english.caing.com/englishNews.jsp?id=100223434&time=2011-02-01&cl=111&page=all
Thanks Colin, good article. That's pretty much the problem with the Keynesian way of economics... doesn't work, or so we are slowly beginning to realise.
Luckily (or probably not depending on your point of view), the current economic system carries within it the seeds of its own destruction.
Very true Animal Lover, that's the beauty of economics - far too mainly variables to be a science at times (as your opinions in 94 proved).
I just get the feeling that lots of factors from 08 are coming to a head in 2011 - the austerity measures basically put a plaster on a wound that won't heal (the wound being debt and unemployment).
I can't see a magical wave of wage growth inflating the debt away, yet I also find it hard to envisage a generation of belt tightening and debt repayment (human greed also ensures speculation). I have neither a great deal of debts or assets, and so am watching the events unfold with much interest and no agenda. One thing is certain, 2011 be a wild ride and create textbook case studies for the next generation on economic policy.
It was inevitable that sooner or later New Zealand would implement a capital gains tax, Norman told interest.co.nz, saying it was the central element missing from the Saving Working Group’s prescription for how to improve the nation’s savings rate.
so how do the Greens feel about immigration given:
Migration policy linked to inflated housing prices, Government spending and low savingsAnti-immigration feeling has no place in the Green party Immigration and Population policies released today, Green MP Keith Locke says.
"Our policy is the opposite of Winston Peters'," the Party's Immigration Spokesperson Keith Locke says.
http://www.greens.org.nz/press-releases/greens-counter-peters-welcoming-immigration-policy
On welfare the Greens believe that every child deserves the same start as any other (home health education) no matter what actions the parents take or how many children they have. They justify this by citing the Spirit Level which states that more equal societies have fewer negative statistics.
Here it comes..600 Suez canal workers have dropped tools and are having a sit in! Meenwhile Hammas have admited blowing the Gas line to Israel,and vow to step up operations..Oil jumped,on this news...Saudi have overstated their pumping capacity by 40% and cannot fill any disruption gaps .They all overstate their reserves so they can sell more barrels under the standing OPEC agreements.
A capital gains tax ("CGT") is totally unnecessary. The focus instead must be on improving the quality of Government expenditure and cutting it. It is not a sustainable situation to overspend over $300 million per week, and fund this by borrowings.
Savings Working Group ommitted 2008
The Savings Working Group ommitted to analyse the impact of 2008 on the housing market, which was the single worst year for house prices in New Zealand history (real falls were around -11% in NZ for that single year). Instead they worked on the 2001 - 2007 period, a "boom" period in the housing market. It is not fair to only include the boom years and ignore downturn years. Remembering that New Zealand from 1990 - 2007 had the 3rd largest population growth rate in the OECD, and migration is one of the major factors in the housing market. Andrew Coleman and John Landon-Lane in September 2007 produced an excellent report for the Reserve Bank entitled "Housing Markets and Migration in New Zealand, 1962-2006". Their research showed that a net immigration flow of 1% is equivalent to a 10% increase in house prices. So if our net immigration went up by 10%, does this one factor alone show where the movement in house prices went?
It is time for Russel Norman to look at the full picture and not just the portion of the statistics that he likes. He stated that "the tax system is the cause of half the increase in house prices in the last decade – clearly the thing that’s missing is the capital gains tax, excluding the family home”. With all due respect this is not correct, and in fact imposing a CGT would be a disaster for our country. There would be less investment, competition, fairness, privacy and employment as a result of imposing a CGT.
