National has unveiled the tax policy it will take into the election, but it depends on the implementation and success of two brand new taxes to be self-funding.
It also depends on revenue from the emissions trading scheme (ETS), which is only expected to continue pumping out cash until some time next decade, while markets decide how much.
The ETS revenue drying up will be a problem for a future government. But the funding of the tax plan depends on $3.7 billion in untested taxes, which critics are already questioning.
A rule change to allow non-residents to buy residential properties worth more than $2 million, in exchange for a 15% tax on the transaction, would be the biggest contributor by far.
A policy document said this would pull in an estimated $2.9 billion in revenue across the four year forecast period — almost half of all the new revenue.
National’s Nicola Willis said money would come from fewer than 2,000 transactions, which would presumably mean each sale would be worth an average of $10 million.
Labour’s Grant Robertson doubted those numbers could be sustained in the long term.
“They are relying on an increasing number of foreign buyers to come in and buy a dwindling number of houses. It simply doesn’t add up,” he said.
“They are saying there would be a never ending stream of foreign speculators coming in to buy … thousands of houses every year, forever.”
The policy document said the revenue was modelled on Quotable Value price data and weighted based on Statistics NZ’s non-resident property transfer data.
There were about 4000 transfers in 2018, prior to the foreign buyer ban, although the data was likely an undercount because it doesn’t include trust or company transactions.
David Parker, Labour’s overseas investment spokesperson, said the forecasts assumed the number of eligible foreign buyers would reach 70% of 2018 levels, when there was no tax.
“It’s impossible to see where all the buyers who could be covered by their tax are coming from. Given they’ve exempted Australia and Singapore they’ve already eliminated 27% of the foreign buyers from 2018”.
A Labour Party press release said National's estimates were "voodoo costings". A phrase Robertson appeared reluctant to repeat in person.
Rolling the dice
The second untested tax involves bringing overseas online gambling websites into the NZ legal system, which National estimated would be worth an estimated $716 million in revenue over four years.
National wants to set up a regulatory regime that would force operators to report their earnings and pay tax, or else have their websites blocked for local IP addresses.
Motivated gamblers could sidestep this measure by using a VPN, but it might be enough of a barrier to motivate overseas companies to register in New Zealand.
Castalia Advisors, a consultancy firm hired to cost the tax package, said the estimates were based on external forecasts of online casino gambling revenue.
Labour’s Revenue and Internal Affairs spokesperson Barbara Edmonds said the Government has been collecting GST on offshore casino platforms since 2016, under the so-called Netflix Tax brought in by the previous National Government.
"The fiscal plan also appears to have had no input from the National’s Revenue spokesperson Andrew Bayly. Mr Bayly knows that GST has been collected from online casino operators overseas since 2016 at a rate of about $37.8 million per year because of a recent Parliamentary question he asked," Edmonds said.
"We also challenge National to provide the costings for the claim that an average of $179 million per year could generate revenue of $716 million over the forecast period. As Andrew Bayly knows, in the seven years since GST has been collected, only a total of $170 million has come from online casinos," added Edmonds.
A bigger problem?
Tax specialist Terry Baucher said either National's numbers were optimistic or gambling was a much bigger problem than anyone realised.
The two remaining revenue measures are more predictable. Preventing commercial property owners from claiming depreciation was standard practice a few years ago.
Treasury forecast the cost of permitting the tax break in March 2020 and National has used this number—$525 million—in its policy.
National would also shift the cost of processing immigration visas onto the applicant. These levies would range between $375 for a student to $2,750 for a partner resident visa.
The revenue was forecast based on the amount of funding allocated to immigration in recent budget documents and included modelling on how the higher costs would impact demand.
Tax is … politics
Baucher said tax policy was ultimately the domain of politics, not economics. The goal is always to rearrange taxes and transfers to benefit your voters.
National has targeted this plan at middle-income families and those who own an investment property — core supporters for the party.
A press release from the Green Party said high-income property speculators would be the biggest winners from a National Party tax plan.
This isn’t obviously true. But property investors will get about $700 million out of it each year.
Green co-leader James Shaw said people on the lowest incomes would miss out, while property speculators line their pockets.
“There are not even crumbs in this policy for students and people on benefits,” he said.
