I have to say that I am not “looking forward” to the interesting times that must be ahead of us, but I see no way at all to avoid them. The current set of ideas and expectations and price escalations has no way to continue. LAQC for housing, if it is to go, has to go with respect to new purchases first. This dips these “rental investors” out of the property market and offers some relief on the prices front. It takes the shine off those investments pretty quick. For the rest, phasing in the removal would have to be gradual and I reckon that there’d be no shortage of work for the moving companies.

I reckon it is almost as good to simply allow people to deduct mortgage interest for their primary residence. It puts money into the market though, and that is the ONE thing this market doesn’t need.

respectfully
BJ

Perhaps one aspect that has been overlooked is what the rents would be if the LAQC status for landlards was removed. If the landlord worked out his return on investment at say 10% (should be nearer 20%) he would have to double his rent. We then get in a situation who blinks first. The renter who faces eviction and has no other house to go to or the landlord who has a morgage to service.

Which is how it should be , the market will then decide what a rental property is really worth.

Consequences may be interesting!

I dont think the LACQ will be removed as most rental houses are owned by companies and any losses that company makes qualifies for tax credits against more productive income (be that personal or another company).

Now you could run the property owning company at a loss on purpose (by charging it huge management fees for example) in order to minimse tax liabilites for a productive company.

I don’t think you know enough about it OR me to make that statement, but feel free to believe you are smarter than I am. I don’t mind taking advantage of other people’s misconceptions.

You go visit pretty much ANY accountant. Explain you have an income in the 70-80K range and ask him about housing investment.

It does NOT work for people who are already on a 6 figure income and it does NOT work for people who are making less than 50K and there are a lot of ways that people structure their lives and their incomes in this country to arrange those conditions as well, but when you hit that sweet spot in the income tax and benefits regime and a lot of people do, the “losing” investment property still wins.

In that income range you will find that people will be almost compelled to enter the market as landlords. Even if they have NO desire or talent for that position and hire other people to manage the properties… it is that big an advantage.

Mouldwarp … I pointed out the foolishness of trying to nail this to one single cause someplace above. There IS a natural shortage of land in all big cities. This has little to do with policies and much more to do with people liking environments rich in entertainments and distractions. The policies you are pointing at are, of course, not “green” either. We don’t control those citiy councils any more than we control parliament. They do contribute to the problem, but so do all the other things that are wrong with government policy in this area.

I can add one more to the list. There is an acute shortage of builders.

I’ve identified several potential building sites, a source for a loan, a design and suppliers of materials. There isn’t a builder within 100K of here that isn’t booked through 2008 or 2009. The amount of work I could do myself but cannot touch because I am not a “registered builder”, is immense (about the only thing I haven’t done is plumbing, I could contract the cement work and pick up some “casual labourers” to help me put some of it together. Except I can’t.

The building trades appear to have leveraged the “leaky homes” issue into a form of monopoly.

I don’t think that was a Green policy move either. I am sure you will blame us for it though.

At least have the wit to realize that we aren’t what you think. Your perception may have something to do with the reception you get here.

—————-

There are a LOT of houses changing hands with prices going perpetually up. This cannot last. The things that are driving most of the sales aren’t artificial shortages, but insane government favoritism shown to rental investors. Expecting the guy who heads the property investment association to own up to the fact that he’s got a privileged position and it needs some adjusting is magical thinking at best. Expecting any truth from him at all is pretty optimistic, but there is so much wrong with this market that almost ANY statement about what is wrong with it is likely to be correct.

BJ

We’re talking about the economic concept of *relative* scarcity, not an absolute scarcity: Nobody ever expected to see families sleeping in tents because there were not enough houses.

If you want to see house prices stabilise, or even fall, then you should announce a policy of making it very easy to develop land. Result? Suddenly there is more land available than there are buyers. At a stroke, the relative scarcity is flipped.

Then there is the question of slashing the state bureacracy involved in the entire building process, so that houses could be built for tens of thousands of dollars less.

Of course, all this is anathema to the Green party. They want tight restrictions on development and *more* control over the house construction industry.

At least, then, have the wit and honesty to recognise and accept the inevitable consequences of your policies.

The last thing you should be doing is announcing a collection of policies which entirely overlook the 800lb gorilla that the Green party brought into the room, and which instead seek to blame private investors - who are guilty merely of responding to these perverse incentives - and which increase still further the state’s powers of monitoring, interfering and controlling people’s lives.

Oh, Mouldy one, if only it were as simple as this, but it is not. This statement isn’t even correct. If it were, there would be untold thousands of homeless, on the basis that there would be too few houses to go around.

However, the reality is that there are very few homeless, and those who are homeless either by choice or because they are on a benefit or a very low income. Almost all New Zealanders can find somewhere to rent, albeit no necessarily a property that ideally meets their needs.

And, yes, admittedly some can only afford to rent with state assistance through the Accommodation Supplement, but this is effectively a massive state subsidy to landlords (and, ultimately, to banks), and is therefore another driver of housing cost increases. Which it shouldn’t be, but I’m not sure how to deal with that one short of heavy-handed regulation of residential rent during the transition. Abolishing the Accommodation Supplement would, at least in the short term until the market adjusted, cause significant homelessness.

There would still be enough houses to go around though, just people on benefits and low incomes wouldn’t be able to afford to rent them until landlords realised that a tenanted house at a lower rent is a better option than paying the mortgage on an empty house.

Fear, Greed, Property and Tax
http://nbr.infometrics.co.nz/fear–greed–property-and-tax_881.html
http://www.tv3.co.nz/News/NewsDisplay/tabid/209/articleID/24985/Defaul t.aspx
jh

No, it isn’t just one thing. There is an element of council over-restriction involved, but it isn’t just that. there is an element of population increase in it, but it isn’t just that either.

No No No No No….

The issue however, is what parts of this are in the control of the government, and the OCR is only one of the things that the government can control. It can also control the application of the CGT, the rate of immigration, the tax perks given to landlords and the overall tax structure. Most of these things are things that we Greens would like them to actually work with to measurably diminish the prices of houses.

Which are damned cheap to build if you have the land to do it. The “cheaper” stuff is perfectly good, and I am not looking for 200+ square meters of space.

Speculative investment in Real-Estate is real. It is serious and it pushes the prices up quite effectively, because prices are set at the margins. It is also the easiest thing to address because it is already subject to government encouragement. The government needs to stop that. It also needs to work the immigration issue and the land availability issue and the mass transit issue and all the rest… but the issue of what it is doing to ENCOURAGE speculation in Real Estate and putting an end to that, is just as real and less inflationary to address than most of the others.

respectfully
BJ
Any one of you claiming that this is a result of “just one thing” is the problem should have no trouble finding the material for a granite countertop between your ears.