Hard News: Death Spiral!
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merc,
It gets real scary when you get people like Winston and Barry on TV3 talking up "my shares in AKL Airport", or Helen talking up AirNZ shares. Alot of council managers have AKL Airport and Ports Of AKL shares as well, meanwhile most politicians are property investors in some form (Michael is, and some others got pinged for double dipping) while they have guaranteed dollar for dollar Super (so they tend to legislate round their personal investment strategies).
Also Govt. bailing out AirNZ to 1 billion dollars, so they could keep Singapore Airlines away, strategic asset you see (free travel for life plus loved one's).
The reason why investing here from offshore is so attractive is because... -
I think we are fleeced on books, CD's, DVD's as well.
I tried to buy a cellphone in Auckland this week. Having held off in Jakarta two weeks ago when I saw it (Sony Ericsson K810) everywhere for about $390, the cheapest I could find it in AK was in the parallel import shop for $700. I'll wait...
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The way out of this bind is to have low interest rates ... but do away with the idea that housing speculation is an acceptable source of income.
Oh FO, please!! [I say that without malice :) ] Housing 'speculation' is no worse that speculating on the sharemarket. What are you suggesting? That we shave the heads of 'housing speculators' and frog march them thru the streets?
If the Govt wants to dampen down the housing market they can pass a law requiring all mortgages to be to a value of no more than 75% of the property value. And if they've really got balls they can make it retrospective, thus requiring existing mortgage holders to pay down their mortgages to the 75% level. Which will require some (many?) to actually sell down their property holdings, which should depress the prices.
At present you can get mortgages of 100% ie no money down; and I hear talk of up to 110% from some lenders (so you can do some improvements before moving in). Easily available credit is what is causing the problem.
</aside> Good to see Mr Grigg is back online, I was worried he might be banged up in a Balinese jail.
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Oh FO, please!! [I say that without malice :) ] Housing 'speculation' is no worse that speculating on the sharemarket
Yes, because it's as trivial to create more land and housing as it is to create more companies and shares on a given stockmarket, and 'somewhere to live' ranks in exactly the same place on the list of human needs as 'possessing stock certificates'.
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Next you'll be saying we shouldn't privatise the water.
I think it's time I called 'COMMUNIST!!!' on this thread.
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If the Govt wants to dampen down the housing market they can pass a law requiring all mortgages to be to a value of no more than 75% of the property value. And if they've really got balls they can make it retrospective, thus requiring existing mortgage holders to pay down their mortgages to the 75% level. Which will require some (many?) to actually sell down their property holdings, which should depress the prices.
I think I speak for about half the homeowners in NZ, when I respectfully tell you where you can shove that idea.
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Kyle, if you're not willing to be part of the solution then you're part of the problem. When the revolution comes it will be fat-cat property owners like yourself who will be first up against the wall.
Housing 'speculation' is no worse than speculating on the sharemarket
No worse, and no better.
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Nat is on the money, but there are far less draconian ways to deal with the housing link in the chain of currency death.
1. Just enforce existing law. Ie, collect income tax from people who trade property for income. Pursue dodgy trusts, depreciation claims, and LAQCs.
2. Make some minor changes to the law: capital gains tax with exemption for family home, changes to the depreciation regime.
3. Housing policy changes that increase the supply. Although I'd very much like to know to what extent there is genuinely an accomodation shortage.
4. Make the Reserve Back change its rules on capital adequacy for banks, such that they can't lend so much against residential property. That needn't be a flat cap as proposed by I/O, it can just be an overall ratio, leaving banks the possibility of lending 100% mortgages for a deserving few.
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leaving banks the possibility of lending 100% mortgages for a deserving few
Ah, there's the rub. This thread is full of damn communists!
Who decides who deserves a 100% mortgage? The banks, or some state agency? And who's a better candidate for a 100% mortgage? The young couple who can't scrape enough together for a deposit, or the developer with multiple properties (a.k.a. securities) and a prior history of servicing 100% mortgages? -
Stephen- a wide range of comments here, and commentators in the media agree on this. If only that meant it'd happen!
But it's off the political agenda, largely 'cos Bill English won't have a bar of it- though Clarke seems to have stepped up to write it off as well.