National’s plan zeros in on its supporters and gives them the biggest tax cut. The party’s gift to the wealthiest New Zealanders was protection against wealth, capital or land taxes.
Baucher said this was a problem as there wasn’t much room to raise rates on things which are currently taxable, such as income and consumption.
“The two main parties aren’t serious about tax. They keep shying away from how we will actually pay for things,” he said.
Unconscious uncoupling
The tax plan released on Wednesday was supposedly “decoupled” from the party’s fiscal plan.
Michael Reddell, an economic commentator, said it wasn’t credible to claim the tax plan was detached from the overall fiscal plan.
In a blog post, he said it might make sense if the budget was already balanced or in surplus.
Budget 2023 forecast deficits of about $7 billion this year and next, but are expected to grow by several billion dollars each in the pre-election update.
The first surplus could be in 2027 and net debt peak above 23% of GDP, although comfortably below the 30% ceiling.
The savings and new taxes found to finance the tax cuts, cannot also be used to close the deficit and National was unlikely to reveal a second set of taxes for its fiscal plan.
“To the extent there is genuine bloat, the tax cuts package will have grabbed it,” he wrote.
If National also wants to cut the deficit, they would need to make deeper and more difficult cuts to public services — which they don’t want to do.
“Both Labour and National profess allegiance to the idea of an operating surplus … but seem to have not the remotest interest in telling us what choices they are going to make to get us there”.
Reddell also cast doubt on whether the package would be inflation neutral as promised.
Cutting the Auckland fuel tax would be stimulatory and revenue reaped from foreign buyers could bring fresh money into the New Zealand economy.
However, he noted the whole package was worth less than 1% of GDP and shouldn’t make much difference to inflation either way.
166 Comments
Our expectations are clear - we want our social system to match the standards set by the Nordic nations.
Never mind the fact that we're not willing to pay as much in taxes as the Swedes, Danes, Norwegians, etc. do, or that we're not as economically productive and industrialised as they are.
In short, achieve less, pay less and demand more.
So, I'm pretty sure they're referring to school not uni generally (PISA scores etc) , and anyway the University of Helsinki seems more than good enough to produce highly competent professionals (see below). Also their GDP per capita is between AU and NZ while they live on a moderately sized frozen bog from which they can extract peat - vs NZ where we sell Milk to China and Ski trips to Aussies, or Au which is a Mediterranean county with a continent sized mine attached.
ARWU World - 82 (2021)
QS World - 104 (2021)
THE World - 98 (2021)
USNWR Global - 81
Agreed. Those rankings mostly rate "universities" and not polytechnics - northern/central European countries favour vocational training over academics because of their industrialised economies.
Another big metric for ranking is academic publishing, which is done in English mostly and therefore US, UK and Aussie universities dominate such rankings.
I wonder how many of their research inclined engineers / scientists go to Nokia et al. instead of Academia. I guess quite a lot. This would depress research rankings but not GDP I imagine.
Although this is Germany, probably indicates my thinking is mostly correct:
In total, Siemens holds more than 46,700 granted patents worldwide. In fiscal 2022, Siemens spent about €5.6 billion on research and development (R&D), with some 46,900 people working in R&D at the company.
Nowhere are those trends more evident than Israel I suppose with no university in the global top 150. Yet, the country has maintained R&D spending at ~4% of its GDP and boasts a rather booming high-tech sector.
Education quality and rankings are clearly not the same thing.
As advisor said above - uni rankings are generally based on research paper rankings, not on the quality of the teaching, nor the competence of grads. Anecdotally, I know a few PhDs in Israel who make guidance systems instead of hanging around the Technion (Israel Institute of Technology).
They probably have one of those education systems where everyone gets a pass regardless of performance, and matriculation is simply based on having turned up. Much the same as how NZ Universities operate for foreign students - pay a fee, get a degree. Everyone gets passed, no failures.
Yeah, it’s all very well wanting the country fixed, but if there’s sadly no one with both the appetite and competence to do it, why not vote in self interest.
Labour had unprecedented power and opportunity and they totally screwed up.
No point dying in a ditch about it. C’est la vie and get on with life.
