The Herald's John Roughan devotes his column this morning to what seems to be a common worry at the moment: the increasing inability of young people to own their own homes. And he has a few nasty truths to say about our current housing market:
It is very pleasant if you are a home owner with the mortgage paid and savings accumulating. You can safely put that money into another house and let tenants pay its mortgage.If it turns out you have borrowed too much, or the rent does not quite cover all the expenses for any reason, you know you will be able to sell the place fairly readily at a capital gain.
The market is so good it keeps the value of rental houses rising at the same time as it maintains an ample supply of tenants who can't afford a mortgage.
Jordan sums up the problem nicely:
There is something wrong with a housing market that is structured to deliver endless capital gains to people who have capital, and deny the ownership of housing to the upcoming generation as the consequence.
This is not what most New Zealanders want. Being able to own your own home is supposed to be one of the basics of kiwi society - as is egalitarianism and the classless society. But both are under threat from the current housing market.
What can we do about it? Roughan suggests a capital gains tax on investment properties, while Jordan also stresses a need for more state houses and government "rent to buy" options. I'd like to see a capital gains tax - but as I've said before, I think this is one of those "third rail" issues and I'm not sure that its politically achievable. OTOH, I thought the same about doing something about student loans - but as more and more people got them, and more and more parents saw their children crippled by debt for life, the political ground shifted. Housing is a much broader issue than student loans - even in an age of mass tertiary education, only 40% of 18-24 years olds go to university or polytech, wheras the aspiration to home ownership is almost universal - so there's definite scope there then for a similar shift. The question then is which party will be first to recognise it...
40 comments:
A capital gains tax on the sale of houses, apart from your own residence, is a good idea. One pays all sorts of capital gains tax on other items (savings accounts, pension plans, etc) so anything that levels the playig field for investment money is good. NZ's economic weakness is having too much of its capital locked up in real estate and not enough in productive investment. Not having capital gains tax on your (basically commercial) real estate dealings and rental properties distorts the savings and investment market.
Posted by Hans Versluys : 8/19/2006 02:09:00 PM
It should apply to your residence also. why effectively disadvantage the poor and help the rich with a tax break?
thats pretty regressive.
Posted by Genius : 8/19/2006 03:08:00 PM
Good old baby boomers-- pulling the ladder up after themselves as usual.
Posted by Amanda : 8/19/2006 03:27:00 PM
Cripes, there has to be enough of us to take them on soon....
Posted by Genius : 8/19/2006 04:20:00 PM
Ahh, we'll get the boomers with euthanasia, don't you fear. Knock 'em off early and inherit the lot before it's drip fed into the health system or private long term hospital care.
Posted by Muerk : 8/19/2006 04:58:00 PM
Being able to own your own home is also the underpinnings of a capatalist society. Private property and all. With less people owning, it will be easier for a socialist gov't to set up "Us" vs "Them" laws to further degrade property rights. I would have thought you would be celebrating.
Posted by Lucia Maria : 8/19/2006 05:09:00 PM
muerk - euthanasia, great idea, but how to make it fashionable amongst the Ponsonby and Khandallah masses?? I know, a cover story in the Listener! "Staying alive past 60 - the REAL dangers"
Posted by Anonymous : 8/19/2006 05:37:00 PM
Lucyna: well, the point is that I want people to have better, more secure lives - not worse and less secure ones.
Home ownership is one of those things which attracts broad agreement across NZ's political spectrum (from everyone except Dr Brash, who thinks that we should all be renting from absentee landlords instead). It's a center issue, not a left or right one. And with the property boom throwin git into sharp focus, its a matter of who moves on it first.
Posted by Idiot/Savant : 8/19/2006 05:42:00 PM
James: there's a fair amount of agreement that it should be only on realised gains (so, when you sell your house), and only on second houses or investment properties. I'd expect the revenue to be recycled through tax changes elsewhere (and funnelling it to low-bracket tax cuts is good), but the income from such a tax would be highly cyclical, so you'd need to be careful that it didn't cause an income squeeze in a property bust.