Rental crisis (in Auckland)
You only need to talk to people trying to rent houses in many central Auckland suburbs and in the well located beach suburbs of Auckland North Shore. There is a mini rental boom on in these areas, with large demand and significant supply issues. Lincoln Tan's excellent article in the NZ Herald http://www.nzherald.co.nz/lincoln-tan/news/article.cfm?a_id=308&objectid=10704614 is a good article documenting the rental supply crisis. There is only one direction for rents currently and that is up. At the Auckland Property Investors' Association meeting which I chaired last night, over 300 landlords were in attendance and in networking with many of them before and after the meetings, there was not one who was going to be issuing rental decreases anytime soon. In fact the vast majority were waiting for the 6 months time bar under the Residential Tenancies Act to be up, before resetting the rents up to the next market level. Imposing a CGT would mean less investors as quite a few invest in the hope of a capital gain, and I know that many will wonder if it is worth it to risk our capital and personally guaranteeing at a minimum many hundreds of thousands of dollars and having our assets let out to other people, as well as being responsible for repairs and maintenance costs, facing interest rate spikes, increasing council rates, and wear the impact of GST (we cannot charge GST on residential rentals). Many investors will sell driving supply down even further and forcing rents to skyrocket. Do we really want to impose large rental price increases on over 1/3 of New Zealanders who are tenants?
CGT is tall poppy syndrome
The other issue I have with Russel Norman is imposing a CGT reeks of tall poppy syndrome. As a capitalist with a social conscience my vision for New Zealand is for a country that embraces those that make an effort to get ahead, and rewards calculated risk takers that save over time. Housing is a very viable investment category and should be considered as part of a diversified portfolio as an inflation proof safe investment where prudent gearing levels are adopted, and adequate focus given to cashflow. Lets reward those Kiwis that don't spend up large on stuff, on buying or leasing a fancy car, having the latest 55 inch LED television, spending $300 each on a great Friday and Saturday night out should be rewarded. Most property investors I know are not flashy or showy people, but family and community oriented people that remember the carnage of the 1987 stock market debacle very well, and they choose not to risk it all to get 2-3% more in finance companies like Hanover, Bridgecorp, South Canterbury Finance etc. We choose housing not for tax reasons, they were just cream, but because we can see it, feel it, and can rely on ourselves to provide for our own financial future. Just because someone (or in this case some category of people) did well in a selected time period (2001 - 2007) doesn't mean we should punish them.
We also need to be careful about damaging small and medium business owners who in many cases have aboslutely no chance of getting finance for their business but for securing lines of credit against their own home or in some cases a rental property. In the event a CGT is brought in, house prices will fall and fall sharply. I know of struggling manufacturers that would be (margin) called and face placing their business into receivership if a CGT were implemented. There would be a lot of damage for business owners if this occurred.
So lets look at all of the facts and decide on whether we want to have a New Zealand that rewards entrepenurship and innovation, or a New Zealand that punishes those that strive to be financially independent of the Government by seeking to provide for their own retirement. Read a bit more about this on my blog at: http://www.nzwealthmentor.com/2011/01/24/we-dont-need-a-capital-gains-tax/
Kind regards
David Whitburn LL.B BSc
President - Auckland Property Investors' Association
WOW, you are so impartial, unbiased, objective and without ulterior motive aren't you David?
CGT can be made to exclude "productive" (product making) businesses so this sentence is utter baloney from a typical moron bank economist:
"Westpac Chief Economist Brendan O'Donovan I know of struggling manufacturers that would be (margin) called and face placing their business into receivership if a CGT were implemented. There would be a lot of damage for business owners if this occurred."
In NZ CGT can be made into what ever structure we like to suit our needs!
"So lets look at all of the facts and decide on whether we want to have a New Zealand that rewards entrepreneurship and innovation, or a New Zealand that punishes those that strive to be financially independent of the Government by seeking to provide for their own retirement."
Hoarding property is NOT innovative, hence it's not called "Intellectual Property"
"Many investors will sell driving supply down even further and forcing rents to skyrocket. Do we really want to impose large rental price increases on over 1/3 of New Zealanders who are tenants? """""
Yeah, but that may mean more people who currently can only afford to rent will buy. Is that not a good thing? Oh, I forgot, you only care about investors...