Private healthcare does not cater to everything. In fact there is a lot it doesn't cater for. It's important that people know this, it's also important that conditions get excluded, and even very well off people often give up the insurance by mid 70's because of the cost as it becomes cost prohibitive - this is the time ill health really becomes common. It's not that black and white and with an aging population we need to be frank about this. The insurance companies don't lose on this, they will actively restrict treatment (recognised, standard treatment) if they don't want to pay for it. This happens in the states. Lots of hooks in it.
There's lots of low hanging fruit without core services
Agencies with standout expenditure growth from FY2018-FY2023 are:
477% Ministry for Pacific Peoples
265% Ministry for Environment
193% Ministry for Women to $15,119,000
113% Ministry of Transport to $75,867,000
73% MSD to $1,629,894,000
67% MBIE to $1,248,940,000
Then theres the hidden unexplained massive increases happening...eg RBNZ up approx a third $88M over 2 years
https://croakingcassandra.com/2023/08/24/spending-lots-more-with-no-par…
The number of employees at the RBNZ ballooned from about 275 to 450+ under Labour. Most of the jobs have the words "diversity" "climate change" and "equity" in their titles. If the RBNZ is sent back to doing its real job instead of pontificating on how to impose Labour ideologies on the economy, running costs can be slashed. Now repeat for every Govt department and QUANGO.
Most of the jobs have the words "diversity" "climate change" and "equity" in their titles.
Very, very few job titles at the RBNZ have any of those words in the title.
https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/publications/…
170 Senior Adviser - Climate
171 Senior Adviser - Te Ao Māori
172 Senior Adviser Brand and Design
173 Senior Adviser Corporate Relations
174 Senior Adviser D&I and Wellbeing
175 Senior Adviser Digital Channels
176 Senior Adviser Engagement, DEI, and Te ao Māori
177 Senior Adviser External Stakeholders
178 Senior Adviser Government & Industry Relations
179 Senior Adviser Protective Security
180 Senior Adviser Social Media and Digital
181 Senior Adviser Stakeholder Engagement
182 Senior Adviser Transformation
183 Senior Adviser, Engagement, DEI, and Te ao Māori
Now, go look and see how many "senior advisors" in those sections are employed. Because there are another 250 people's jobs to account for.
PS. The "D" in D&I and DEI stands for Diversity
PPS. Why does the Reserve Bank need a social media manager? Is Orr posting selfies on Instagram? Are they doing group dances on Tik Tok?
So national show their hand, their intention is to try and goose the residential property market using foreign speculators and launderers. If ever one needed proof they are out of ideas this is it. Pathetic.
If you're going to have speculators and launderers, you might as well take a cut. Makes sense.
However, the idea that busloads of Chinese are going to turn up in your neighborhood willing to pay a king's ransom for your home needs to be put to bed. That urban myth should have died a long time ago.
Busloads of Chinese paying a king's ransom for NZ homes is in integral to National's $25 pw tax sham.
Quite possibly right there Macca. I wonder if they're aware that the screws are tightening in Chyna. You're going to have to be higher-level political connections to funnel money out of the country. Be interesting to see any data on how much capital is escaping to Nu' Zillun. However, National, Labour, the govt, and the banks don't want that kind of information to be out in public.
I didn't mention the Chinese, laundering includes any questionably wealthy foreigner, but since this bothers you, you obviously don't live on the Hibiscus Coast like I do, or you would have seen it with your own eyes. Local real estate office running investment seminars in plain view of the street to Gucci clad Asians (one Asian presenter, one Whitey), literally just off an airport shuttle bus. Sections on the edge of town with real estate signs and car dealership style signs written in Chinese, no English at all, not even a vague attempt to disguise who the buyer is. What myth?
The point is that National have no clue how to lead, nor does any other party in New Zealand. There is no vision, nothing to believe in, New Zealand is the country that sold its soul twice, half to the banks and half to the Wokesters. This is the worst election for the good people of NZ that I can remember.
I'm just going to repeat your last paragraph for deserved emphasis/exposure:
The point is that National have no clue how to lead, nor does any other party in New Zealand. There is no vision, nothing to believe in, New Zealand is the country that sold its soul twice, half to the banks and half to the Wokesters. This is the worst election for the good people of NZ that I can remember.
That was back in the days when the Chinese had money. Then China stopped the outflow of capital by restricting overseas transfers, and the number of foreign buyers crashed. Now the property market is crashing in China so they are going broke and don't have the cash to send overseas anyway.