There is a potential problem with capital losses,and the potential for this to result in further tax evasion/avoidance by the rich. so again, it would take some care.
I wonder if there's any ministries looking into this? Maybe I should go fishing...
Posted by Idiot/Savant : 8/19/2006 05:49:00 PM
Just another failure of the capitalist system in action?
The Crown should eliminate all freehold land tenure and go to a leasehold basis for all property. It is the LAND portion of property values that is rocketing out of control. Leaseholding the land portion would hugely dampen the speculative effect, because the banks could no longer register it as an asset on their books, and thereby spin up yet more credit on the back of the "fractional reserve" effect.
The resulting land rental scheme income stream could be partially used to fund TLA's and I would make ALL mortage interest a tax deductible expense to compensate.
All residential property mortgages to be funded solely by a single NZ owned entity ...like a kiwi Fannie Mae. By all means we can have competitive retailers of mortgage products, but the wholesaler should be a NZ owned public entity. It is totally insane to be exporting the considerable profits of our domestic home mortgage market to bunch of Australian banks.
For similar reasons I would place much tighter restrictions on non-New Zealanders owning our land. Bear in mind that they will usually be in a position to borrow money on much better terms than New Zealanders, have access to much higher incomes and can readily outbid us in our own market. This would remove another inflationary influence.
Finally...and this is the biggy...I would look very hard at the "Housing for Humanity" self-funding model that allows first home owners to get into their OWN home, but with debt that is going to directly benefit their own commumity.
Posted by Anonymous : 8/19/2006 06:45:00 PM
I think your "fair amount of agreement" is the compromise position to ensure various interest groups remain onside.
What is sad is that if home ownership is only 44% there is 56% of the population that won't be hit by the tax at all and you are busy compromising to ensure you get the next 20 odd percent that may well net benefit from the tax anyway.
If you were like this on all issues this blog would be pretty boring.
Then again maybe almost all the commentators and decision makers are in the other 30%.
Posted by Genius : 8/19/2006 07:06:00 PM
Logix,
the hong Kong solution.
It tends to run into political problems over time. Much land that used to be leasehold (eg ex feudal land) was freed up as public pressue came to change it such as there is in israel I believe.
Posted by Genius : 8/19/2006 07:15:00 PM
Hi guys,
If you really want to make housing affordable, scrap the zoning regulations.Peter Cresswell said it best:
Not-PC: Newsworthy indeed: Good Sense on bad planning
Not-PC: Sprawl is good; regulation is not
Cheers
Julian
Posted by Julian Pistorius : 8/19/2006 07:23:00 PM
This "let the cities sprawl" model that the Demographia nutjobs are promoting has been de-bunked over and over. It's a facile fantasy based on a deeply flawed US model, where the combination of low-cost fuel and vast amounts of land have allowed the delusion of infinite suburban expansion to persist well past it's use by date.
By contrast NZ simply cannot sustain this car based low-density model. We actually do not have a lot of good land to both build and farm on. In fact we already have far too much land that should have never been cleared for farming, nor ever built on for homes. Far too many slip-prone hillsides, or flood-plain s are now seen as hazards that will one day need to be restored to something like their original purposes.
A glance at map of our major cities reveals even further the folly of the "infinite suburban sprawl" concept. NZ geopgraphy is nothing like North America. Our actual portion of fertile arable land is not large; the portion suitable for cities is even less. As our population grows tightened land managment is a reality you had better just get used to.
Posted by Anonymous : 8/19/2006 07:58:00 PM
> This "let the cities sprawl" model
Preventing sprawl just means that houses WILL cost more.
All sorts of regulations like minimum housing sizes and restrictions on where you can build and what you can build and who you have to ask before you can build will all do the same. Some of which may have benefits that outweigh the losses others of which may just sound good.
In the long run one would hope that far less people will travel far to work as technology makes it easier to work from home or the local centre. A hell of a lot of jobs should be possible to do from home.