"In the event a CGT is brought in, house prices will fall and fall sharply"
What is your evidence for that? Many countries have introduced CGT and it has had minimal if any impact in terms of reducing house prices. However, taking some heat out of gains would not only help young kiwis get into homes, it would also help direct investment and the economy in general to more productive investment
"So lets look at all of the facts and decide on whether we want to have a New Zealand that rewards entrepenurship and innovation ."
Well well well - we will only have a New Zealand that truly rewards entrepreneurship and innovation if we move away from our national, eocnomically unsustainable infatuation with property
By the way, stamping your name and qualfications in bold is rather pompous
Matt
BA (hons) MA (hons) BArch (hons)
"Many countries have introduced CGT and it has had minimal if any impact in terms of reducing house prices." Exactly, so why do we want more tax and bureaucratic expense?
"we will only have a New Zealand that truly rewards entrepreneurship and innovation if we move away from our national, eocnomically unsustainable infatuation with property" No chance of that, Matt, it's in our bones....! ;)
Murray
BUM (hons) PI (hons) LiFE (hons) - still looks pompous even not in bold ;)
My god this argument is SO LAME! If it wouldn't work then WHY are you so scared of it being introduced?
Believe it of not WE here in NZ can make OUR CGT in any form or application WE like!. NO one is saying make a CGT based on other dumbass countries who only made it a useless tool by allowing banks to drop OCR's way too low following the Greenspan Plan.
The jig is up PI's. We are coming to get you whether you like it or not
Most property investors I know are not flashy or showy people, but family and community oriented people that remember the carnage of the 1987 stock market debacle very well
I find that a very interesting insight. If the majority of PIs remember 1987 well, the implicaton is they lost investment/wealth during that bubble/crash. Which also implies they were old enough at the time to be significant investors.
Would it be right then to assume they are mostly BBers?
Looks like they might have just blown it a second time!
"Would it be right then to assume they are mostly BBers?"
A recent ANZ survey showed 60% of property investors under 50 years old, and only 12% over 60 years old, which as they said "throws doubt on the talked-about “bow-wave” of properties hitting the market as retiring property investors liquidate their assets"
I've always said the "Baby Boomer's Sell Up" theory is over-hyped and will be a fizzer, just like the Y2K bug and various other forecasted calamities that didn't eventuate (didn't someone say the median house price would be down 30% by Nov 2009?!!).....
@ Kate: "Looks like they might have just blown it a second time"
Not an unreasonable observation Kate: Unfortunately David Whitburn LL.B BSc (President - Auckland Property Investors' Association) contribution is not a contribution - it is a "Press Release" typical of any "Peak Body" or, the preferred term "Lobbyist" who do as they are told by their committee to do their job and represent their interests. It's not often you see this type of influence peddling done so openly, but it will have been simultaneously released to all the MSM news outlets and posted on every medium or forum that accepts contributors posts. It's not an opinion. It's a contrived attempt to control and steer the debate.
Interesting debate going on :) I won't post my qualifications as I don't want to appear pompous :)
It would appear that 45-64 age group have the highest % ownership rate of rental properties
Stats from p 34 http://www.dbh.govt.nz/UserFiles/File/Publications/Sector/pdf/2009-2010-nz-housing-report.pdf
Age group, ownership rate %, mean value $, median value $
18-24 0.8 316,800 304,100
25-34 5.3 224,000 161,800
35-44 9.6 279,900 210,800
45-54 12.3 330,100 246,100
55-64 11.9 349,000 241,000
In the absence of accessible and current real-time statistics, it is useful to look to research studies that use
surveys as a means of filling the gap, even if they provide only a snapshot at a particular point in time. Snively
(2009) cites two surveys that analyse the profiles and preferences of property investors.
The ANZ Property Investors Survey (ANZ, 2007) reported that investors were typically high-income earners
with an average income of $80,000 to $90,000. About 37% of investors had an annual income over $100,000.
