Treasury and the Inland Revenue (IRD) aren’t confident extending the bright-line test from two to five years will make houses more affordable.
The Government has committed to extending the test by introducing a supplementary order paper to the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill.
The Bill is expected to be enacted in March.
It will mean profits from residential investment properties bought and sold within five, rather than two, years will be taxable.
Current exemptions, including that for the main home of an owner-occupier, will remain.
Treasury and the IRD can see merits in the extension, but say its benefits are “difficult to quantify”.
In the regulatory impact statement (RIS) they prepared for the Minister of Finance and Revenue Minister, they acknowledge: “To the extent that the longer bright-line discourages speculators and investors from buying residential property, prospective first-home buyers could benefit from this proposal.
“At the margin, discouraging residential property speculators may also reduce competition in the housing market, reducing upward pressure on property prices and improving housing affordability for first-home buyers.
“Existing owner-occupiers who are seeking to move up the property ladder may also be positively impacted by this policy, to a lesser degree.
“While less competition in the market may reduce the price they would otherwise receive for their existing property, it may also reduce the price of the next property they buy.”
However in weighing up the risks and unintended consequences of the policy, the IRD favours the existing two year test “mainly because it reduces over-reach”.
In other words, reduces the likelihood of those not intending to resell being implicated by the law.
The RIS says this risk could be managed by adding exemptions to the test, but this would only complicate it.
Treasury’s stance isn’t quite as definitive as the IRD’s.
It says the risks related to “over-reach” and “lock-in” can’t be quantified, so it is “difficult to assess their significance in relation to the Government’s objectives for extending the bright-line test”.
Lock-in can affect the efficient allocation of assets, discourage property owners from recognising their assets and essentially reduce the number of dwellings for sale.
The RIS also points out reduced rental property supply, caused by less investor/speculator activity, could cause rents to rise.
“A higher level of homeownership among former renters is unlikely to completely offset the pressure on rental prices,” it says.
The RIS notes that extending the bright-line test was the only option the agencies had a mandate to assess.
"Consequently, it is not possible to be confident that the Government’s objectives are being met in the best way and with the least unintended consequences.
"It would therefore be desirable to monitor and evaluate the outcomes in practice."
Steven Joyce says Government should heed the warnings
National Party Finance Spokesperson, Steven Joyce, is critical of the extension.
He says the law change needs to be properly examined through a select committee process.
“This is particularly true given the ambivalence of Treasury to the move and the opposition of the IRD to the change…
“By tacking this change on now to an already existing tax bill, they are seeking to avoid scrutiny by mum and dad investors and the Finance and Expenditure Committee.”
Joyce says: “We have a Government that is declaring war on mum and dad property investors and treating them all like they are speculators. Whether it’s this or negative gearing or the proposed capital gains tax, it’s all designed to nail legitimate property investors.”
However Revenue Minister Stuart Nash is adamant the extension will “bring fairness back into the tax system”.
“We need investment which grows the economy and creates jobs, not the sort of investment which distorts the residential housing market,” he says.
The RIS estimates that once in full swing, the extended bright line test will raise $50 million of revenue a year.
237 Comments
Exactly. I bought a couple of my properties in the 90's with the intention to resell but not till when I am about to retire (still 20+ years away). So when I am selling them in 2040 are you telling me that IRD will go back 40+ years to enforce the policy of intent for CGT?
DGZ, it comes back to your intentions to sell in the first place. It appears there is no time frame. This is why many speculators wish to be labelled "investors" thinking this is a cunning way to avoid CGT. IRD are not stupid.
This is what IRD have to say about a common misconception that if I only sell one property or hold a property for 10 years before I sell, I won't have to pay tax. The law says: Wrong on both counts. It always comes back to your intention when you bought the property. If one of your intentions was resale, you'll pay tax on any profit you make when you sell. It's a popular misconception that holding a property for 10 years means you avoid paying tax.
http://www.ird.govt.nz/property/property-selling/selling-property.html
My gut feeling is that this is an area where future Governments, using the IRD, are in a strong position and may milk this big time for extra revenue should it be needed. Everyone has to sell eventually.
This is what your "mentor" John Key had to say on the matter in May 2015;
"people calling for a new capital gains tax often overlooked the fact that under existing rules anyone buying property with the intention of selling for a gain was liable for tax on that gain"
https://www.stuff.co.nz/business/68612603/tighter-rules-on-residential-…
DGZ, if you have any concerns, ring IRD, allow them to identify you and ask them yourself.
I bet that you won't ;-)
I cannot find any evidence that there is a specific time frame for IRD not to perform retrospective CGT assessments.
Personally, I wouldn't be prepared to risk this one myself because the noose does appear to be tightening. It would be interesting to revisit how IRD are administering this if the Governments book go into the red. It's a potential cash cow.
Don't get me wrong, I couldn't care a less if you paid nil tax, its your life. Just passing on general information that's available for public viewing.
I cannot find any evidence that there is a specific time frame for IRD not to perform retrospective CGT assessments.
WRONG.
IRD will never go back 40+ years to drill into your intention if the property was bought for resale. It would be silly not to claim that you're a long-term investor if you're a 'Buy-And-Keep'..
That whole trail of comments is stoopid. End of the day Govt/IRD can change rules and do what they want. One suspects that most investors, speculators don't vote national so changes targeting that group would loose no votes. Will more change happen....but your guess is a good as mine.
I'm sure PI land BBQs all discuss how great it is that this could never happen, but who really knows.
