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  • Ask GRA A Question FREE

    OK we are feeling generous at GRA today, and I have decided I like Property Talk. Ask me a question and I'll try to answer it FREE. This offer expires when I get tired.
    Last edited by Matt Gilligan; 10-07-2008, 11:49 AM.
    Matthew Gilligan CA - E-mail Matt
    Chartered Accountant Specialising in Tax Structures, Property & Trusts
    Read my book: Tax Structures 101

  • #2
    Okay Cheers

    1. Will Immigration fill the gap of Babyboomers retiring post 2010 and cause a property boom as people like Roy Fong and Dean Letfus believe.

    2. Whats your take on how the new laws of association will end up going into law and how will the IRD approach them.

    3. Property market and economy are in a mini downward spiral at the moment, how far do you think prices will go, another 10%.

    4. When will market start the road to recovery, will it be late 2009 as some say or more into 2010 / 2011 / 2012 as the more negative suggest.

    5. Will the 3 trust Rolls Royce structure still work post 1/4/09.

    6. Will silver prices reach 100.

    Comment


    • #3
      OMG Where do I start ?

      Originally posted by Bluekiwi View Post
      1. Will Immigration fill the gap of Babyboomers retiring post 2010 and cause a property boom as people like Roy Fong and Dean Letfus believe.
      Originally posted by Bluekiwi View Post
      2. Whats your take on how the new laws of association will end up going into law and how will the IRD approach them.
      3. Property market and economy are in a mini downward spiral at the moment, how far do you think prices will go, another 10%.
      4. When will market start the road to recovery, will it be late 2009 as some say or more into 2010 / 2011 / 2012 as the more negative suggest.
      5. Will the 3 trust Rolls Royce structure still work post 1/4/09.
      6. Will silver prices reach 100.
      1. Will Immigration fill the gap of Babyboomers retiring post 2010 and cause a property boom as people like Roy Fong and Dean Letfus believe.

      Its logical that when our exchange drops due to recessionary pressure, our property economy looks under-valued attracting immigrants and capital investment. Cheap exchange = better bang for your buck for immigrants.

      So I totally agree with their theories...and the people they stole them off - whoever they were !

      Probably someone really smart like Bernard Salt at KPMG in Melbourne. He is a great read on all things demographic in Aussie and lots of it transfers directly into NZ. Well worth the read.

      2. Whats your take on how the new laws of association will end up going into law and how will the IRD approach them.

      I think IRD will get their way with this one. Tainting is coming in. Just hold for 10 years, make more money, and take advantage of the 10 year rule to break tainting post 1.4.09. Just as IRD intended, hang on to your property acquired with the intention of long term investment for 10 years post 1.4.09 (if you are a trader), if you don't want to pay tax.

      See my thread on this for those interested...

      http://www.propertytalk.com/forum/sh...ad.php?t=16844

      3. Property market and economy are in a mini downward spiral at the moment, how far do you think prices will go, another 10%.

      Ummm, I think mini is a bit of an understatement.

      I reckon we are in for a big one. Down 20-33% (depending on your area) this year, small bounce next year as interest rates drop, recovery slowly clawing back thereafter over 5 years before we see another boom environment.

      4. When will market start the road to recovery, will it be late 2009 as some say or more into 2010 / 2011 / 2012 as the more negative suggest.

      2012 would be my pick. NZ is in seriously bad shape at present. There is a lot of pain to go before it gets better. Unfortunately when things go really high...they tend to go really low.

      An extraneous factor that no one is looking at yet, but watch this space, is what do the collapsed finance companies do with their property ? Billions of dollars worth of unfinished development property...what do they do with it ? I'll tell you what they do, they can't sell it for more than 25%-50% for a few years, so they finish the developments and DUMP the property for 50-60% of previous MV.

      This happened post the 80's crash, and we are yet to see this emerge - it takes a year or two for the mezz funders to get permission from their investors to move from being failed financiers to developers, in order to get their money out. Wait till this stock hits the market, with no requirement to sell at fair market value.


      5. Will the 3 trust Rolls Royce structure still work post 1/4/09.

      Yep but won't break tainting.
      Last edited by Matt Gilligan; 08-07-2008, 11:10 AM. Reason: Tidied up formatting
      Matthew Gilligan CA - E-mail Matt
      Chartered Accountant Specialising in Tax Structures, Property & Trusts
      Read my book: Tax Structures 101

      Comment


      • #4
        Haha.... well you asked !!!

        Cheers thanks very much for that Matt

        Comment


        • #5
          Hi Matthew

          On behalf of the PropertyTalk community I would like to thank you for your very generous offer of a free question and answer time.