Now if we are saying we are a land poor country does that have immigration implications? I'm still finding it hard to see us as land poor I’m afraid...
Posted by Genius : 8/19/2006 09:48:00 PM
A capital gains tax on property will not lower the cost of property - it will in fact make it more expensive as house owners will factor it into the selling price.
If we are land poor why are we allowing more people migrate to this country than leave - you are only making the problem worse if you believe that.
Personally I don't - Great Britian manages to house a great number more people than we do in NZ.
To lower the prices of houses we need to increase the supply - it's that simple.
The more houses available to buyers the cheaper it will be.
Posted by Anonymous : 8/20/2006 12:41:00 PM
Anonymous,
> A capital gains tax on property will not lower the cost of property - it will in fact make it more expensive
can I have some of what your smoking?
If property prices were a result of owners making some fixed profit (like selling gold on the metals exchange) they would have gone up by cost of capital minus rent plus a small profit every year.
Obviously they haven't otherwise we would not be having this discussion at all.
Clearly the housing market is more like the market for 2005 5 cent pieces where people buy in IF it looks like they can make a big profit (and it gets to be worth a lot of money) and if they don’t think they can it is worth face value.
Posted by Genius : 8/20/2006 02:35:00 PM
It's not clear to me exactly what effect a capital gains tax would have.
1. The average investor only has one investment property. (Only a minority have a portfolio of multiple units.)
If you only own a single property, it is quite easy to have it owned by a trust, or family member or some arrangement that would avoid the tax.
2. As the onwer of 5 units myself, a realised capital gains tax would only discourage me from ever selling them, thereby tightening the market and reducing it's efficiency even more. An unrealised gains tax would push up rents, disadvantaging those who do NOT want to own a home.
3. Property investors in general do not directly lead price rises, the serious investor makes his money when he BUYS, usually somewhere in the lower quartile of the market. Agreed this supports the market, but investors are not directly price setters.
4. A capital gains tax in general might only catch less than 10% of the market in it's net, possibly less. It is not at all clear that this would drive the market strongly enough to have much effect to dampen or increase prices either way.
I recall reading that about 80% of all wealth in this country has been generated on the back of property investment and development. Capitalism is a fantastic wealth generator, but it also is a wealth concentrator, and this is precisely the effect you are seeing here; those with the assets and cash flow are making more assets and cash...those without are not. Unmoderated capital markets always behave like this. I find it a tad amusing that the right wing taxcuttasaurous crowds solution to this fundamental flaw is however...a new tax.
Posted by Anonymous : 8/20/2006 03:33:00 PM
I might also add that most domestic rental properties are now making less than 5% return and many are cash-flow negative. The investor is only hanging in there from month to month because of the tax-offset on other income. ie the taxpayer is in general making a substantial subsidy to underwrite affordable rents in this country.
A capital gains tax would collapse this arrangement and force rents to double. Be careful what you ask for.
Posted by Anonymous : 8/20/2006 03:51:00 PM
> If you only own a single property, it is quite easy to have it owned by a trust
Which is exactly why I/S's plan and the greens plan doesn’t really work - but that doesn’t mean it isn’t a step in the right direction. If it just inflicted some pain on you that would be a start. If you think you can make all the money back by slaping your rents up then you should not fear at all.
> A realized capital gains tax would only discourage me from ever selling them
Again, changing the structure could remove your ability to do that. BUT it isn’t a big problem if you only own property for the rent and charge a certain rate for that. In that case if a person wants to buy a property (and own it) all they have to do is offer enough money to exceed your rental profits to make it worth your while.
Any bank that knows you will have to pay a capital gains tax wont let you leverage the capital you obviously owe in capital gains (and that they will owe if they have to repossess your house) so you wont be able to do the good old borrow as the market goes up.