The survey also reported that over 20% of landlords had been landlords for less than one year, and over 50%
The National Landlord Survey in 2003 from the Centre for Research, Evaluation, and Social Assessment
(CRESA) found that:
• 38% of landlords cited capital gain as the main benefit of owning a rental property
• 32% cited the regular income stream
• 25% cited retirement investment and income
• 9% cited tax
• 8% referred to rent as providing a means for repaying mortgages.
75+ 1.8 238,400 183,600
Total 7.9 305,800 224,000
Source: Scobie, Le and Gibson (2007), Appendix Table 2, p 29
In the absence of accessible and current real-time statistics, it is useful
I would not expect your qualifications to be that great as it is my experience that PI's are generally people on mid to low inocmes who are trying to get ahead by way of property investment. Being a landlord does not require rocket science credentials. Buy a crappy building usually,deal with people who think you are rich and who do not look after your property and the return is terrible. That is why more and more rentals are going on the market.
Err...ex agent what crawled up your behind today?
You assume that I have not got 'great qualifications' because I own rentals. Your are so presumptious!
Read the stats I posted. A lot of PIs earn over 100K.
A lot of your posts are very generic with hearsay and mysterious friends telling you the inside word. Murray showed you up the other day with your claim of 1000 empty rentals in Hamilton
Never ASS_U_ME.
I like Matt in Auckland, but I think you assume that because he has three degrees (Great work MIA) he is smart because he is waiting on the sidelines.
People have to do their own research and their numbers and make their own informed choice about any form of investment.
To put the record straight, I do have more/and higher qualifications than that Matt, but it don't make me dumber or smarter. Cue for Matt to read through my post and pick up all the spelling errors :)
Regards
There are a lot more than his 49 if I recall correctly empty rentals in Hamilton. That is why when you drive around there like anywhere else in NZ you see "for rent" signs not the usual "for sale" signs on a lot of property. $100 k or thereabouts is not a great income 28/29. Not enough to get ahead and feed the family so people have looked to rental investments. Selling in 2007/2008 was the smart move as it is all downhill from here.
Ex agent says $100 k or thereabouts is not a great income 28/29.
Depending on what you read 100K aint too bad at all.
http://en.wikipedia.org/wiki/Median_household_income
And if you listen to the 3.5 income/house ratio man Hugh P, 100k will buy you a median housed priced in NZ.
It aint all 'downhill from here', haven't you read the latest QV release, Auckland prices are stable and places to rent in demand
I would not expect your qualifications to be that great as it is my experience that PI's are generally people on mid to low inocmes who are trying to get ahead by way of property investment. Being a landlord does not require rocket science credentials. Buy a crappy building usually,deal with people who think you are rich and who do not look after your property and the return is terrible. That is why more and more rentals are going on the market.
Both are negatively geared iconoclast. The one I know personally has been told by his bank to sell a couple.. His loans are all interest only and the bank are concerned about that fact and want some debt paid off. He is not a happy chappy but he did bring it upon himself. He is single has no surviving children and one grandchild. Why did he bother to put himself in a position where the bank calls the shots and not himself. He would have at least 50 investments including some scruffy commercials. In fact they are all scruffy as he buys at the bottom end and hates spending money on maintenance. He has regular problems with tenants as you would guess. He works overseas on contract and is well paid so why bother getting so big.
I am a property investor under 45 and with 2 properties I would sell if a CGT were imposed. I rent my own home to allow me to live in a nicer location. My fear is that as David Whitburn so accurately stated, that CGT would lower the price of houses and risk me losing my business as it is really tough in the market currently to keep trading.
I have had to lay-off staff and am only taking what amounts to the minium wage out and have nearly maxed out my line of credit cross-secured against both of these rental properties. It is pretty stressful right now. I am trying to move out to a less expensive suburb but saw over 40 people in an open home inside 30 minutes in Sandringham!?!
As a Labour voter (one of only 10% in the poll - is this the Green's party special website or the Green party's finance division here as it really looks like it), I am glad my party doesn't support a CGT. We need to have a Labour dominated government to keep balance in the property market and fairness for landlords and tenants.
How is CGT going to help business owners like me?
