Comments on: Should the rules around property change?

By: Melanie

Melanie — Sun, 24 Aug 2008 21:39:16 +0000

I agree with Jeremy’s comments. I don’t think think house prices should be a political issue & I don’t think that responsible property investors are the problem with excessive debt/inflation. It is the people who keep racking up their mortgages to the limit to buy toys such as boats, motorhomes, cars & plasma TVs that should suffer the consequences (& I think a lot are!) If the government wants to interfere, then imposing rules/limits on banks lending on property is the only effective answer. Stop the toy buyers but still enable responsible property investment – after all someone has to be a landlord to the sector of society who will never be able to own their own homes.

By: cathy

cathy — Fri, 22 Aug 2008 07:40:56 +0000

i may be behind the eight-ball on this, but we have no capital gains tax, right? so what about income tax on the increase in capital value? is that just a sneaky way of taxing capital gains without taxing capital gains? or have i missed something

By: John

John — Thu, 14 Aug 2008 21:56:58 +0000

Just like to point out that no one is going to suggest rule changes here on this blog because we are all property investors. If we weren’t, we might suggest changes like: having GST on rent, capital gains tax on house price increases etc. We like the way things are now. You can buy an investment house without involving middlemen, if you make a loss you get it off tax and if you make a profit one day you dont have to pay tax on it. Cool…

By: Jeremy

Jeremy — Sun, 10 Aug 2008 22:19:21 +0000

I find people are so negative about inflation. Personally I like it. It diminishes my debt and increases my wage.

By: Hamish

Hamish — Fri, 08 Aug 2008 23:12:31 +0000

The tax benefits of investing in property are too good.

If we had an economy that encouraged enterprise and businesses than maybe we would have other things to invest in. Maybe tax benefits for these sorts of activities would be a positive way to encourage change.

By: Alan Pitts

Alan Pitts — Fri, 08 Aug 2008 09:04:16 +0000

In the 70′s when you went to a bank in the UK to get a mortgage you had to have !0% deposit and the banks would lend you 3 1/2 times the main earner’s salary and 1/2 the second earner. Go back to that and it will automatically control house prices. For rentals the income is the rent so just make the banks use the 3 1/2 times formula. Its the greedy banks that have changed the lending criteria. In the UK the banks have been lending 125% of value, those responsible should be banned from banking.

By: User

User — Fri, 08 Aug 2008 04:50:33 +0000

First of all, I’m not at all against Property
Quite the contrary.. but…

Seeing most of this created credit has been used in NZ property it seems fair to try and curb the increase in credit and associated asset values caused through speculation and ‘tax incentives’ i.e. negative gearing, no cap gains tax etc

The basic goal of raising interest rates is to constrict the credit/ money supply, unfortunately it is a blunt instrument and has many negative side effects, namely:
- Pushes up the NZ dollar (carry trade) hurting exporters/ GDP producers
- Decreases cost of imports spurring more consumption/ household consumer credit
- Creates trade imbalances relating to the currency and more net outflows (barring inflation to commodities which is currently happening and offsetting deficits)

Changes to the tax law would reduce the speculative part of property investing which has contributed (albeit not all) to the exponential growth,
The truth is if you can make money easily in propoerty with no capital gains tax and negative gear your income as a tax avoidance scheme. why wouldn’t you?

However, please refer US 1986 tax reform act, where negative gearing was rampant… then got stamped out for individuals and self employed people… contributing to the 1987 savings and loans crash…

History repeats, and those who do not learn the lessons are doomed to repeat them

By: Jeremy

Jeremy — Fri, 08 Aug 2008 02:50:12 +0000

Also, I cant see why the Govt (apparently) wants us to dabble in the sharemarket. Isn’t that a particularly hazardous thing to do with your hard earned cash? I guess quite a few quite rational and careful people invested in the likes of Enron. If the Govt wants us all to play on the sharemarket, why is ‘How to invest wisely in the sharemarket’ not a strand in the school curiculum?

By: User

User — Fri, 08 Aug 2008 02:21:52 +0000

Bollards job is to maintian stability in the financial markets, he is doing this rather prudently even though people are crying about high rates.
Although before people start trying to crucify Alan for doing his job well (in my opinion) they need to understand the consequences of not doing so
A few facts to consider
1) House prices are up mainly due to credit expansion – between 2000-2008 the M3 (broadest form of money) money supply in NZ has roughly doubled and has roughly done so since the world went off the gold standard in 1971. Currently credit is expanding at 7.45% in NZ (2008) although the ‘official’ inflation rate is ~4.0%
2) Purchasing power of everyones dollars are dropping daily as more money is printed. US$1 in 1920′s now worth equiv. $25 in purchasing power parity
3) Hard assets are being revalued accordingly
4) Wages are not keeping up with inflation minus tax
5) We have tax laws that strongly favour property over other assets, no incentive to invest elsewhere creating an imbalance from productive (i.e. businesses creating jobs/ tax) to non-productive (i.e. real estate)
6) Consequences of asset price instability are possibly hyperinflation, deflation, stagflation and other undesirables

Over 2000 years of economic history prove that excessive growth rates are unsustainable and need to be constrained to sustainable levels (i.e. wage growth) to avoid bubbles and the associated problems that follow

By: RGH

RGH — Fri, 08 Aug 2008 01:29:57 +0000

Property is such an attractive form of investment in N.Z. that it is hardly surprising there is such a “love affair” with it.
When politicians ‘restructured” the N.Z. economy in the 80s/90s and took away tax advantages for superannuation, and destroyed many peoples’ livelihoods with privatisation and corporatisation (often only to feed dividend-hungry American shareholders), property became the easiest and quickest way for people to protect their futures. Share-Markets are scary for the inexperienced, and with no capital-gains taxes or stamp duty (as in Aussie) on property to worry about, and with Banks loaning like drunken-sailors, what else would you do?