The interest editors have your details right? Wouldn't be that hard to pass the information on discretely without you knowing and from a privacy perspective, well given our previous governments position on honesty and integrity with privacy matters (e.g. Todd Barclay).....who cares? The law is there to be broken right?
Think the Search and Surveillance Act also states that it's allowable to violate a persons privacy if it is suspected an individual is breaking the law. And it sounds like your position is marginal.
Under the intent rule, then yes, any profit is taxable whether it is 10 years or 40. The likelihood of IRD following up on the rule after 40 years is probably very minimal. I know of one property investor buying in 2000 whose sole intent was to build up the equity and sell it when they retired. Under the intent law they should have paid tax when they sold 14 years later. There was no phone call from IRD asking what their intent was when they purchased.
This is why the intent law needs to be removed. Ideally the capital/revenue distinction needs to be removed entirely. It is an outdated concept. If it is income, pay income tax.
And you will advocate for such increased value to be indexed and the annual increase apportioned over the years or do you support taxing it in the year of sale thereby increasing the tax if the additional income moves the income to a higher tax level in which case you support fiscal drag practiced by almost all past Governments in NZ and elsewhere.
That we confuse the difference between a residential property and a business share is a very worrying sign...
A residential property should be where we raise families, and a share is where we invest to build a more productive business environment (create jobs/productivity).
Buying and selling residential properties to each other is a zero sum game. Only winner is the bank (but from a short-term self interested perspective, it may seem like there are winners, but that thinking is shallow and doesn't consider the whole society and the future (only the present and the self) - it's almost as if they can't recognise the discomfort they're creating for other people).
There is absolutely no problem with buying a house to let. It's always happened in earlier decades here and overseas even in shamubeels most favourite model country for rental standard and law, Germany. If you don't like the whole concept then emigrate to communist Russia mate
i brought my rental house for the same reason increase in CG, not sure on your point.
if i buy and sell shares short term IRD will come down on me like a ton of bricks if i did not declare the income as taxable as they say the intent is trading.
but for short term house buying and selling they will look the other way as long as i live in it (now) and use the excuse change of circumstances.
....... I know of situations where house flippers who have always lived in the property and have got pinged by IRD (and its amusing to hold such info and observe how they still put on a front at the bbq's!!). The IRD sometimes move slowly, but trolling through property records and targeting a pattern of flipping (own home or not) is something they do.
Houseworks, what's eating you? CGT facts hard to swallow? Just suck it in like the rest of the population.
In my opinion, if someone doesn't follow this particular tax law, it leaves them open the possibility of an expensive an unwelcome surprise down the line. Just because IRD don't make contact doesn't mean that the individual is in the clear.
Under the intent provision, it very much leaves many open to the possibility of retrospective assessments years down the line. The way I see it, IRD/future Governments have both the legislation and the time to perform retrospective assessments if need be. Data matching is becoming more powerful by the day.
Trust me, I'm not trying to be venomous towards property, or even share speculators. I just think its plain foolhardy to assume that when capital gains are realized outside the brightline, no matter the timeline, then there is no CGT payable. Even DGZ was going around telling everyone this!
Seriously? ha-ha! Many astute property investors already know the tax law and pay their fair share of tax. The majority I feel a conveniently naive and are in no position to complain if they get a fright. None of my comments should come as a surprise. Its all on the IRD website in public view. Despite what you think, I have no agenda to upset anyone.
Houseworks, if you have a problem with the current CGT law and how it applies to you, ring IRD!
Do you think this guy will be whacked with a CGT? NOT!
Apartment 'flipped' for $500k gross profit in five months. http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=119…
DGZ, nice! There are many cases like this in recent years. They must have spent heaps on it though. A gross profit of $500K, minus materials expenses, tax, agents fee, legal fees etc = nett profit of (?)
Still not bad for five months work.
Not unlike the typical life cycle of a speculator/flipper, how much $$, and how many properties properties has this couple lost money on? Its swings and roundabouts - right? I have witnessed examples where greedy relatives have been driven by the need to make up for previous losses, with mixed results.
Only the good news stories are aired openly, otherwise its a purely need to know basis only ;-)
Hi DGZ Its possible he will be liable for bright-line tax but also the headline is misleading imo. The owner completed a total gut and refurb with all sorts of costs coming out his ears. The Herald is highlighting all these cases and ird has access to the same info but we don't hear about how soneone has been pinged
Houseworks, that's just complete rubbish!
IRD say; If you buy and sell a residential property within two years, you'll pay tax on the income you earn from the sale, unless you're selling your family (main) home or another exclusion applies. This is regardless of your intention at the time of the purchase. A withholding tax may also be deducted at the time of sale.
Houseworks, can you please enlighten me as to what other earnings can be derived (besides capital gains) from the sale of a property within two years and that this Brightline test is solely intended for?
On what grounds are you arguing the current two year brightline test is NOT a capital gains tax?
I'm certainly no tax expert, its all on the IRD website. I have visited several times myself. It's easier learning by doing basic research. It's interesting stuff.
I suggest you stop the random guesswork and visit it yourself!
if it was where he was living he does not qualify for the bright line test
The bright-line test does not apply to a person's main home. A person can only have one main home
http://www.ird.govt.nz/technical-tax/legislation/2015/2015-111/leg-2015…
Hi All :
on the ird website there is a questionnaire which answers if CGT applies.
