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Steps no politician will take to control property prices

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  • Steps no politician will take to control property prices

    Hi there

    In my opinion if the following steps are taken, the property prices can be controlled not only for now but for a long time to come

    1. Impose a 15% stamp duty on all secondary residential housing. Exempt new houses to encourage new builds. This will also reduce speculation as every time a property is sold the Lele loses 15% value to the government
    2. Every residential house wil have a minimum compulsory rental income added to the gross income of the owner based on the rates charged by the council. Only self occupied houses will be exempt. This will force the landlords to rent out their houses as no one like to pay for taxes on an non existent income
    3. Increase Capital gains tax from property to 90% if sold within a year to 0 if sold after 10 years with the tax decreasing by 10% every year of holding
    4. Levy progressively higher taxes on sections kept idle to discourage land banking

    The funds collected from these measures should be used to create better and faster infrastructure in the regions from which the funds are collected like high speed trains and wider roads and also subsidise mass transportation.

    It has been seen worldwide that people don't mind living farther away from the city centre if they can reach their work place quickly,( less then 45 mins) comfortably and economically.
    So issue monthly passes for same prices irrespective on the distance they travel for use in trains bus and ferries at highly subsidised prices.

    But I doubt any politician will take the risk of implementing these unpopular measures which will hurt the people in the short term but will be highly beneficial over a longer period

    These measures are very easy to implement with the resources and data already available with the government

    Cheers
    Last edited by jamesnz; 03-08-2016, 01:53 AM.

  • #2
    There are a lot of theories for how to "work around" the underlying drivers: a) record low interest rates make secure assets very cheap and b) high migration.

    If you really want to fix the problem the developed nations of the world would need to agree to end quantitive easing with sanctions/penalties for nations who do not while at the same time pushing through articles like the unitary plan which allow for lower cost higher density housing.

    Anyway, your proposals would mean I would never sell a property. I'm 34. So that keeps everything I own off the market for the next (hopefully!) 60 years since I plan to live to a ripe old age. Then it would pass on to my kids so you'd need to reintroduce death duties.

    #2 in particular would be an absolute nightmare. What if I can't let my property to a suitable tenant? Who decides how much I've been trying? Will I get full insurance cover for damages at no excess because the worst tenants can always get a house?

    I am fine with inflation adjusted CGT because it's income. Taxing profit is not going to crater the economy. However it would be very easy to work around, you sell your property into a company and sell shares of the company. But 90% is silly, just tax it at the regular income rate and adjust for capital investment and inflation. If you want to get interesting you *could* tax as return on capital invested, not return on asset value. Just remember that it's more painful to sell than keep people simply wont sell.
    Free online Property Investment Course from iFindProperty, a residential investment property agency.

    Comment


    • #3
      I could not not understand what you meant when you said you were 34 and you could not sell your property.
      How do these proposals discourage you to sell your property unless it was to sell high and buy low again ?
      you would anyway need a house to stay for your next 60 years.
      The idea of these measures is in fact to compel you to either live, rent or sell.


      #2 If you are owning an investment property and you can't rent it out, you pay the price for being inefficient.
      If you can't find a suitable tenant, you have no business owning a rental property in my opinion, and sooner you sell it, the better for you.
      For short periods, yes it may remain unoccupied but then you won't mind paying the tax on the notional income.
      Moreover I am not suggesting that the rents be calculated based in all 12 months occupancy, it can be based on 10-11 months, which I think is the industry norm.
      Also the landlord insurance should be made more comprehensive and subsided by the government to encourage wider coverage

      The capital gain evasion through holding companies can easily be checked by the government in this digital age.

      Cheers

      Comment


      • #4
        Originally posted by jamesnz View Post

        The funds collected from these measures should be used to create better and faster infrastructure in the regions from which the funds are collected like high speed trains and wider roads and also subsidise mass transportation.

        It has been seen worldwide that people don't mind living farther away from the city centre if they can reach their work place quickly,( less then 45 mins) comfortably and economically.
        So issue monthly passes for same prices irrespective on the distance they travel for use in trains bus and ferries at highly subsidised prices.

        I'm missing something... Can you list the cities in NZ that have a 45minute commute to the CBD?

        Comment


        • #5
          There's no nice way to say this, James, but a raft of stupid, symptom-chasing measures just adds more (expensive) bureaucracy, while not fixing the underlying problems. The sorts of problems Nick G has given examples of. That sort of treat-the-symptoms-not-the-cause approach is beloved by the W'gton woodenheads of every hue and colour, too.

