Hmmm – well I guess there is the Acheson Street shops a coupla blocks away from me in Shirley – basically a rollerdoor display area, in a state house area – most of which never roll up – there’s even a gone-out-of-business ‘Dress for Even Less’, which says a lot!
I know it is nearly 40 years ago, but I remember the Acheson Ave shops with fondness. Our weekly ( or fortnightly) shopping was done at "Mr Anderson's"- probably a 4 square or similar. Any number of the 7 kids would walk there with our mother, do the shopping there, ( or muck about at McFarlane park) go down to the butchers along the road (sawdust on the floor, free saveloy) and wander home. Mr Anderson would pull up in his white station wagon (from memory) at our place around 530 or 6 to deliver the groceries to us. Great service, but also some sense of community that has diminished- and which I think the whole housing as investment ( instead of a home) is reflective of too. (Shoe-horning the actual topic in at the end there ;-)
There are actually two related structural biases:
- firstly, property inflation gains are undertaxed
- secondly, leverage is available to ordinary individuals on property purchases and not on any other asset class.
This is not widely understood, but if I buy a house on an 80% mortgage and it appreciates by 10%, I make a 50% gain on my equity. Less the mortgage costs, plus the rent, but it works out at a yield way above the bare gain.
If it consistently depreciates, then my equity can be wiped out, but if I can still keep up interest payments, I'm unlikely to have the bank demand additional security.
Compare this to shares (or anything else). It's "possible" to borrow on "margin", but only for a short time, difficult to arrange and the moment the price drops, the broker will want an additional margin payment.
firstly, property inflation gains are undertaxed
I think it would be more accurate to say that capital gains after inflation are undertaxed. Australia used to do this explicitly, taxing everything after inflation when you sold the property. It was quite straightforward and seemed fair to most people.
But Howard "simplified" that with a 50% discount instead of indexing, which encouraged people to trade properties more often when there was higher inflation. The win for Howard was that more trading = more stamp duty, and stamp duty goes to the state governments so he could cut their funding and they wouldn't whine. But the day the house trading encouragement goes away is the day state revenue collapses.
I think we should go (back) to indexing asset values and taxing the gains.
One thing NSW at least does is a land tax based on total value of all the land you own. House you live in is exempt, as is social housing, but it's a progressive tax - this is why you don't see giant megacorps owning billions of dollars of property. They would be paying 1% of land value every year, instead of the 0.1% that a single sub-%500k investment property costs you. Again, I think that this is a good idea but the exemption for your house should be 50% ort less, rather than 100%. Instead of stamp duty, preferably.
This clickbait nonsense in the Herald and Stuff is infuriating. No doubt, the current tax regime and demand vs supply absolutely favours property investment. We have been trying to guide our daughter into a first home in Auckland, she has $30k saved, achieved by living at home until recently.
It simply doesn’t make sense to buy in the areas she can safely (that takes out Clendon) and logistically (bye bye Pokeno) live. 750k for a very tired weatherboard ex statehouse in Panmure which has already been subdivided - badly? No thanks.
We are better to buy a leveraged investment property, sit on it for 10 years and then borrow against that equity while she keeps saving up her deposit. Unless the immigration tide is turned off, or the tax rules are changed, I cant see the situation changing.
On my first day at my first inner-city Sydney job the company smartarse asked me if it was true that people from NZ would look inside the back of a radio hoping to spot the little man inside. "Don't take any notice of that bastard", said the guy at the next desk. "He asked me the same thing about people from Penrith when he discovered that's where I'm from".
The Tintin cover is brilliant!
first inner-city Sydney job the company smartarse
Ah yes, the Lesser Australian Dickhead, a promiscuous species seen in a wide variety of habitats throughout the country. An introduced species, commonly regarded as a pest if not a plague, very resilient in the face of attempts to control its behaviour or limit the population.
We have been trying to guide our daughter into a first home in Auckland, she has $30k saved
$30k doesn't get you overly far against a deposit requirement of, at pretty much barest minimum, 10%. The only places for $300k tend to be apartments, and the banks are much more hesitant to lend on those for a large number of reasons.
And it goes back that far .... I remember Michael Cullen being particularly (and cavalierly) dismissive of the idea of introducing a capital gains tax.
This sort of institutionalised crisis takes decades to form, and will probably take a long way to unwind - assuming there is a political will to do so.
I'm still not sure if he was ideologically opposed to a CGT, or because he was spooked by NZ Inc's "winter of discontent" in the Clark Govt's 1st term.
I was listening to an RNZ segment last night where Kim Hill interviewed Walter Scheidel, who identified the "four horsemen" of inequality: mass mobilization or state warfare, transformative revolution, state collapse, and plague. Generation Rent-Seeker has become just as powerful as an upper house, and it'll likely take one of those horsemen to dislodge them.