So if CGT ,or whtever, is a likelyhood, why don't you sell now? As who's going to buy your properties at the current market price, if anything does come in? What 'upside' do you see in any tax, or other, changes coming through that are going to help boost prices? I don't see any.
"We need to have a Labour dominated government to keep balance in the property market and fairness for landlords and tenants."
LOL! Labour, the party of choice for property spruikers!!!!
Vote For Labour! We'll keep doing what we've always done to keep prices inflated, including:
- Forming and maintaining a tax system favourable to property speculation
- Devising and maintaining a regulatory environment that limits the supply of housing
Nikki - you need to think about it this way. You are not a property investor, you are a property debtor - and one who earns the minimum wage and is paying a market rent to someone else to live in an area that doesn't reflect your current means. No wonder this stressful.
If you reduce that debt now, you relieve some of that stress. Ask yourself, could you earn more than the minimum wage working for someone else - preferably an employer within walking distance to one of your rentals? If so, perhaps the best idea is to sell the business, take the salaried employment, sell one of your rentals and live in the other.
CGT will lower the prices of houses and hopefully rent so people have smaller mortgages and rents and therefore will be able to spend more with businesses like yours. That has to be a positive move for the country as a whole. Housing values coming down will also make it more affordable for more people to buy homes who currently are not in a position to do so. We need to stop the need for them to go to Australia to buy their first home. If you are not in central auckland rental property wise I would sell at least one of them as they are going to keep dropping in value for some time yet.
"CGT will lower the prices of houses "
Please show me one example from anywhere or anywhen of putting an extra tax on something lowering its price. I'm in favour of a CGT but have no illusions about it lowering prices. At best it would be price neutral to the buyer. Labour introduced a "Speculation Tax" of 90% of the value increase of a property about 1972. It ran for a couple of years before the Muldoon Govt threw it into touch. During that time it was only paid on one, yep, one transaction.
It would be a useful device to help prevent speculative buying in the future, but lowering current prices, not a chance.
Wow, Nikki, take the hint, go get a real job. Ingnore the noise thats around short term fluff. Long term its all down hill.
I had a friend ring this morning. Went to see his bank manager to try and transfer some O/D debt onto his longer term debt. Bank manager gave him some bad news. He now is forced to live within his means.( he has hit the wall) He is going to be spending a lot less this year and for probably the next decade. Rural NZ is not going to be proping up urban NZ any longer. The cold hand of capitalism is coming our way.
Hey no need for personal attacks thanks - especially from anonymous sock puppets with fake names like andrewj and Matt in Auck. Labour is a great party as it embraces the workers who are either employed or in business. It doesn't seek to punish tenants by making rents go up, home-owners by collapsing house prices. It is a party for all Kiwis who want a hand up not a hand out, and I like being rewarded in my clothing business. Sure times are tough now, but I am happy renting to get my kids into a school with parents that care about their kids education.
Imposing a CGT on my rentals is absurd and true leaders like Phil Goff and David Cunliffe know what damage that this would do to me and my friends that teach, nurse, serve the public working for teh Auckland Council and in Government Departments. We like to invest to provide social housing for our communities. CGT would make it not worthwhile for the risks we have in dealing with bad tenants that inevitably occur in South Auckland, and having to give personal guarantees to lots of debt. I like my tenants and consider them my friends. Even if I have to put in a bit of money each week to top up the mortgage, it is so worth it as I am helping them in their lives too. We cannot have everyone in a state house these days.
PS> andrewj I like the flexibility and ability to be a bit part time and flexible in my hours. Who are you tellign me what to do?
PS> Matt in Auck - Labour is the party for everyone, landlords and tenants. Look at the last few times Labour was in Government and all teh economic prosperity and surpluses we had. I had a thriving business then, my friends in the public sector got massive pay rises and cut hours and now with National it has gone to custard. Only Labour show true intelligence and financial leadership.