          I hope that the questions asked are good sensible ones worthy of your time in answering them.

          Regards
          "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

          Comment


          • #6
            Hi Matthew,

            I see petrol is up 6c overnight, how high do you see fuel costs going and what effect will this have on the NZ property market in the short/medium term?

            Throw your heart over the bar and your body will follow - Norman Vincent Peale

            Comment


            • #7
              Hi Matthew,

              I am very interested in these changes to the associated persons rules, and also the existing rules.

              I am not myself a trader, but one day may like to do a subdivision. I would intend to hold the property for more than 10 years, as that fits with my strategy. However, one concern is tainting persons associated with me.

              I would hate to commit my children to having to hold their properties for 10 years or more (assuming that my subdivision was more than of a simple nature).

              My question is this: Do you know of any actual cases under the existing rules of where the IRD has successfully gone after family members of traders and taxed their property transactions because they are associated to a trader/developer?

              If there are such cases, could you maybe outline the details, and any ways you see of protecting against this?

              Thanks in advance,

              Paul.

              Comment


              • #8
                hi M.G

                what parallels do you see with the gloomy NZ property market in the next few years and the australian property market, given this is a global downturn. will certain parts of aussie continue to flourish amongst the widespread gloom?

                Comment


                • #9
                  Oil and Food inflation impact

                  Originally posted by nzfrazer View Post
                  Hi Matthew,

                  I see petrol is up 6c overnight, how high do you see fuel costs going and what effect will this have on the NZ property market in the short/medium term?
                  Oil and foodd inflation is obviously recessionary. Tight household budgets getting tighter, means less money for retail spending, having fun, investing and saving, - very depressing really and impeacts immensely on property due to tighter budgets and the population's confedence is further knocked by it.

                  However its not the end of the world, - I think the market will comphensate very quickly. By next year we will be all but over it as we will have got used to the costs and adjusted our lifestyles to suit.

                  If a household is paying double fuel costs and cannot afford it, they will guts it out until they change their car, and buy a more economic vehicle. Meantime they will catch the bus, train or carpool, and put their second car in the garage or sell it on trademe.

                  Have you noticed the roads are quieter ?

                  In the medium term fuel will be less of a factor as wages rise, and fuel consumption drops.

                  So the rise in fuel costs are manageable.

                  Its the same with food. People will change their diets and rely less on dairy and high cost protein foods, and eat cheaper food. Not saying this is a good thing, but its reality.

                  In summary the economy will adapt its consumption of food and oil to adjust and work its way around the increaase in costs. Short run it's recessionary and depressing however for the global population to get their heads around it, not just Kiwi's.

                  Feel sorry for third world countries that don't have room in their lifestyle to adjust their behavior patterns around the new costs, - as they are already living on a subsistence budget.
                  Matthew Gilligan CA - E-mail Matt
                  Chartered Accountant Specialising in Tax Structures, Property & Trusts
                  Read my book: Tax Structures 101

                  Comment


                  • #10
                    Aussie Market v NZ Market

                    Originally posted by chook View Post
                    what parallels do you see with the gloomy NZ property market in the next few years and the australian property market, given this is a global downturn. will certain parts of aussie continue to flourish amongst the widespread gloom?

                    Aussie is coping with the bitter pill of oil and food inflation, high interest rates and knocked business confidence from the credit crunch.

                    However Aussie is in a fundamentally different position to NZ. They have huge immigration, running at historic peaks ( 186,000 people migrating to Aussie this year net of outflows), plus internal population growth from net births and deaths of 550,000+). This coupled with a chronic housing shortage on the East Coast, and rapidly rising rents.

                    They also have a 40% wage gap in NZ, a massive mining boom, and a growing economy ( verses our recessionary economy.) They are better positioned to weather the tougher global market than NZ right now and will be more resilient economically than NZ.

                    Property price growth is very much about supply and demand imbalance. At present, there is a massive shortage of East Coast Aussie housing ( even in Sydney) and it is rapidly getting worse.

                    Developers spooked by credit cost ( myself included) are not building at a rate that is keeping up with real demand.
                    Long story short, the East Coast of Aussie is going to have a rest year this year, but will not go backwards, even though I understand parts of it are down 5% at present.

                    The West Coast of Aussie has issues - Perth is off the back of a boom. I would not invest in Perth for a few years.

                    I have 9 development properties in Melbourne, all in for plans and permits. I have sold 5 of them ( at a profit ), spooked by the NZ market I guess ( bringing some cash back for my NZ development operations)

                    However I like the shape of the Aussie market and encourage others to investigate it. There are some deals around at present, its well worth checking out.