Then China stopped the outflow of capital by restricting overseas transfers, and the number of foreign buyers crashed
Money doesn't necessarily flow out of China by traditional means like bank transfers. You might know that anyway but just thought I would highlight the point.
I do know that, but its well known that the CCP crackdown on transfers dramatically reduced the number of people getting their money out, and the amount of money out. The drop in foreign buyers in NZ showed up long before Labour enacted the FFB. Which is why it didnt really have much of an effect on house prices.
Won’t it just push up house prices as everyone tries to creep into the 2m bracket. Also speculators can bundle cheaper houses together to make a +2m property package.
Can’t they just leave property alone. Labour has actually got it perfect with their policies to cool the market.
Being cynical about it, perhaps just provide bolt holes for when they have actively screwed up their own countries enough that they have to run here. Parasites such as hedge fund managers, politicians, lobbyists, oh and maybe the occasional successful business person who we shouldn't have an axe to grind with.
This is the future, this is our dominant strategy in a Net Zero world as our primary exports are gradually replaced with locking our land up with pine. If you want to maintain anything like the standard of living we have then we sell land to foreigners to import capital.
They will most likely be temporary residents - not non-resident. Currently a surgeon coming to NZ for a year or two on contract cant buy a house. Ditto for a lot of other skilled workers like CEOs, CFOs etc. Despite Labour handing out permanent residency to everyone, not everyone actually wants it. Especially when you have offshore income and assets that you dont want to pay tax on.
Or maybe, it will help attract some of the much needed skills we need to this country. A surgeon earns an average US$750k a year in the US, so they are not poor. Imagine telling them that they can come to NZ but they can only rent some crappy 2 bedroom townhouse off a foreign investor because they arent allowed to buy a house in Remuera for their family and send their kids to a decent school. Lifting the ban means that temporary residents are able to buy houses, these are the people who are happy to come here for a few years, contribute, and then leave. They are not seeking permanent residency, because who really wants to be stuck in this country forever once you've already done all the tramping tracks?
National’s plan zeros in on its supporters and gives them the biggest tax cut. The party’s gift to the wealthiest New Zealanders was protection against wealth, capital or land taxes.
Do you want to win elections in New Zealand or do you want to stand on the moral high ground? You can't have both.
We are going to run big budget deficits for years.
Lower income for already low income public or taxpayer funded services from cancelling Fair Pay Agreements
Tax back for middle income earners
No extra tax, increased capital gains and 'partnerships' for affluent private equity to fund expenditure
Major CO2 polluters lose subsidies, putting their business models and their unionised employees at risk
National's strategy is to enrich some wealthy by distracting some workers by fiddling around the edges and quietly pulling the rug out from under Labour's voter base under the guise of helping the 'squeezed middle'.
Meanwhile the property industry, building contractors, farmers and private equity get the cream while environmental polluter risk is socialised.
Losers here would be disabled beneficiaries, single mums, Fair Pay affected workers, the young and future generations, ecosystems and the undisclosed back office functions that keep things functioning that National seek to save $598m but don't want to be clear on because it's politically sensitive.
Yes I posted this yesterday. But reposting for reference. And before someone jumps, I'm not partisan, and Labour hasn't been impressive either
Somebody gave me the following example yesterday of how the foreign buyer tax could be bad and may push house prices up
foreigner 1 buys a $2 million dollar house and pays $300k in tax.
foreigner 1 then sells the house for $2.3M (to make his money back) and as no local buyers can afford it foreigner 2 buys it and then pays $345k in tax.
So effectively raising from 2 transactions $645k… and then I thought about it.
$645k is the equivalent of 30 average earners annual tax bills
its the equivalent of tax paid on $2.1M profit for a company
It’s the average tax paid on 129 rental properties
$645k would pay for 6 nurses
it would pay for 32 superannuints
it would pay for 60000 school lunches
it would pay for 2 new warm state houses to be built
all from one transaction and suddenly I thought this is brillant NZ doesn’t have minerals like Aussie or Oil like Norway or major banks like Europe we only have real estate or Dairy
here is the greatest opportunity to get super profits from the cottage industry we are obsessed as a country with and it means we could all practically stop working and just sell our real estate at a 15% premium to the rest of the world.
genius
But your thinking too narrow - your assuming we only sell 2000 houses a year. If we sold all 2 million houses at $2 million each that would raise 60 trillion dollars in taxes - we’d be infinitely rich. We wouldn’t technically have a house but we’d have awesome health care.