Normally a residential home( to keep family away from the rain/cold/heat/ and have privacy). should not be taxed because
a) unlike other forms of "Capital" the home does not qualify for any depreciation. In fact the maintenance/repair taxes etc are paid for by the owner from taxed money.
b) If the person who lives in the house then passes it on to relative there is no tax.
c) The provision to avoid TAX gain through outright sale also as per IRD if there is
no pattern in selling and buying houses. ie the person keeps on buying and selling.
d) If the IRD took a person to court for sale of family home after 10-15 years they would need a provision in the law for depreciation/replacement of house after its
life ( from the day it was built) (50 years?) and also revaluation of the house if
a major changes (or catastrophe occurred)
e) As per IRD one can offset losses of sale to income.
f) major point being as the land is normally supposed to appreciate and not the house
and the sale would include both would the cost of maintaining the house be deductible from the "profit"
g) Every person would need to keep accounts for the house and declare it in a tax return.
H) MOST important if a person sold the house after a catastrophe at a lesser price
eg christchurch it would be deductible from their taxes. Also sale of leaky properties
would be offset again.
In other countries just to avoid the taxation and the ( cost of compliance) the taxation authority waives tax if the person buys another house within a fixed period.
I do not know the best option in case of houses(read homes) since we tend to attach
emotions ( which may be correct) to them.
When you're laying off a third of your staff it's a bit rich to think they can do more audit work.
https://www.stuff.co.nz/business/industries/78231571/Inland-Revenue-to-…
that was under national, all government departments including the police were faced with the option of reduce services or and staff as budgets were not increased to match the increase in population.
you will find that policy will reverse now and staff will be redeployed to other sections to reinstate services.
Those staff could be set the task to look and all sales 10 years and under and if not the family home check tax returns
Regulation is not necessarily a negative. It provides a known environment. The question is where the balance should be. A good example is a modern form of monopoly where I build next to you with the intent of forcing you out by intentionally cutting off your sun and privacy. I then buy your place and do the same to the new neighbour etc. I have no intention of living in the houses, just extracting the biggest profit, and leave unlovable and unlivable dwellings as my legacy.
I’m borderline NIMBY/MIMBY. I can’t complain about the lack of apartments to downsize into yet say no to new development as well, however I want very long term certainty over what can be built where and I want it to be in keeping with the way the suburb is already developing. The possibility that the UP is a dud worries me as it encourages the developers to push for loose planning and then it’s all on.
I would say that if you own a property within 5km of Auckland CBD it is fairly safe to assume that high density will be allowed at some stage. It would be pretty silly to offer long term certainty of single detached dwellings anywhere near the CBD or decent public transport.
the new Auckland plan is already affecting house pricing (land) some people are now sitting on gold mines
Zoned for Apartment & Terrace Housing
https://www.trademe.co.nz/property/residential-property-for-sale/auctio…
https://www.trademe.co.nz/property/residential-property-for-sale/auctio…
This is just to stop the flippers. Stories of houses being sold several times in one day are just sad unless you are a flipper or clipper (agents). Govt promised it in the election and its in progress in parliment now. According Ird and Treasury comment is in the "thanks but just get on with your jobs" catogory.
Long term property owner nil impact, move on.
Treasury and the IRD can see merits in the extension, but say its benefits are “difficult to quantify
That's the sad story of life here in NZ - put up flack - lot of smoke screens - we don't have the data to advise you on - we've never measured it because we haven't been required to - 'bout time you started
Too many un-measurables - is that a valid reason not to do it? - NO
Fair and share - two rather innocuous and overly used words in the ongoing discourse especially when in actual fact both are determined arbitrarily and conversely both are entirely dependant on a whole host of wider considerations to allow any semblance of legitimacy. Take out the ‘and’ and it becomes a statement of entitlement or claim which is even more perverse given that it is then rather an approximation of worth based on a more personal and subjective metric outside of the wider value judgements on which it is accorded. Our current financial system has been co-opted, by those who benefit most in doing so, into being our master and not the servant of our economy and business that was originally intended. Efficiencies permitted through the allocation of capital and resources, at least in a free market sense, are now essentially subverted to such a degree that fair and share are no longer meaningful and more just a mere tautology conveniently occasioned by the political rhetoric of our significant betters. But I digress...
The Coalition Govt. Wants to slow down the housing market and stop speculation of people investing in housing.
They say it is so that people invest in productive industries in nZ that provides jobs etc.
I have never had my question answered as to what productive industries you can invest in.
By buying shares doesn’t create additional jobs and is a risky investment.
Property investors do provide jobs.
The Boy there are share and shares just like there is property and property. Buy houses in Christchurch and you lose capital. Buy in the Lakes and Dunedin and you get capital gain. Some shares are risky. Some shares just keep pumping out dividends and capital gains. You need to do your homework with both classes. I did mine. You didn’t and hence your constant whining about the new government.
Is it not also the case, that as NZ increasingly became drunk on the property bubble, that banks also lent less money to start ups/entrepreneurs/businesses because for a goodly while at least, there was almost no regulation on lending to the housing market, so banks ploughed in heavily? Not that banks weren't also lending for mortgages before, but as property addiction took hold, banks were less interested in supporting new businesses and mortgage lending has crowded out lending to businesses. NZ really has become more and more of an economic one trick pony.
True. A mortgage is an easy low risk loan for a bank. The same invested in manufacturing is high risk but that is where NZ can become wealthier - I mean real wealth the government can tax and provide hospitals, expensive drugs, new school buildings, better roads and railways, etc whereas my house has tripled in value so I am now a millionaire but no way of my spending it or the government taxing it (except TOP's wealth tax).
Absolutely true. Lets say you own a small business with 1 million dollars worth of assets - stock, vehicles, machinery - but you dont own a house. The stock seen as too risky an asset to loan against, conversely they will (would?) give you as much as they could if you secure property against any borrowings.