                    Hope that helps.
                    Last edited by donna; 08-07-2008, 05:54 PM. Reason: felt like cleaning...removed excess font tags
                    Matthew Gilligan CA - E-mail Matt
                    Chartered Accountant Specialising in Tax Structures, Property & Trusts
                    Read my book: Tax Structures 101

                    Comment


                    • #11
                      Thank you for your offer of free advice. Im a newbie (this is my first post), have been reading/studying for a year. We have bought and sold (ignorantly) three rentals. We want to create a portfolio of 10 rentals over the next 10 years.
                      My question is:
                      Given the current recession and doom messages about the economy, should we buy again or focus on paying off debt? We have 1 home, 1 rental (LAQC), 2 shares of a retirement village (LAQC)development. Our focus is debt reduction on the home (only 100k to go), then focus on rental (a similar amount), aiming to be mortgage free in 5 years (except the retirement village development which is 100% borrowed). Total borrowings: $400k. When do we jump into the market. Feels like the more I know, the less confident I am....is this common?

                      Comment


                      • #12
                        Changing Trustees

                        Hello Matthew,

                        Could you please advise if I change one of my trustees of my Trust (which own a number of buy and hold properties), whether or not it will invoke depreciation recovered.

                        If it does invoke depreciation recovered would you recommend to clients to have a corporate trustee, in order to give you some control over depreciation recovered.

                        Thank you for your kind offer.
                        Ross

                        Comment


                        • #13
                          Does a change of Trustee invoke Depreciation Recovered

                          Originally posted by ManagementHQ View Post
                          Hello Matthew,

                          Could you please advise if I change one of my trustees of my Trust (which own a number of buy and hold properties), whether or not it will invoke depreciation recovered.

                          If it does invoke depreciation recovered would you recommend to clients to have a corporate trustee, in order to give you some control over depreciation recovered.

                          Thank you for your kind offer.
                          Ross

                          A change of Trustee is not a disposal for tax purposes and therefore does not trigger depreciation recovered.
                          Matthew Gilligan CA - E-mail Matt
                          Chartered Accountant Specialising in Tax Structures, Property & Trusts
                          Read my book: Tax Structures 101

                          Comment


                          • #14
                            Advice on investing in this market

                            Originally posted by Sara View Post
                            Thank you for your offer of free advice. Im a newbie (this is my first post), have been reading/studying for a year. We have bought and sold (ignorantly) three rentals. We want to create a portfolio of 10 rentals over the next 10 years.
                            My question is:
                            Given the current recession and doom messages about the economy, should we buy again or focus on paying off debt? We have 1 home, 1 rental (LAQC), 2 shares of a retirement village (LAQC)development. Our focus is debt reduction on the home (only 100k to go), then focus on rental (a similar amount), aiming to be mortgage free in 5 years (except the retirement village development which is 100% borrowed). Total borrowings: $400k. When do we jump into the market. Feels like the more I know, the less confident I am....is this common?
                            A big question Sarah, and pehaps some of the PT crew will come in and give this some thought.

                            My view is that you should only invest if you can afford it, rule no 1.
                            Rule no 2, I subscribe to the utopian view that in the long term property will keep going up. But in the short run it may go down further in this market.

                            If you can find bargains, and I mean bargains, grab them. Try to set high standards. Eg Positive cashflow pre-tax in a good capital growth area, like Auckland, Wellington, Canterbury, Central Otago.

                            Queenstown is taking a hammering - its a boom bust town. Worth a look at present in my view, though cashflow will be low.

                            I'll focus on tax today, as property questions take a lot to answer thoroughly, and really your cashflow needs to be analysed, including tax position, I would look at your risk profile, and then the question gets answered properly.

                            Over to the PT crew - I am sure they will have useful commentary.
                            Last edited by Matt Gilligan; 08-07-2008, 04:36 PM.
                            Matthew Gilligan CA - E-mail Matt
                            Chartered Accountant Specialising in Tax Structures, Property & Trusts
                            Read my book: Tax Structures 101

                            Comment


                            • #15
                              Is there any benefit in having a family (or other) trust in these circs:

                              1. All properties are held in the name of one individual.
                              2. Likelihood of assets needing protection from creditors is Nil or close to.
                              3. All assets revert to a single person upon death, and will is current.
                              4. Taken all together, properties make a small loss, but will be into profit within the next few years.
                              5. Losses/profits do not need to be shared.
                              6. Rest home subsidy from the government is not an issue.

                              Thanks for your time ....

                              Comment

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