The labour party sold us out on a wave of debt. They mislead and lied to the electorate. They let one of the most destructive bubbles in our history establish. They let investment be misallocated on a grand scale. If you want a hand up I sugest you sell your houses while there are still suckers out there.
I see your friends are happily sucking away on the state Tit. Im sorry but aunt helen has dried up, time to be weaned. The public sector has a wage stucture higher than the private sector, tax revenue is falling you little dream world is about to end.
Nikki Property is your real name?
Im taking this post as a hoax.
May be Nikki hasn't yet had the benefit of experiencing an economic squeeze before, if this be her.
".. 2003 New Zealand Young Designer of the Year Award resulted in 17-year-old Nikki..."
I am very serious, and when Phil Goff is the elected to be the next Prime Minister of NZ, with David Cunliffe as our Treasurer, we will see an end to the recession, and another period of prosperity. Sharemarkets and Property Markets go the best with Labour.
The Auckland Property Investors Association are right in saying a CGT would be detrimental to our economy in so many ways. National and Labour both know this. They are quite similar parties except National sell state assets, Labour keep them (now or if they are better sold to third parties for the interests of NZ) and they help younger business owners like me in taking risks, and they don't cut the public sector back to danagerous levels.
Remember Labour is a party for the workers and we reward hard work - so if you get an asset, you get the rewards from it. If you get a job, the rights flow. If you choose not to work, you get a hand up and training to be a productive person. There are some amazing union training schemes these days, and so many cool and funky polytech courses. Look at how working hours per week went down thanks to labour. This is progress. National's idea is just to get everyone working more hours for many more years. The Green's idea is to get everyone to be beneficiaries of the state and drive out those with assets to invest outside NZ (where returns are often better), and to sign onto ridiculous CO2 levels when they ignore evidence of the sun's temperature rising and long term climate issues, and think NZ makes a difference in the world's pollution count. ACT's leader busted himself with perks and trading in for a younger wife (so they are gone, unless John Boscawen can beat a boring and stumbling Alan Peachey in Tamaki which is very possible), Hone has destroyed the Maori party that will get cleaned up in Te Maori seats and rightfully returned to Labour, and NZ First may win 5% but who can trust Winston Peters.
I am very serious, and when Phil Goff is the elected to be the next Prime Minister of NZ, with David Cunliffe as our Treasurer, we will see an end to the recession, and another period of prosperity. Sharemarkets and Property Markets go the best with Labour.
The Auckland Property Investors Association are right in saying a CGT would be detrimental to our economy in so many ways. National and Labour both know this. They are quite similar parties except National sell state assets, Labour keep them (now or if they are better sold to third parties for the interests of NZ) and they help younger business owners like me in taking risks, and they don't cut the public sector back to danagerous levels.
Remember Labour is a party for the workers and we reward hard work - so if you get an asset, you get the rewards from it. If you get a job, the rights flow. If you choose not to work, you get a hand up and training to be a productive person. There are some amazing union training schemes these days, and so many cool and funky polytech courses. Look at how working hours per week went down thanks to labour. This is progress. National's idea is just to get everyone working more hours for many more years. The Green's idea is to get everyone to be beneficiaries of the state and drive out those with assets to invest outside NZ (where returns are often better), and to sign onto ridiculous CO2 levels when they ignore evidence of the sun's temperature rising and long term climate issues, and think NZ makes a difference in the world's pollution count. ACT's leader busted himself with perks and trading in for a younger wife (so they are gone, unless John Boscawen can beat a boring and stumbling Alan Peachey in Tamaki which is very possible), Hone has destroyed the Maori party that will get cleaned up in Te Maori seats and rightfully returned to Labour, and NZ First may win 5% but who can trust Winston Peters.
C'mon guys , Nikki is on the up and up . Phil Goff has already signalled that Labour will boost the miimum wage to $ 15 / hour . And David Cunliffe will extend WFF to encompass more of the long suffering middle-income tax-payers . There will be more jobs . Children living in poverty will decrease . Hospital waiting lists will be slashed again . Housing NZ will upgrade existing stock , and build more . All property developers will be forced to incorporate affordable housing into their subdivisions ....