I went to the open market and got investment (yes the man 2 this does happen). The investor in my business has tripled his money in 5 years, and has had the total investment paid back in dividends.
Gordon, how does buying shares create jobs????
Buying property does create work for many people that we employ!
Don’t give s rats what you think of Chch as our values on paper have escalated and although they may be flat at the moment, they definitely,have not declined from the peak!
Haven’t got any in Dunedin basically because we can’t personally manage them and also wouldn’t be keen on students as we only have quality property and not hovels!
Up for that challenge yet, Gordon?
The share market provides liquidity making it more attractive to fund business directly through share placement, IPOs etc. Without a functioning share market business funding would be more expensive and difficult. I've only been investing for 5 years or so and have provided money directly to half a dozen companies or so, who employ people and use my money to make the world a more productive place. My rental property has benefitted noone but myself, the tenants are happy but if I didn't rent it out someone else would buy it and live there - no net gain.
Can you explain how after an IPO, a company derives any benefit from someone "investing" in a share?
The company earned some money at the IPO - or more likely the private owner earned some money at the IPO, Once the share is sold, there is zero flow of money back to the company.
"Can you explain how after an IPO, a company derives any benefit from someone "investing" in a share?"
Why do people prescribe to this silly notion?
A simple way to highlight this is that a company's ability to borrow and invest is directly related to the market value of the company (and some cashflow constarints). In simple terms, the higher the market value is, the more the company should be able to leverage.
I'm not aware of many listed companies taking on debt to buy properties, with the obvious exception of property investment companies. On the contrary, several companies are actively selling their properties and leasing back as this is considered more efficient and flexible e.g. PGW and warehouse.
Robot, they provide employment for Painters, builders, solicitors, accountants, aluminium window producers, hardware shops, concrete placers, roofers etc.etc.etc.
How on earth does buying shares that are already in existence actually create jobs.
It doesn’t actually give the company any extra money at all to employ more people.
What are these productive industries or business’s that the average person can invest in please????????
You said the other day you do your own maintenance - so you don't employ a painters, builders etc or is this just a another example of you being economical with the truth. You also seem to want to take some sort of moral high ground. I never claimed that share investing created jobs but you did make claims about property investors. You seem desperate to tar and feather share investors - why ?
I don't think you understand why I use the avatar BadRobot. It's the opposite of GoodRobot - you know the people - blindly doing what they are told , drinking the KoolAid - like you. How about actually thinking for once. I have a sense of humour - it's actually a very dry, ironic sense of humour.
The simple argument is that NO INVESTMENT PROPERTY IS EVER BOUGHT WITH THE INTENTION OF RENT INCOME ONLY. Simply the IRD should tax every disposal. Based on that the legislators need to allow for inflation effects as some deduction when held for lengthy periods.
No need for bright line tests.
Simple, eh?
IRD already has the tools.
Force them to implement them.
Over the years wildcard. 80s crash lost capital, 90s made nothing yet spent my time guarding my shares against another loss 2000s lost capital feltex and nzog. You will say I wasn't diversified enough and you're probably right but you can't diversify enough when the whole market goes down. I never ever claimed a capital loss as it wasn't a business. Last 4 years held genesis which haven't gone backwards but I find I spend more time checking the share price than warranted. Best and safest investment is property. If you buy a bad one which we haven't you can do stuff to turn it around. In bad times of recession property pretty much holds its value and we buy multi unit which has good yield.
You invest in shares yourself or through someone?
You've said this a few times now - that in a downturn, property 'pretty much' holds its value. That's not true. Perhaps that's correct for NZ over the last 30-40 years but it's not true on a global scale or a NZ historical scale. Have you ever considered that your sample set is too limited to make such conclusions?
I can't help but laugh when people won't touch shares now because they were burnt in '87 so instead it's 100% into property investing. Yet the same animal spirits that caused that could well be at play in our housing market...just a different asset class.
"...Perhaps that's correct for NZ over the last 30-40 years..."
So you agree with me! NZ property "pretty much" holds its value during a crash and this has been proven for as far back as anyone can remember. There are always exceptions in individual cases. I can't emphasize it enough for anybody weighing up their options.
Just highlighting the that you're selectively choosing information that reinforces your bias, without looking at the full picture.
Open mindedness is important if you're going to be successful in decision making - limiting opinions/analysis/thinking to 'some' data, not 'all' data is going to provide inferior outcomes.
Thanks for the reply. I'm sorry you've had bad experiences with the sharemarket, and I can see why you tend to avoid it now. As for diversification, if your portfolio was only a few companies (rule of thumb is to have a maximum of 4% of your portfolio in one) then yes, you weren't sufficiently diversified. Markets do go down, but one company tanking does not necessarily mean they all do. Besides, recessions and market corrections can be a perfect time to buy.
The trend of sharetrading is now microinvesting, ETFs and index funds; options that are low cost, easy, diversified and require very little work. Maybe it would be a good time for you to re-evaluate your views? It would be a shame if you discount an entire asset class because of previous bad experiences.
I do the investing and tax myself and use online platforms in NZ. 95% of my portfolio is currently in index funds and ETFs through fee-free brokers. Brokerage fees for share purchases of individual companies is a big hit to the capital when you're paying upwards of $30 a trade (or $15 through ASB). I'm looking for a platform in Australia that is similar to InvestNow or Smartshares and when I do I'll be moving my portfolio over there. There's also the added bonus of accessing the ASX and it's bigger variety of ETPs more easily and more cheaply.