> An unrealized gains tax would push up rents
If that was strictly the case rents would be negative (because investors make massive capital gains profits they could afford to pay people to live in their houses). Obviously what really happens is that renters pay a rate relative to all sorts of market forces, most importantly incomes. And as a result rents haven’t fluctuated al that wildly over the last few years and are not the problem.
> Property investors in general do not directly lead price rises
No one cares who leads the price rise - we are discussing a system that would result in lower prices overall.
> 4. A capital gains tax in general might only catch less than 10% of the market in its net
Again same problem.
> I find it a tad amusing that the right wing taxcuttasaurous crowd’s solution
FYI the tax cut people (who generally have lots of capital) oppose the capital gains tax in case you have been eating mushrooms lately.
> A capital gains tax would collapse this arrangement and force rents to double. Be careful what you ask for.
What would happen if you doubled rents all of a sudden?
Come on now logix your analysis is only half an inch deep.
Posted by Genius : 8/20/2006 04:12:00 PM
>>> most domestic rental properties are now making less than 5% return and many are cash-flow negative.... A capital gains tax would collapse this arrangement and force rents to double.
I should have said rental rates "would have been negitive" now with any luck things are going to settle a bit.
BTW an unrealised capital gains tax of course does not effect cashflow so your mixing your arguments here in your desperate atempt to self justify.
Posted by Genius : 8/20/2006 04:19:00 PM
>>>BTW an unrealised capital gains tax of course does not effect cashflow
Yes I agree that I took a shortcut there...an unrealised capital gains tax would impact rents immediately, a realised one would have a delayed effect. If I had to sell I would simply factor in the tax along with all my other costs....and I am ONLY going to sell if either I am forced to by sustained nett cash losses, or I can make a useful profit. Otherwise I just sit on it.
>>>If you think you can make all the money back by slaping your rents up then you should not fear at all.<<<
I've just done a quick look at one of my units...a very average middle of the road property. It has costs of $18,000 pa and a rental income of $14,000 pa. The taxpayer is subsidising the difference. Right now however if the tenant was to purchase the property at market price for it, they would have a mortgage that would cost them about $26,000 pa, plus rates, insurances and maintenance. Not to mention the legal, bank and estate agent fees every time they move. (On average every 12 months). The tenant is getting a cheap rent in the short term, I am getting the equity in the long-term...what is so wrong with that?
>>>If that was strictly the case rents would be negative (because investors make massive capital gains profits they could afford to pay people to live in their houses)
That has to be the wackiest argument yet. Unrealised capital gains produce no cash flow. With exactly WHAT would I "pay my tenants to live in my properties"??? I think I must have totally missed your point.
My point, just to be clear is that a capital gains tax would not necessarily have the effect you are looking for, unless it had the effect of immediately forcing large numbers of investors to dump their properties on the market in some kind of nationwide firesale. This effect would of course be a one off in response to the new rules, but would have no lasting impact on the market. New investors would simply return to the market with different financial gearing and charge higher rents, making it even harder for those saving for their own home to ever get a deposit.
The only merit to your argument is the idea that I would not be able to mortgage the taxable portion of my "capital gain" for further borrowing. This would slow down the rate at which I could expand my portfolio...but this is offset by the fact that I would NEVER sell, thereby tightening market supply.
As I said at the beginning, I do not think there is clear evidence that the market would long-term respond to a capital gains tax in the way you hope.
PS. If you really want to own a home there are plenty of zero deposit schemes out there. You won't be able to afford OE adventures and too many toys for a few years, but there is no such thing as a free lunch.
Posted by Anonymous : 8/20/2006 07:35:00 PM
James,
>>> It would more likely represent a correcting of a perverted market, for the better relating to other forms of investment.<<<
I totally agree. Once upon a time investors did not touch anything with less than a 10% return, nowadays we are fiddling around with 3-5% returns, negative cash flows and milking depreciation schedules. It's crazy, it's high risk, it's a lot of work and I don't like it...but I'm stuck with the ride like everyone else.