I honestly can't tell if you are joking or not.
You know you could just do this yourself? Sell your house and live like a king for a while. Live in a fancy hotel, eat at restaurants, buy expensive clothes.
You would be homeless with nothing eventually, but till then, what a life!
they do not need it to add up all they need to keep saying over and over is we are giving you a TAX cut, its the same old national election strategy, that is all a lot of people hear, as a auckland ratepayer i am now pissed off as because of taking the 10 cents away, our rates will have to rise even more next year as it leaves a 2 billion dollar hole in auckland councils roading books. Auckland Mayor Wayne Brown says scrapping regional fuel tax could leave council with $2b budget gap“It will mean more delays to sensible projects to optimise our road network and more potholes.” Auckland’s acting mayor Desley Simpson said National’s plan to scrap the city’s regional fuel tax (RFT) would leave “a significant hole”.
The fuel tax provides about $150 million annually, by charging 11.5 cents per litre of fuel.
Yep, the revenue generated from the increased petrol costs was ring-fenced to improve the transport system. What National are going to do is increase the carbon tax which will still keep petrol prices high and use that money to remove Labour's excellent housing policies and again subsidise landlords.
You know who will benefit from this, people who own 7 homes. It's so shameless it's Trumpesque. Worse National leader ever.
https://www.nzherald.co.nz/business/election-2023-rental-prices-unlikel…
"Sharon Cullwick, who sits on the executive of the New Zealand Property Investors Federation, said bringing back the interest deductibility was “great news”. “We did know it was coming but we were hoping they would do it quicker.” (meaning,our big donations were going to bear fruit)
"Cullwick said it wanted the change brought in sooner because some people were having to sell their rentals because they couldn’t afford to pay the interest."(meaning,who cares about the owner occupier who has to sell due interest cost)
"National has said that since the two policies came in rents have risen an average of $75 a week."
Cullwick doubted rental prices would come down if the policies were changed.
“It comes back to supply and demand.”(so which one is it,rents rise because of the policies,but won't come down if the policy reversed)
I'm in the group that would benefit most: 2 young kids with childcare.
Still can't vote for National sadly, due to them bringing back the interest deductability on 2nd properties. For all Labour's failings, that is good policy. You can invest in a 2nd, or 3rd, or 4th house if you want, and you can get interest deducted if you build i.e. you add to the housing stock. However, if you want to compete with people who want to live in an existing house and are thereby driving the prices up, then why should you have a tax advantage over them? And why should the country be encouraging that when it's the exact opposite of what the country needs: really stupid, shortsighted stuff.
Great post Reprobate,I would be happy for a change of goverment,having voted Nats before,swing voter...but that deductibilty policy that Labour brought in was good policy,incentivised investment in the right way,I feel we will definately be going backwards (or back on track) by removing it.Having said that,probably can't see myself voting Labour,which is what the Nats are banking on...vote someone out rather than in,hence,less scrutiny on their policies.
Yeah I won't vote National on account of the interest deductibility. I have kids in day care as well. It is just to bitter of a pill for me to swallow. You have a wide spread cost of living crisis where people are struggling to feed their families. Nationals response is to reintroduce a tax policy that benefits probably 1-2% of incredibly wealthy Kiwi's. Its pathetic.
Nick Goodall from Corelogic said in a stuff article today that recent research has shown that increases in rent were tied to incomes, not the increased costs for landlords. I completely believe this. Landlords most of the time charge as much as the tenant can afford. This is why some landlords have been selling up because they can't simply pass on the costs to tenants because they've already squeezed them as much as they can, and they weren't prepared for higher interest rates.
FHBs currently have a record high market share of buyers at the moment so labours changes are working as they intended, and rents haven't gone up nearly as much as other countries in recent years.
National saying that giving back deductibility is about reducing rents works for their vote winning story but it's BS.
I expect National to bring in even more immigrants to create more rental demand. People that can't keep up will be on the street.