          Comment


          • #6
            Perry - this is as fired up as I've seen you get... I love a little bit of fire in the discussion!

            i think Jamesnz is showing some frustration which is common when things change so quickly... This is not the exclusive domain of price inflation in property... When a corporate (or any large organization) goes through major transformation projects there is often a large number of employees who complain about the changes and provide helpful feedback about what should happen in order to maintain the status quo.

            In reality if the market had grown 5-8% a year with consistency from 2008 - 2016 I doubt there would be such interest in crashing price... But stagnation for 4-5 years then rapid growth gets those not on the bus to have a lot to say about what should happen in order to allow them to go back to a time they should have gotten on he bus.

            If we were to see a long term downward trend in house prices... Say 5% a year and that was predicted to be a long term trend... How many home buyers would be keen to buy a house and would they support house price deflation from the point they buy their house?

            Comment


            • #7
              Originally posted by Perry View Post
              There's no nice way to say this, James, but a raft of stupid, symptom-chasing measures just adds more (expensive) bureaucracy, while not fixing the underlying problems. The sorts of problems Nick G has given examples of. That sort of treat-the-symptoms-not-the-cause approach is beloved by the W'gton woodenheads of every hue and colour, too.
              Well nicely said Perry, I was just going to say the same things, but less nicely
              Squadly dinky do!

              Comment


              • #8
                There is always a major snag with a CGT.
                In order to get it electable, it must always exempt the owner-occupied home (I'll certainly vote for a tax on you, but I'll never vote for a tax on me!)

                OK, right now I inherit say 600K from my dear dead auntie.
                I have quite a few choices on what I do with that money (apart from blowing it on loose women and strong drink).
                One of those options is to buy an investment property and rent it out, few tax implications on that.

                But if you have your CGT in place. I'll say "Hell no, I'm not going to do that".
                Instead, I spend the money pimping up my owner-occupied house - hot and cold spa pools, gold plated taps, a present-wrapping room, and whatever else.
                The reason why?
                Because, if I then sell the place for some inflated price having done all that, I escape the CGT.

                So - and this has apparently happened in Australian cities - a CGT that exempts owner-occupied housing actually creates more property price inflation because that's exactly the path a lot of people take.

                A CGT actually does make fiscal sense, but only (as with GST) when it applies to absolutely everything.
                Otherwise it distorts. And as the Labour Party found, that's electoral suicide.

                And a footnote:
                I frequently say to those who promote a CGT as the cure for property price inflation "Show me one city, just one, in a country that does have a CGT, where such at tax has been actually proven to have had a restraining effect on property prices".

                No-one has yet been able to point to one such successful example.
                I am still waiting.

                Comment


                • #9
                  Don't hold your breath.

                  Comment


                  • #10
                    Originally posted by jamesnz View Post
                    Hi there

                    In my opinion if the following steps are taken, the property prices can be controlled not only for now but for a long time to come
                    Why would you want to control property prices?
                    If you have a good enough reason, then there are more simple steps you could take, such as legislating the price of all houses.
                    Wimping around with various taxes and duties is a cop out.
                    Either totally control the price of houses or leave them alone.

                    Comment


                    • #11
                      Hi There

                      no one wants to control the prices.
                      it is just that speculation should not pay
                      The buy today sell after 6 months should be driven out of the current market
                      I see no harm in doing that when property prices are going through the roof

                      Comment


                      • #12
                        Years ago, in NZ, if you could get your hands on a brand new car you could sell it after 13 months use for more than you had paid for it.
                        This was in a time of savage import controls, and various Governments bent over backwards designing various complex rules and regulations to prevent this sort of speculation.
                        None worked.
                        The only eventual cure was to lift all of the import controls so that enough new cars were available to satisfy the demand.

                        All attempts by any and every Government to defeat the market will eventually fail.

                        Comment


                        • #13
                          it is just that speculation should not pay
                          The buy today sell after 6 months should be driven out of the current market
                          Why? People who think like this should go live in North Korea, or China or any communist nation where everything is controlled. Leave NZ alone.

                          Comment


                          • #14
                            Tax it, ban it and turn NZ into the Venezuela of the pacific.
                            What is needed is more private property rights and a whole lot less government.
                            The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.

                            Comment


                            • #15
                              Originally posted by flyernzl View Post
                              Years ago, in NZ . . . All attempts by any and every Government to defeat the market will eventually fail.
                              Anyone remember MRP price controls?

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