Meanwhile in Chchch $550,000 apparently becomes the new 'affordable' housing price...
"for a decent quality home"... let us hope that that is what Ngai Tahu Incorporated is being forced to build, because we desperately need to see that become the new normal. I don't have any confidence that they would choose to do so.
But that is a whole other topic: what does a decent home cost, and why don't companies build them and people buy them?
I just built a wildly over-expensive 2.4x3.6m sleepout in our backyard ($6000!! - yes, I counted) but it is insulated and very comfortable. To the point where it has changed how I feel about the whole house, it's become "my lovely bedshed with that pile of brickwork shielding it from the road".
"He asked me the same thing about people from Penrith when he discovered that's where I'm from".
How does it compare to the Sutherland Shire, where the Cronulla riots happened a bit over a decade ago?
How does it compare to the Sutherland Shire, where the Cronulla riots happened a bit over a decade ago?
People fighting over surf breaks and arguing about $50,000+ cars are not really the criminal elements most people fear. In that area you're far more likely to get run off the road by a new-ish Range Rover occupied by someone checking Facebook than beaten up by a drug dealer. It's gone from "the bogan beach" to "OMG, a beach in the city!!!" in the last 20 years. Apartments within driving distance of the beach start about $1M but a house near the beach is 3M+.
The Cronulla riots were a locals vs outsiders problem, which you get at beachside suburbs. There was a huge element of using talkback radio to arrange a fight and it's a bit hard to untangle the politics as a result (radio host Alan Jones is explicitly not part of any of the groups in the riot except perhaps the police command group).
Generation Rent-Seeker has become just as powerful as an upper house, and it’ll likely take one of those horsemen to dislodge them.
So ... a plague upon their houses ... perhaps we need some Aussie termites
Someone said to me a while back, "when you earn the average wage but you can't afford the average house something is screwed"
Simple really when you think about it.
Nah, that's because the curve has changed as much as anything else. The extreme ends used to be much closer to the centre before, now the richest are pushing the average up more because they have 100x the average wealth rather than 10x.
This Companies Office entry indicates that Ron Hoy Fong recently re-registered a company in the name of Richmastery, the get-rich-quick “property education” company that left a trail of victims before the GFC.
Here’s the Herald’s 2009 report on Richmastery going into liquidation. By, er, Anne Gibson.
a plague upon their houses … perhaps we need some Aussie termites
or termagents - Pauline Hanson seems like a one-woman plague...
By, er, Anne Gibson.
and there's this story from April 3
How to get a $1.7m Auckland property portfolio in 4 years
in which "(Phil) Twyford praised the Herald for its property coverage because he said it showed what was really going on and had resulted in people calling for an end to speculation and property flippping."
So there ya go!
And this, in an article which otherwise appears to be promoting membership in a property investors' association.
With our tax and investment systems so ridiculously geared towards property as an asset class, for those who could it has simply been the most sensible way to save for their retirement.
Pretty much. It's an asset that's easy to understand, over which you have a lot of control, and isn't really that much work to look after. With the tax structures how they are, it's almost foolish not to be in it, if you have the capital. If the other option is stocks and shares, or a small business, it's no wonder that people who have spent their life in some kind of salaried non-speculative job aren't really that keen on a more risky (and possibly more productive) option.
It's not their fault the system is fucked. Nor are they under an obligation to get screwed by it because others are being screwed by it.
It's a huge and complicated problem. Not surprising when it's almost all of our capital. The annoying simplicity of the Herald's approach is not effectively countered by more oversimplifications.
It's got to the point where I've seriously considered that having two kids is too expensive. It's not just a 10% on a potentially million-dollar house, getting through University isn't exactly cheap either. My 15-year-old has already decided she'll never buy in Auckland.
Not surprising when it’s almost all of our capital.
You ain't kidding. Nearly 77% of the national wealth is tied up in residential property (scroll down for the pretty horizontal bar graph titled "New Zealand Asset Classes").
It’s a huge and complicated problem.
True, but it there are some pretty easily picked low hanging fruit:
* Change our immigration policy settings to massively reduce the number of people moving to Auckland.
* Disallow non-residents from purchasing real estate
* Implement a capital gains tax (except on the whanau whare)
* Redirect investment from un-needed motorways (such as this expensive rort) into a proper 21st century transport model (like CFN 2)).
I don't think National want to lose this election. They can only follow their kaupapa of directing wealth to the wealthy if they are in power. The real driver is that they just don't care and they have no shame.
Change our immigration policy settings to massively reduce the number of people moving to Auckland.
How, exactly, would you do that? Incentives to live in the regions, which will then suffer the same kinds of infrastructure and housing-price stress as Auckland but with a far lower starting point in terms of capability to cope?
My Fav article is by Scott Yorke