Because the removal of interest deductibility has removed large numbers of older, cheaper properties from the market, forcing low income people to pay higher rents for brand new houses, or simply dumping them into emergency housing while waiting for Kainga Ora to build them a house. Emergency housing costs have exploded from $36M under National to $365M a year under Labour. The public housing waitlist quintupled. But hey, its all about you being able to buy a house right?
They were sold to FHB. Labour has effectively reversed the market. Instead of FHB going out to the outskirts and building brand new family homes, they are now competing with investors to buy new builds, so guess what, the price of new builds far exceeds the cost of buying an existing property. Now FHB soak up all the ex-rental stock instead of building. The result is that low income earners have no ability to rent a new build investment property, and all the cheaper older established housing that they used to rent have all but gone. Its these internal market adjustments that everyone misses when they blithely say "oh but the houses are still there". Yes, they are, but who owns them, how many of each type are available to rent, and how much is that rent. The main thing driving the recent big rent increases is the replacement of cheaper rental housing with more expensive new builds - which has resulted in a huge increase in people now in emergency housing and on the public housing waitlist.
In my area, an older 2 bedroom flat rents for $420-$450 a week. There are about 2 of these available to rent at the moment. However, there are about 30 brand new townhouses available to rent for $500-$550 a week. So now people have to pay up to $130 a week extra to find a place to live.
You missed the point of my comment - FHB used to buy lovely brand new code compliant houses (thats literally how places like Rolleston and Rangiora developed), they are now being priced out of those nice houses by investors seeking interest deductibility who are overpaying for the tax break (the tax benefits are now built into the price, so everyone pays, even owner-occupiers). FHB don't really want to buy "do ups" but now have to as that's all they can afford. Meanwhile those that can only afford to rent have no choices. So everyone loses. Investors are overpaying. FHB are getting lower quality housing. Low income tenants are getting no housing at all.
And to be clear, the market should operate this way - FHB build the brand new 3-4 bedroom homes at reasonable prices. (In Chch pre-Covid this used to be around $450-$500k, however, a new 3-4 bedroom home in Chch is now around $800k, prices have gone up far more than the price of existing houses thanks to forcing investor demand into this small sector of the market). Investors buy existing older housing at lower prices (eg. you can still get 2 bedroom flats for $400-$450k) so they can rent it at lower rents to low income tenants. Low income tenants are then not forced into emergency housing or living in a Kainga Ora million dollar home courtesy of taxpayers.
Reality usually trumps ideology. The rental market is currently not healthy for low income tenants. The emergency housing and public housing waitlist should be clear and obvious indications of the current sickness. This is ALL Labour's fault.
Why should FHB be buying brand new? Even the whole narrative that seems to come from older generations (mainly Boomers I imagine) is that young people shouldn't strive to have what their parents have today, they should start with a basic doer upper home.
Maybe if the banks weren't so willing to let people keep their first home as a rental, and leverage off that into their second home, there'd be more entry level homes for FHB to buy. Let the Landlords, sorry "businesses", be the ones that provide new stock to the market.
:) I got it. to be clear - the market should not operate the way you envision - and your vision is no less ideologically driven than the opposing view I present.
it has helped that for the last ~9 years, the perversion that is the first home buyers grant has enabled fhb to outbid investors on new builds while those same investors outbid fhb on bottom-shelf second-hand houses. along with the extra risk this transfers to the fhb due to the vastly different resolution times of the two - why is it acceptable for a fhb to wait ~18-30 months for their home, whilst paying rent and having the risk of dodgy builders etc, but the investor gets their resolution (and security) in a matter of weeks?
as long as we keep allowing 'investors' to leverage equity without realizing (and paying CGT if appropriate), AND allowing them i/o mortgages, not a lot will change - and god-forbid we return to subsidizing them via a tax return not available to either renters or owner-occupiers.
long gone are the days a fhb could build a new home on the outskirts whilst still being only a few minutes drive from the work that enables them to pay for it.
The two things that stick out for me are;
- I thought I read on this site (in the comments so you know, not gospel) that new builds didn’t stack up financially for investors, even with the interest deductibility?
- Surely buying a do-er up-er, is a great opportunity for FHB to build sweat equity, the way I've read some commenters say the younger generation are too lazy to do?
Even in the regions a new build is over $1mil so not really FHB territory I would have thought, at this rate FHB are going to be over 40.