Hi wildcard thats good to hear what you're doing. I might go back to shares in future but would do it differently, and not diy.
You're obvs a keen share investor and really smart. If you get sick of the sharemarket i suggest look into property. Don't listen to the doomers here! There are still absolutely unbelievable bargain properties for sale that take a bit of work but are well and truly worth the money. We bought something almost by chance just a few months ago and it will triple in price when fully leased which should be pretty soon. Btw did you buy into bitcoins or any other crypto?
That was pretty much all that was rented in my younger days, landlords were few and far between and if you rented a stand alone house, it was likely to be off the owner occupier who was away for an extended period, and you tended to rent only short term, either in your footloose years prior to marriage or as an interim measure till you purchased post marriage.
Then you lose your bet. What I quoted from my younger days is the actual experience of myself and family and everyone we associated with, we were ordinary working folk, builders, roof tilers, painters,farmers, shop workers etc, most of the wives were stay at home mothers until kds went to school. Our first home was on 1/3 of an acre, South Auckland overlooking the harbour, surrounded by farmland, we were our early/mid twenties. Nothing even remotely near that place would ever be considered a first home these days, so forget trying to suggest I don't know of what I speak, I do. We were even landlords for a year ourselves when we spent a year overseas working.
What I do now is dictated by my age and my love of traveling around and my love and concern for my grandchildren and my concern for the prospects of people in general in a vastly changing future.
The highest amount of owner occupied homes was 76 percent in 1983 so there couldn't have been just a few landlords. Extremists love rewriting history . The reason more people are doing it is that it has been the safest option. No cgt applied across the board so houses were not unique
There will always be a fair chunk of non owners because of how the measurement is taken, it includes people aged as young as 15. It presumably did then and it does now. People owned much, much younger in my day, as they also had children younger. The most telling figures would exclude those who would clearly not be homeowners, break it down into age brackets, dollars to doughnuts you will see a trend appear then. I will not accept you telling me what I do and do not know from my own personal experience as well, either.
Clearly I know I am fine and do not need to be trying to deny others access to housing by hoarding a lot of it for myself. Again, you make lots of assumptions about me, all incorrect, other than I have attempted to make my life as carefree as possible, but not for the reasons you think.
So if you have some capital you could put your money where your big mouth is and individually or with friends and family put your capital and skills to use buying land and developing affordable homes. Organise and manage the work and even help others to pick up skills Aces. Put your hands in your head and help make the society you want.
So what type of society do you want house works? A series of rich darklords who pay minimal taxes, push rents up, house prices out of reach of the average family, force government to pay out excessive amounts of the tax take (from actual productive workers) to pay benefits and accommodation supplements because the cost of living is to high?
So are you part of the problem, or are you part of the solution? Are you voting with your feet or did you vote for the party that preferred to deny there was an issue? Or do you like being rich too much? Your short term financial gain is more important than the overall well-being of the Nation over the long term? Which camp are you in?
I tend to agree with PocketAces. Even a single female with a reasonable income could by a house on her own in the 90's. Property investing is not "as safe as houses" and not the one way bet that many people think it is. There are way too many regulations now aimed at targeting the mum and dad investors because too many people have piled into it all at the same time. It is now dog eat dog trying to cannabilise proft margins. It is just way too risky with so many rentals now having meth contamination and all the new legislation will just suck you dry. I was reluctantly a so called "property investor" for the best part of a decade. I was extremely lucky that I only had 3 sets of tenants during that time and ALL of them looked after the property and ALL paid their rent on time! Given a choice, I would only do it again if I chose to move towns again and would keep the property as a homebase. Besides, I have renovated it to almost a new build for my own enjoyment and not for others to enjoy.
Basel Brush III, "The simple argument is that NO INVESTMENT PROPERTY IS EVER BOUGHT WITH THE INTENTION OF RENT INCOME ONLY"
"Boom Boom" your comment is true. I think the door is wide open for future governments to milk this for all its worth, as and when the need arises.
So, you would reject the argument that high house prices are due to low interest rates, and these low interest rates are the result of Central Planning? To me there is an argument for government intervention during times of crisis, but it seems that Bureaucrats and their lackey politicians then turn crisis management into ongoing intervention as Policy. In this way they have kept interest rates too low and so caused a dramatic house price revaluation worldwide on the expectation that low interest rates will last forever. I'm talking more about world interest rates coming out of the US, Europe, China and Japan, than here in NZ. The low interest rates are particularly popular with the dominant Militarist class of Bureaucrats as it means lots of dosh forever for them as it removes any constraint on government spending.
If Capitalism means the shift of capital away from productive enterprise to easier to make non productive, then we need a better system. You are quite wrong I believe. Those making money through speculation of non productive assets are really riding on the back of the true capitalist. Also, if you really knew my comments from this site you would know I am non political and don't vote, so your comment regarding this is quite wrong.
Always nice to troll the trolls :-)
But on a serious note, I am an inventor that is building an enterprise around the patented invention. As someone that seeks capital I am starved of it because all the people like yourself that find it easier to make money for nothing rather than apply it to something truly productive and tradeable.
Property investors/speculators are in no position to lecture me, the morality of what they do is indeed questionable.
Let me put it another way. Why should I base my business in New Zealand (It has international appeal and I could base it anywhere) and support your continued making of money for free off my hard working enterprise that adds value to the land you own.
“We need investment which grows the economy and creates jobs, not the sort of investment which distorts the residential housing market,” he says.
But this guy is telling me property doubles every 8 to 12 years
https://www.trademe.co.nz/business-farming-industry/businesses-for-sale…
Not entirely implausible.