They may see it as political poison, butsince there are few if any other plausible avenues, it seems fair that English- and Clarke- wear this.
There ought to be exporters calling for their heads. -
Kyle, if you're not willing to be part of the solution then you're part of the problem. When the revolution comes it will be fat-cat property owners like yourself who will be first up against the wall.
I'm not sure if my three bedroom ex-Railways house in Dunedin qualifies me as a fat cat property owner. A rather scrawny cat to be honest.
It seems to me that the sane solution to the property 'crisis' is a capital gains tax on everything but the primary piece of property. Hits the property speculators, collects income from the government, and doesn't hurt the family home at all.
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Totally agree Kyle. I still can't understand why money I earn by working is taxed while money earnt by not working is tax-free. I don't understand how it doesn't simply privelege speculators.
(And I'm not totally convinced the "family home" should be exempt. It's still "unearned" money (though "improvements" need to be considered) and it *should* even out somewhat in that the cost of the tax to vendors is mirrored in lowerprices for buyers.) -
Nominally, Rob, it isn't tax-free. If you trade anything for income - from apples to shares to houses - you are supposed to pay tax on that income.
However most people who are in the business of trading property don't declare that income, and IRD doesn't go after them.
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What does the room say to this one (idea related by someone who'd seen it on the telly)...
Hit all that consumer spending by hitting all that ludicrous credit - lower the bankruptcy threshold.
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(And I'm not totally convinced the "family home" should be exempt. It's still "unearned" money (though "improvements" need to be considered) and it *should* even out somewhat in that the cost of the tax to vendors is mirrored in lowerprices for buyers.)
Well that would be:
1. Political suicide. The family home is still very deep in the NZ psyche.
2. Annoying administratively. People (normally) already keep records of what they do on rental properties for tax/trust/etc purposes. When I spend a hundred dollars here and there on my family house, it would annoy the hell out of me collecting receipts to prove for a future write off in 5/10/20 years in the future that it was improvements, and therefore already taxed through my income, rather than capital gains. If houses are your business then yes, you should have to do these things. If one house is your home, then you shouldn't need a lawyer and an accountant to figure out your capital gain amount when you sell it.
3. Hitting middle income earners rather than just people who are wealthy enough to own umpteen bits of property. You'd hit middle income earners if it's a tax imposed because the money is needed, but if the prime purpose is to calm down property speculation, then hitting the family home is just money grabbing.
4. A disincentive for people to sell houses and move. Because if they lose another $20,000 in tax when they sell their house and buy another one, then you're going to discourage people from moving around the country for jobs, training, family reasons, and dampen the property market that we all want to encourage - reasonably priced houses for people to move into as first homes.
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Agreed on point 2. Didn't consider that at all. Not sure about 3 and 4.
But 1 is the sticking point, really. Not because we're wedded to the family home- you only pay the tax on the difference in value, IF you sell. What we're wedded to is changing houses and the notion that the family home is both inflation-proof, and making us money. (And if you're on a 100% mortgage at 10% interest, it blimmin better be!) Yet that's the very thing which the mad upwards ever-upwards Icarus-flight of house prices threatens: there'll be a end at some stage, and it'll be painful.
Look, even the limited proposals Cullen spoke of having discussed with Key were nixed by English (followed up by Clarke). It's a clear case where the best interests of the NZ economy overall are ignored in a game of political chicken. I think less of both English and Clarke as a result. I'm already part of the Cullen cult ;-) And I'm starting to think Key without English would be a safer pair of hands than the current, rather awkward situation. (If you've seen the first episode of Flight of the Conchords: think of Sally as the National Party. She's going out with Jermaine now- but Brett's always in the same room....) -
Official Cash Rate changes for the last 12 months:
July 26: OCR increased by .25 per cent to a total of 8.25 per cent.
June 7: OCR increased .25 per cent to a total of 8 per cent.
April 26: OCR increased .25 per cent to a total of 7.75 per cent.
March 8: OCR increased .25 per cent to a total of 7.5 per cent.
January 25: there was no change.
December 7: there was no change.
October 26: there was no change.
September 14: there was no change.
July 27: there was no change.
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WH,
Lo, and the Cat of Doom brought wailing and gnashing of teeth to all that beheld it.
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