Boomers beware, if your adult children get you hang glider(or other dangerous sports) lessons for Father’s Day :-D
This isn’t obviously true. But property investors will get about $700 million out of it each year.
or it's 700Mil grabbed by labour-green unfairly in the first place.
Willis said on the radio, under labour the social housing waiting list has jumped 4 times and we need a healthy rental market. she was right. if landlord makes no money, why would they do it?
Nah, what we need is a central government shared-equity scheme. Given renters are presently paying all of their landlords costs (plus a bit of margin if the landlord can squeeze it out of the tenant) - the only difference between a landlord and a tenant is that the tenant doesn't have a deposit.
I recall a previous ACT slogan, 'Freedom to build' but what we really need is 'Freedom to own'. The way our housing market works presently makes for an intergenerational tenancy trap. Free this and the next generation through government initiative. And save $2 billion+ and rising annual accommodation supplement costs.
Kate,in most cases the landlord didn't have a deposit either,they just had equity from untaxed capital gains.
And given the deposits required these days,that is a hell of an advantage.
I would like to see any equity from subsequent investment properties ( i.e after the first one) taxed as realised capital gains at the time of purchase.
Their shared equity scheme was always going to fail. Why?
It’s simple, but obviously too complex for the governments buffoons.
- Govt puts in up to 20% equity
- but guess what, with a small deposit, a big mortgage is still required (500k-ish), and finance is over 7% (it was already over 5% when they introduced the scheme)
- then you have a household income cap, which for most doesn’t allow for servicing of the mortgage
Genius from Megan Woods and Team !!!!!
Government equity on an individual-choice basis (i.e., tailored for each loan on a circumstances/needs basis), perhaps to a maximum of 50%. Available to FHBs and other qualifiers to limit entry to those truly in need. Development-bank like finance (similar to what was done during the massive state house build post-WWII) for a specified period of time - perhaps up to 2 decades. Mandatory scheduled payments to ensure 'true' equity (not unearned gains) is realised over time - such payments able to be adjusted as income fluctuates (i.e., in the event of sudden illness or job loss).
Many other things to think about but that's hopefully helpful.
And who would be lending to all these people? Those with bad credit, low incomes, inconsistent employment, benefit dependency, and those who simply don't want to own a property. The banks? Think they already tried that, resulted in something called the GFC. I don't think they are in a hurry to repeat that experiment.
I dont think so. 12% of the working age population is on a benefit. So you can deduct them from the 33% of households who rent. As a guestimate half of the rest probably fall into my "bad credit" or "inconsistent employment history" or are low income. How many are actually left who can save a deposit and afford to service a mortgage?
The point of shared equity is that the government provides the deposit - and thus takes an equity share in the property. And yes, it is near impossible to save for a deposit in this rental market environment (the one where, you know, your expected to pay all your landlords costs - including paying off his/her mortgage in full).
All those doing the above (i.e., paying off their landlord's mortgage) can afford to service a mortgage.
Any other questions?.
Not the "paper rich", cash poor amateur investors who clamber over FHB and seasoned investors to buy a rot box for a premium over what it's worth, using 100% lending while claiming they're doing the work of Jesus and expecting everyone else to subsidize their poor financial acumen.
Those who actually have the means to buy and hold rental property. Sure, they may use modest mortgages, certainly not to the same desperate degree as the swathe of "mom and pop" on their deluded "get rich" with zero work journey.
it's never about equity or who makes money in NZ housing market. The problem of NZ housing market is it's too expensive. too expensive to own, too expensive to rent. Labour and the Greens never understood the problem, that's why they chose to punish Landlords or property investors with the hope it'll feel good and .... and that's it.
the real question is, why is NZ housing so expensive? why?
Because we have never regulated the rental market; because we have allowed further borrowing based on unrealised capital gains; because we are attracted to non-employee based, low work-effort money making schemes.
In short, we have accepted that being a rentier-class society is morally okay.
that's not factually true. residential rentals are highly regulated, and most often protecting renters than landlords.
as for borrowing, which country on the planet does not allow mortgages or borrowing?
properties are big business and hires plenty of worker and professionals, from trades people, to accountant, to lawyers, real estate agents, and everyone involved as consumers.
in short, as long as there are some people need to rent, you cannot kill renters class, nor can you kill landlords class unless NZ becomes a communism country where everyone is 'provided to you' by the states.