Posted by Anonymous : 8/20/2006 07:49:00 PM
> and I am ONLY going to sell if either I am forced to by sustained net cash losses
I'm hoping you will
> or I can make a useful profit.
I expect you'd be happy with a loss which you could use to offset tax. Besides I’m more worried you will buy more properties than interested in making you sell them.
> The taxpayer is subsidizing the difference.
The taxpayer may also be subsidizing the rent via accommodation supplements and so forth. But it is better to do it that way than the way it is happening with you.
> The tenant is getting a cheap rent in the short term, I am getting the equity in the long-term...what is so wrong with that?
Our plan here is not to make you money from working people's incomes (income tax). I'd rather YOU subsidized his rent - and it is my bet that you would. Of course you could TRY doubling rents I'm interested in calling your bluff.
> Unrealized capital gains produce no cash flow.
Exactly - you are the one who mixed them up.
> a capital gains tax would not necessarily have the effect you are looking for
Taxes suck money out of systems (or should if designed correctly). That is the result we want.
> New investors would simply return to the market with different financial gearing and charge higher rents, making it even harder for those saving for their own home to ever get a deposit.
Ha-ha you are a saint! You’re buying all the houses (and inflating the prices and thus your cost of capital) so that other people can ‘save’ those costs of capital!
> but this is offset by the fact that I would NEVER sell.
As I said - your growing your portfolio is a greater risk - so your threat of not selling is outweighed, even if we just stem the tide of your antisocial behavior that is a start. Besides, a little tinkering would solve that problem also.
> If you really want to own a home there are plenty of zero deposit schemes out there.
I oppose your position on ideological grounds not personal ones.
You seem to be defending it on personal grounds.
>You won't be able to afford OE adventures and too many toys for a few years,
I don’t go on OE's or buy toys (except a couple of baby toys). I seriously doubt you can compare to me in that sort of area.
> but there is no such thing as a free lunch.
Mr 'making capital from tax free capital', there is, and your eating it.
> but I'm stuck with the ride like everyone else.
I’m sure that is what the cigarette companies say. I'm stuck on the riiiddeee! I'd get off if I coouuldd!
Posted by Genius : 8/21/2006 07:40:00 AM
Hi guys,
Me again, I just thought I'd check something. Doesn't Australia have a capital gains tax already? And don't they also complain about very high house prices, presenting a big entry barrier to the market?
To my eyes, it doesn't look like capital gains tax has solved that problem at all.
Cheers
Julian
P.S. And doesn't Australia also (historically) have restrictive zoning practices? Coincidence? :)
Posted by Julian Pistorius : 8/21/2006 10:29:00 AM
Genius,
Typical... the right only supports capitalism, so long they get to write the rules to best suit them personally. You really have no idea how property investment works...some of your explanations are so devoid of reality I just plain give up discussing them with you.
I will put it in a very simple nutshell:
1. Serious property investors DO NOT drive the market. If anything they dampen it by only ever buying at the best bargins they can find.
2. And like all capitalists, they make a return on their capital. That return can be immediate in the form of high rents or delayed in the form of capital gains.
If you attempt to reduce market prices with an unrealised cgt tax then all that will happen is that we will raise rents to compensate (making it harder for first home buyers to ever save a deposit), or if you do it as a realisied cgt, we will never sell and thus further tighten the market.
Now I am not a big fan of how the market is working at present. Personally I would much prefer lower property prices (as you do) and sensible returns in the 10% range as they were historically. But I am telling you that the idea of achieving this with a cgt is a pretty tenuous one at best.
What you are really doing is playing out the common envy that many people have regarding landlords, as demonstrated by your first comment that you hope "I loose money". That is usually the kind of attitude attributed to us scummy lefties is it not?
Posted by Anonymous : 8/21/2006 01:51:00 PM
Julian,
> Doesn't Australia have a capital gains tax already?