If you work it backwards, it lines up roughly with what my parents and Grandparents paid back in the day. About $5k (Or equiv in Pounds) in 1950. About $150k in 1995, and about $480k in 2010.
2010 = $500,000
2000 = $250,000
1990 = $125,000
1980 = $62,500
1970 = $31,250
1960 = $15,625
1950 = $7,812
etc...
Exactly. You have to overlay wage inflation over house price. I suspect till the 80's the wage / house ratio did not change much from 3 times. Since then it has increased and now got to the point where house price increase are not sustainable no matter what financial engineering takes place.
Did the median income in NZ double every 8-10 years? Property is over-valued and the bull market is turning to a bear market. Interest rates are starting to rise in the US, coming off an all time 10 year low. We are starting to return to a more normal interest rate economy, which will also place a downwards pressure on property prices. A prospective buyer can only afford to buy a property, when the bank dictates it's lending terms and this includes the amount of deposit and whether or not the bank is nervous about declining property values. Besides, you need a much higher rate of inflation to start eroding away all that debt that property investors are holding right now. To get inflation up, we need more productivity in NZ otherwise our low wages will not rise as fast as we need to pay off all our private housing debt. I can see storm clouds gathering.
Nymad, you are not correct!
.
Having a high share price nowadays is irrelevant.
It did matter once but companies would manipulate their price by buying and selling their script to raise the price.
Doubt lending institutions lend against the share price value nowadays, and if they did they would be dumb.
Share prices can drop so quickly and be worth next to nothing easily and that is why the sharemarket is blatant gambling!
Banks lend on company strength, that is turnover, productivity and profit and ongoing profitability etc.
People buying and selling shares does absolutely nothing for the companies finances and that is why I want to know what investing in productive industries to grow the country ARE??????
Investing in rental property does help,the country out majorly by providing work for many people and the country receives tax, unlike investing in the. Sharemarket
TM2,
Banks lend on company strength, that is turnover, productivity and profit and ongoing profitability etc.
Really?
Even in the case of property 'investors' like yourself?
Productivity and profitability aren't synonymous with your approach to property 'investing'.
Banks lend on collateral. All institutions do.
The more you can put up, the lower your risk profile.
Banks lend on company strength, that is turnover, productivity and profit and ongoing profitability etc.
Again, market capitalisation is a market derived valuation of a company on the basis of these factors. If share price is appreciating, so is at least one of these elements. Indicating that lending risk is reducing.
that is why I want to know what investing in productive industries to grow the country ARE??????
People have said it before, and I'll say it again... you are the reason property 'investing' is known as a simple man's game.
If you cannot work out what productive investment is, it indicates one (or both) of two things:
- You don't have the aptitude to understand the basics of economics.
- You are unwilling to increase your knowledge base in said area.
I can't answer which one it is. But I do have a strong suspicion.
I feel you're commenting above your understanding of English by not knowing the difference between you're and your....
I use an accountant to reduce stress and workload as well as to employ local people to do the work I don't want to do. I use property managers too.
Criticising property investors for following a business plan that is too simple is invalid. Keeping it simple is often the key to success. Demonising property investors and describing them as "leeches" is invalid too when the government urged people to provide for their own retirements and the further education of their children while allowing a multitude of rich immigrants in from developing nations. The canny investor could easily predict that there would be an increase in house prices in desirable areas going way beyond normal inflation as well as a constant stream of tenants. The sheer scale of immigration meant that entire cities would become desirable locations. A "no-brainer" as they say.
Zachary Smith, by alluding to yourself as "a canny investor" is pushing it. Opportunistic, lucky and with a degree of gambling mentality using other people's money also comes to mind. You just have a typical sense of self entitlement. You're never satisfied and lust for much more than just one house. It's only ever about houses ;-) It's a little shallow to now describe yourself as canny for predicting Auckland's growing population - now that it's played out. It's like giving yourself retrospective canny medals for being lucky.
What label do you give yourself when the bottom drops out of it all (Ireland Style)? A victim of the mistakes others made? You become a one trick pony.
You have chosen your poison , just as I have chosen mine. I don't care about property investors per se but what I do care about is the financial implications if it all turns to custard. Contrary to what people claim debt is bad full stop. While those who were lucky enough to have benefited from recent house price inflation may argue that debt has served them well , it is only the house price inflation that has made it beneficial (especially for those who are on interest only loans). As soon as house price inflation stops or even worse goes backwards the equation quickly does not add up. Equity is going backwards and you are paying interest to the bank.
I think you confuse canny investor with pure dumb luck. If you look at A2 Milk the 52 week change is 264% - I consider that more luck than anything else - I'm not convinced that the share price matches it's underlying value.
Z S, there are 2 types of people:
1) People who blame everything and everyone for their situation (the majority as shown by the numerous thumbs up of anti-whatever posts). These people like to stick their noses into other people's affairs and they love to blame the government, landlords, immigration, the system, laws, lack of laws, foreigners, the counil.....
2) People who ask themselves, How can I make my life better?
Yvil, in your moment of keyboard rage, you excreted a limited understanding of people that surround us all. I dug these up just for you;
1/ Conscientiousness.
2/ Extroversion.
3/ Agreeableness.
4/ Openness to experience.
5/ Neuroticism
https://www.inc.com/amy-morin/psychologists-say-there-are-5-personality…
It does depend on how you treat the expenditure - is it capitalized (generally when the benefit is greater than one year) or treated as an expense (repairs and maintenance or benefit is less than one year). If an electrician installs a new circuit in a room I would argue that the "cost" should be capitalized as the benefit is greater than one year but I suspect most property investors would just expense it.