Multiple factors contribute to it being expensive, at its simplest demand has outstripped supply for decades.
Continuous population growth (well faster than we build houses to match at least) for decades. If NZ had a shrinking population, such as Invercargill had for decades (or Japan as a whole country has), house prices (rents too) would be low because there were more than needed. Then, having failed to manage population, we pump up demand further with subsidies such as accommodation supplement. Not to mention credit growth being outsources to private banks.
Supply has problems too, but we could reduce demand overnight just by stopping population growth and then drop the accommodation supplement to stop it propping up rents.
Developers over priced their Kiwibuild houses because they knew that if they didnt sell, the Govt would be forced to buy them at that price. It is such a perfect illustration of the naivety of the Labour Govt and their complete cluelessness as to how commercial markets operate. They then ended up owning hundreds of unsold Kiwibuild homes that they then later were forced to offload for losses, funded by the taxpayer.
I witnessed this first hand with a large developer in Christchurch - the houses they sold themselves were $30k cheaper ($450k) than the exact same houses in the subdivision that were labelled Kiwibuild.
Willis said on the radio, under labour the social housing waiting list has jumped 4 times and we need a healthy rental market. she was right. if landlord makes no money, why would they do it?
For those sweet, sweet untaxed capital gains of course.
For a healthy rental market we need a government committed to keeping population growth in check (say no more than 0.5%). Sadly I'm not sure there's any party offering that option.
If landlord makes no money, why would they do it?
Isnt that the whole scheme ? You load up the rental with all the debt, including transferring debt from the family home, you claim the tax back against personal income (pre ringfencing), and pay no tax personally. You knowingly have a losing business.... Thats why these rules were put in place, the whole scheme was designed to pay no tax.
Thats why they did/do it. Without tax free capital gains there was never a dollar to be made for all the Karen/Bruces come latelys.
Maybe they should just extend their proposed 15% stamp duty on (some) foreign buyers houses of $2mil+ to everyone? That would be a much better tool I feel.
Restricting it to foreign buyers only, where up to 40 countries may be exempt because of various treaties and /or FTA's seems awfully ambitious.
Why would you come to NZ to buy an expensive property with a 15% premium, when other people in the same situation to you will get it 15% cheaper just because they were born in a different foreign country to you.
National have already said Singapore and Australia are already exempt, as to beyond that - this seems to be in dispute, but either way it seems incredibly doubtful they will get the numbers they are expecting, each year, forever, to pay for this.
I'm moving in the direction of a matauranga Māori approach - I'm just not yet convinced the Māori caucus wouldn't bend to the will of Māori corporate elites. Many rūnanga members will tell you their corporate arms do not adhere to the kaupapa faithfully;
https://ojs.victoria.ac.nz/pq/article/view/5686
Karaitiana Taiuru provides the Ngāi Tahu rūnanga perspective explaining how it is often in conflict with their iwi/corporate perspective.
Another example;
https://www.newsroom.co.nz/doc-takes-its-time-on-sea-change-for-waiheke
The rūnanga (Trust Board) had been sidelined by an earlier Treaty settlement process in 2013; and replaced by iwi/corporate friendlies.
The Ngāti Pāoa Trust Board was effectively shelved in 2013 by the two interim trustees of the post-settlement governance entity in expectation of a speedy conclusion to settlement negotiations, but High Court action by disaffected members of the iwi led to its revival three years later.
The NZX50 is a bond proxy, hence why its falling. That's the market telling you that interest rates are expected to go up. And dont forget, the NZX50 includes dividend returns (unlike every other major index which is a capital only index) so its underperformance is even more dire.
The NZX50 is a bond proxy, hence why its falling. That's the market telling you that interest rates are expected to go up. And dont forget, the NZX50 includes dividend returns (unlike every other major index which is a capital only index) so its underperformance is even more dire
Bingo
It makes a huge difference, as most of the top stocks are big dividend payers. The 5 year return for the NZ50G (gross) is 23.5% compared to the NZ50C (capital) which returned 8.85% over the same period. Good article here about the differences and what it means for investors.
https://milfordasset.com/insights/gross-index-will-beat-capital-one
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