Moz says "Whatever you do, don't follow the Australian model of a token capital gains tax that is only applied to honest people - the concessions here amount to a significant subsidy to property investors and have screwed the lower classes. The capital gains tax is only applied to half the gain, interest payments on investment properties are deductible against earned income, many (most?) people don't declare of pay the tax anyway, and the upshot is a big pile of people in the trasher generation with multiple properties and a ridiculous renting market in much of the country."
In the comments
http://jtc.blogs.com/just_left/2006/08/an_issue_of_our.html#comments
Maybe that is why.
> And doesn't Australia also (historically) have restrictive zoning practices? Coincidence? :)
No obviously not, that is the other solution to the problem.
Logix,
> Typical... the right only supports capitalism, so long they get to write the rules to best suit them personally.
1) Have you just noticed you have become the monster you despise? Now trying to pretend the hypocrisy is outside of you instead of inside.
2) I think you are getting confused.
> Serious property investors DO NOT drive the market.
Maybe you don't understand how a market works. If there are three tomatoes and two people (who want one each) and a fair market tomatoes will probably be low cost. If I come along and buy the two cheapest tomatoes suddenly the price of the remaining one will go up.
"But you bought the chepest ones!" I hear you protest.. jeezzzz
> And like all capitalists, they make a return on their capital.
Not ALL capitalists - besides, how did your desire to make money at the expense of others suddenly becomes part of the proof as well as your conclusion?
> What you are really doing is playing out the common envy that many people have regarding landlords
So says the man who is seemingly driven against his own principles by his own self interest.
> As demonstrated by your first comment that you hope "I loose money".
I hope you loose money in an instrumental sense. I wan't you to correct your behavior and loosing money seems to be the way to get you to do that. Besides, I think your loss (eg you runing a cashflow loss and making a loss on capital) is a win for society as a whole - at least to a certain point.
I would also like capital investment incentives to be in the right places, that means (generally speaking) not in your pocket.
Posted by Genius : 8/21/2006 08:46:00 PM
>>>Maybe you don't understand how a market works. If there are three tomatoes and two people (who want one each) and a fair market tomatoes will probably be low cost. If I come along and buy the two cheapest tomatoes suddenly the price of the remaining one will go up.
The domestic house market is not an efficient one in the way your tomato example would imply.
1. The tomato I buy may be a over-ripe old thing that I want for pickling...you want a green one to ripen on a window-ledge. We are only notionally both in the tomato market, and my market behaviour does not necessarily have a lot of effect on yours.
2. I accept that there is SOME degree of coupling between the upper and lower ends of the market...but it is nowhere near as strong as your three tomato example would imply. Talk to a real-estate agent sometime...they will tell you that buyers and sellers in the say <$300k range and those >$600k live in two different worlds with not much in common.
3. And motivations for buying and selling are only partly coupled to price. All sorts of non-rational price behaviours abound in the market.
Overall real estate does not obey theoretical market behaviour very well. It is well known as quite "inefficient". All I am saying is that IF your cgt somehow magically DID dampen the investor market, it would be mainly at the low end, and it is not at all clear that this would dramatically affect the whole market as you might wish.
>>>Not ALL capitalists - besides, how did your desire to make money at the expense of others suddenly becomes part of the proof as well as your conclusion?
WTF are you getting at? That the purpose of capitalism is to LOOSE money? All I was pointing out is that investors generally choose one of two strategies to get a return on their capital, on cash flow or on capital gain. They respond to market and tax conditions by moving from one strategy to the other. That is one more reason WHY a cgt is unlikely to have the effect you want in the long run. Yes you can induce temporary upheavals with clumsy interventions, but in the long run the capitalism always works to concentrate wealth.
>>>I would also like capital investment incentives to be in the right places, that means (generally speaking) not in your pocket.
Where?? In yours? The sad fact is that for the average person there are not a lot of good alternatives to property investment. The NZ stock market has a long history of burning billions of dollars of small shareholders wealth, and most safer forms of investment barely keep ahead of inflation.
>>>So says the man who is seemingly driven against his own principles by his own self interest.