And you do - please enlighten.
http://www.markhams.co.nz/repairs-and-maintenace-rm-expenditure-capital…
EDIT : added link
In such cases it generally doesn't really matter - the $100k expenditure can be treated either as capital or operating expenditure
In this specific case when buying an asset that is used in earning "income" knowing it is subject to what is known as dilapidated repairs (or deferred maintenance), the cost of those repairs will automatically be treated as capital expenditure
Gordon, stop talking your usual rubbish!
If you are sure that I haven’t got the resources to buy in different markets, then put your money where your mouth is and take up my challenge!
PS. The challenge is there for anyone that continues to knock property investors!
I know you won’t respond because everyone knows that you haven’t got money to meet my challenge!
Go on tell us all that you have got plenty and you will take up my challenge.
I know you won’t because you just comment just to put down property investors, because you are an extremely jealous man that missed the boat!
Go on Gordon, there you have it, take me up on the 50k or an amount you are happy with if you haven’t got that amount, but has to be worth my time!
Why would you be content with only poor old Christchurch? You owe it to your family to diversify The Boy. I know you don’t have the mental ability or courage to get shares right . But at least get property right. Be courageous and have a go. You might get ahead in life. You forget I am a property investor, property developer, equities investor and a retailer. I am just not a holder of residential tenancies. Too easy , too boring and poor returns.
Gordon, firstly are you up,for,the challenge or not?
You never answer , which says you are just full of wind and jealous.
Secondly I have told you we have serious funds with a financial advisor but itwasn’t thru my investing!
Thirdly, I have divesrsified into many different types of property Gordon and it is a success for us!
Fourthly, no I don’t need to buy any shares personally as I am not comfortable with them as a long term investment as I have very little control over them, and got singed in 1987.
Finally, we have got property right and working great in Chch.
People have made more money in property since the earthquakes than what they would’ve in Auckland as a percentage.
As for getting ahead in life, I am more than happy with my lot and would never want to become a bitter and twisted person like yourself Gordon!
Take up the challenge, but I know you won’t because you know that I am “The Man”.
Robot, what’s tounderstand with shares?
Most passive type of investment there is along with Term Deposits!
You don’t have to be too talented to own shares as there is nothing to do except hope they hold their value!
Property investors comtribute to society by providing a service and employment which share investors do not do.
You also need to do repairs and ensure rent is paid etc.
Shares are for lazy investors!
Well you seem to have problems for starters. You have admitted that you don't understand shares and lost money on the share investments you have made so what does that make you? Perhaps property is for dumb investors who want to waste their weekends fixing the problems at their rental properties. In life you pay for everything in terms of time or money - which ever you have the most of. Investing in shares and bonds allows me the freedom to do what I want with my spare time. Investing should be on auto-pilot not spending endless hours in work that isn't adding significant value to the asset - now that is dumb. If you can't explain your investment strategy in 30 seconds you don't have an investment strategy.
THE MAN 2, and many others are capital gain "one trick ponies". There is nothing smart, canny or astute about their investment strategy. There are many Ron Fong puppets here.
It will be interesting to watch if the same boastful ponies can perform financially when it goes into reverse.
We are about to find out.
Funny how The Regulations seem to end up compounding the problem. By the time the problem is acknowledged and a possible attempted solution is politically fashionable, a good ten years have passed and conditions have changed.
1 Falling interest rates have caused house prices to rise, cos yer can afford to borrow more munny from your friendly Aussie Bank Overlords. Quite inexplicably, yer Overlords don't tel yer that falling interest rates is also why yer wages haven't gone up in real terms.
2 People who feel they have missed out are pissed off. So they vote for a politician who says the right things (Mr Trump or Miss Ardern, different people, same reason).
3 Interest rates start rising. This causes house prices to stagnate, but fall in real terms. Wages however start rising, because they move up when interest rates move up.
4 The new politicians make some fashionable changes that make things worse, and, if you are lucky, some that makes things better, usually by accident. It takes some years to tell which is which and a few more years to stop turning a blind eye to the abject failure of yer favourite fashionable solution.
So, expect your wages to rise and therefore your rents to rise too, but house prices to get cheaper measured in hours worked. Capital gains taxes will of course make things worse. More wasteful regulations and more pressure on rents, more polarisation between landlords and tenants, and generally a lot more arguing and blaming all round.
Everyone under 40 will think I am barmy, cos you need to go through the cycles as a tax paying adult to sense the repeating pattern.
Robot, yes I do do repairs and maintenance.
I don’t mind at all as I probably spend approx 2 to 3hours per week on average and the rentals return a substantial income from the rents.
Certainly far better than being regimented with a 8 to 5 JOB!
Would I swap landlording for a JOB, not on your nelly!
Working a JOB is overrated.
Where did I say that I didn’t understand shares?????
They are very easy to understand as we currently have heaps of equities but not from my investing!
Did get singed in 87 just like most seasoned investors got heavily burnt!
THE MAN 2, it was you that previously commented that you provide a considerable contribution to the local economy by employing labour to perform repairs and maintenance on your allegedly large Christchurch property portfolio - right?
Your contradictions aside, now you do your own repairs and maintenance. Gordon has hit the nail on the head about you owning two "as is where is" rentals. Otherwise, how would you find the time?
RP, I do do repairs and maintenance on our properties.
I don’tdo all of them as I am not a builder, but We do have tradesmen that do the repairs etc. that I don’t do!
How do I find the time to do what?