.... It all worked so beautifully from 1999-2008.......... Really don't know why you lost faith in us ....... We'll sock it to the rich-pricks , once again , with punitively high taxes , which they cheerfully coughed up last time ............
.......... And if needs be , the pixies at the bottom of the garden will fire up the Gestetner , and print off a whole new batch of munny ........ The Kiwi peso .............
Ah Nikki , you are a treasure !
You should change your name to better reflect your circumstances.
Nikki who Blindly Chose to Believe in Growth Forever.
Doesn't matter whether you followed the red signs or the blue signs, there was no yellow brick road.
Goff, Cunliffe, Key and English either lied to you. or they truly believe their hogwash. Either way, you've been had.
There's a best-seller waiting to be written though - might earn you some royalties. I'll give you the working title for free:
Grandchildren of the Poor.
your sequel could be:
Simple on a Recycling Bin.
Others would be: 19 and hatey-poor; The Turd Wave; Humanism in Purgatory; Armaggedon Closer.
All yours.
The following is an example of CGT versus Stamp Duty on a property purchased for $300,000 out of 10 similar properties all valued around the $300k mark. The one purchased is done so because it has potential to be done up and enhanced, so spend $30,000 on a coat of paint, re-roofed, and some fencing, then sold off. Whatever. Purchased using bridging finance @ 7% for 6 months. Having spent $30,000 it is only worth $330,000 so long as your prospective buyer likes your added value, otherwise he can buy any one of the others for $300,000. This example demonstrates how it takes the quick turnover speculators out of the market. The business model doesnt work under a stamp duty regime. I'm a retired speculator.
Stamp Duty method
Initial Purchase of property $300,000
Stamp Duty $ 15,000
Legal costs $ 2,000
Renovation costs $ 30,000
Auction program costs $ 5,000
RE agent sales commission $ 9,000
Bridging Loan Interest $ 10,000
Total $371,000
Sold $330,000
Capital Gains Tax nil
Stamp Duty paid $ 15,000
Capital Loss $ 41,000
CGT method
Initial Purchase of property $300,000
Legal costs $ 2,000
Renovation costs $ 30,000
Auction program costs $ 5,000
RE agent sales commission $ 9,000
Bridging Loan Interest $ 10,000
Total $356,000
Sold $330,000
Stamp Duty nil
Capital Gains Tax Paid nil
Capital Loss offset $ 26,000
An interesting comparison iconoclast. No wonder some bloggers here are all for a cgt - in effect it means they pay nothing and have a loss to offset, all the while making the ignorant feel good about capitalists paying for a tax that while in theory would exist, but in reality doesn't.
The deafening silence on a call for stamp duty is very noticeable. As your example shows it would be a true cost, not a myth as your example shows a cgt would potentially be.
Now listen up you lot - get a load of this :-
A Contributors post in BusinessSpectator Today
Self-fulfilling property prophecies
I can't comment on Germany, but I am familiar with Switzerland (See A housing market whodunit, February 10). The chief reason for the situation would be that Switzerland has punitive taxes on property profits in order to stamp out speculation. If you sell within five years of purchasing, the tax rate is 90 per cent of the profit, regardless of your (low) income tax situation. This tapers off after five years, but after 50 years it's still in the order of 10 per cent of profits. (And there is no adjustment for inflation!) The introduction to the valuation of my parents' house in Bern prior to selling it three years ago read: "Single family houses are not an item of investment, they are an item of consumption." Here in Australia we seem to regard housing as an investment, something to make money on. And if enough people play that game (including the taxation law) this becomes self-fulfilling – at least for a while. On the subject of affordability: five-year mortgages are at 2 per cent in Switzerland. One million gets you a decent house (but maybe not in Wengen or Gstaad or Davos!) The interest will be far more affordable than if you buy a house in Sydney and borrow at 7 per cent or more.
Markus Auf der Maur
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