There are 168 hours in a week RP if you didn’t already know, and we employ people dah!
I don’t have a job as our rentals provide the income!
I am an investor, and anyone that knows me knows that I am very successful at it!
If you are prepared to get off your butt and work you will get ahead.
Yes I have bought many properties sight unseen so I suppose you could call me a gambler, but never fallen on my face!
You are either on it The Boy or very close to it. Remember you lost money in the 87 crash. You were born in lucky times just like myself. Cheap assets to buy and heaps of them. Neither of us are clever. Those who buy assets today at the prices they command are much cleverer and braver than the boomers. I recognise that fact. You in your arrogance deny it.
Agree Gordon - what interests me is looking at the chart of long term interest rates and noticing just how inversely correlated asset prices are to interest rates. It's been all downhill since the 1980's for rates and it's given many people a false sense of security about how 'clever' they are at 'property' investing. No, it's just been easier to service debt. But a few people are calling time on that trend of reducing rates and I can't help but wonder long term - say the next 10-30 years - what affect that will have on things like house prices. I can see house prices in NZ being static or negative for the next decade in that environment, perhaps longer. Interesting times ahead.
Gordon, everyone lost money in 87!
Notborn in lucky times at all Gordon.
You can be successful in anytime providing you are prepared to work and invest intelligently!
You may not be clever Gordon, but “The Man” certainly is, that is why I am “The Man”
You can put yourself down but you will never put me down with words.
I have still been buying property in the last year or so very successfully and will into the future.
You are only limited by your own self belief.
Arrogance perhaps but backing yourself is a trait that we all need to be successful!
You are the proverbial pot calling the kettle black The Boy. You only advise people to buy houses in Christchurch and we all know except you that that would be stupid thing to do as house prices down there are going backwards and the rental yields are continuing to drop. And there is always the possibility of another big one and even you might be able to work what I mean in saying that. You remind me of the proverbial bully. Really they are not comfortable with themselves because if they were they would not be a bully. You shout out how great you are and how well you have done and we all know that those who shout out loud have something to hide. I highly suspect you own no real estate at all because if you were comfortable with who you are and with what you have you would not have to use the silly arrogant name you use and put down those who are less fortunate than you.
You are a boomer like myself and we were lucky to be born when we were. I got a great free education at school and university and at the time when assets were cheap to buy I had a well above average income and was able to buy them. Even though you were not well educated you say you are an RE agent and you say you gathered up some houses. I assume everything was above board when you dealt with vendors in those situations. If what you say is true then you have done okay. I know I have done okay and I was able to retire well before most people do. We both need to remember that we were born at a time when things were improving and when we were in our prime we had the ability to buy assets which were cheap to buy. Neither of us could do it as easily today. If you deny that fact then you are even more ignorant and more stupid than what you already portray yourself as on this site.
Gordon, you are a bitter and twisted jealous old man, that won’t take up my challenge, and yet you write things about “The Man” that are blatant lies.
You know little about anything financial.
Finally I have never bullied anyone and my posts are to encourage people into getting off their butts and investing in things they are comfortable with!
Won’t bother replying to any further crap you write, unless it is that you are taking up my challenge to you.
Know you won’t because you know that what I write is gospel!
The Boy you are a typical uneducated boomer who had to resort to being a RE Agent to make a living and to boot you then resorted to also being a residential landlord (or as you say) as you can do nothing else to get by. Then when the going gets tough and the RB and the government start implementing measures to make it more of a level playing field you whine and moan and get angry and start coming out with some ridiculous comments about Jacinda's pregnancy and alike. If you were born today you would struggle because you do not have the ability to get ahead in times which are much tougher than when you and I got going. You obviously are under some pressure. You should take advice from someone who knows what they doing and get diversified. Then you will be able to sleep better at night and make provision for your children in the future.
Just ill considered opinions from yet another property spruiker. It takes time to get big projects underway. Furthermore, mum and dad investors are merely collateral of the immense problems created by professional speculators and other supporters of our housing ponzi.
hmmm I'm not sure what there is to disagree with there.
I was at a dinner party once with a well-heeled financier (most certainly didn't vote Labour), anyway long story short his commentary was, in a nutshell, mum & dad investors are there to be fleeced, his job is to get in early pump up prices, encourage mum & dad investors to jump in and then pull the pin, riding off into the sunset having pumped and dumped leaving ma and pa penniless - to his mind they were collateral damage.
As per Jim Lovell, “There are people who make things happen, there are people who watch things happen, and there are people who wonder what happened”. The private investor in the share market is the latter. The person you met sounds rather distasteful, but what they said is broadly true. The aim is to flog equities for the highest P/E ratio possible and the private investor is the least risk averse and least sophisticated. This is why I don’t directly own listed shares and look for private equity opportunities.
I think I missed the current round of largesse in shares, so I'm sitting on the sidelines on that one watching, I'll probably have a dash at those once I feel they're not so over-valued.
I've invested in a number of start ups here and abroad - the NZD being so high has made it quite attractive to pop a speculative gamble down on some overseas markets, I've gone for disruptors and growth markets, which hopefully will work out, if not it was capital I was prepared to lose! I invested in Zeffer over here, I like the product, cider's a growth market, they seem to have a sensible expansion strategy, and they play quite nicely on their kiwiness, we'll see how that pans out.
Yes he was remarkably distasteful, it was eye opening, but I didn't disagree with that's how the game is played, hence the above strategy really, I suppose I should shake his hand if the equity plays work out! - I've got 20 or so equity investments, 8-9/10 probably won't work, 1 or 2 strike it big and it's a win all round.
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