Neither you nor I get much say in how this world works. As a person matures they need wealth to spend on themselves, their family and their community. My principles get put into action because I have enough wealth to be able to make choices and to be of service to those around me; poverty by contrast is not just a lack of cash...it fundamantally shuts down "principles" altogether.
When I was younger I was focussed on all the reasons why I could NOT do what I wanted, like most people I had a wishbone, not a backbone. Quit serving me up excuses as to why the world should be better suited to your wishes and put YOUR back into getting what you want.
Posted by Anonymous : 8/22/2006 12:32:00 AM
1 & 2) Houses aren’t tomatoes but they aren't university graduation photos either. I think I have made my point.
> That the purpose of capitalism is to LOOSE money?
Sometimes capitalists will loose money and sometimes they should be made to do so. there are all sorts of behavious that we might want to guide people away from.
> But in the long run the capitalism always works to concentrate wealth.
It does if you don’t interfere with it. We place a number of restrictions to reduce that effect so that the circulation of money and people can keep the economy sloshing along in its own capitalist way.
That is what tools like the tax system are all about dealing with that. The market is a slippery beast but it isn’t uncontrollable as some far right would have you believe (Interestingthat you seem to have joined them!) - that is why countries with strategies can actually do quite well.
Interestingly last time I looked in the growth hall of fame (a number of Asian countries) they all seem to have have CGT but in the growth hall of shame (a few European ones in there) they don't have it.
> For the average person there are not a lot of good alternatives to property investment.
Property investment is one of the worst alternatives. Besides I am not an individualist, I don't accept your right to be antisocial.
> Neither you nor I get much say in how this world works. As a person matures they need wealth to spend on themselves, their family and their community.
Again as above. You can live quite cheaply on almost nothing (the UB for example) it is only being "sucked in by consumerism" that makes that hard for some (in general - sometimes there are special circumstances).
> Poverty by contrast is not just a lack of cash...it fundamentally shuts down "principles" altogether.
Cripes - it might for YOU. It certainly doesn't for me.
> Quit serving me up excuses as to why the world should be better suited to your wishes and put YOUR back into getting what you want.
No excuses. I am not sufering at all, but the country is as you pump up the cost of living. So this IS doing somthing. What I want is for you to pay tax. And I'm quite eager to put my back into it.
Posted by Genius : 8/22/2006 07:43:00 AM
I am not sufering at all, but the country is as you pump up the cost of living.
Sighs. There was NEVER a time when there was 100% home ownership. There is ALWAYS a demand for rental accomodation for many perfectly good reasons....and I provide that social good at reasonable prices at good quality.
PS In fact the five units I own I have BUILT new. It takes planning, effort and skill to do that and still make it worthwhile in the long run...but personally I am increasing the housing supply. Just how is that "anti-social"?
Posted by Anonymous : 8/22/2006 08:50:00 AM
And one final thing. If you did introduce enough taxes to "put all those bastard landlords out of business"...and forced us to dump all our properties on the market, you have not altered the supply or demand situation one iota. You would now have all our ex-tenants out on the market frantically looking for a roof over their heads.
Now that may be a good thing in terms of getting people into their own homes, but how has it improved affordability? Not ss much as you would like to think. Great...you've gotten them into a home, but locked into a crippling mortgage and hugely reduced their ability to move to a better location if opportunity arises.
All I am saying is that the housing market is a much more complex beast than you are making out, and it reacts in ways that are not likely to male your cgt work in the way you think it will. It doesn't in Australia , so why should it here? You really cannot answer that question.
>>>Cripes - it might for YOU. It certainly doesn't for me.
Yes I knew you might say something like that....I'll get back to you in another 30yrs time.
Posted by Anonymous : 8/22/2006 09:42:00 AM
> You would now have all our ex-tenants out on the market frantically looking for a roof over their heads.
You are really using any argument you can dig up here. Try and imagine what would really happen to these tenants and see if your argument has much relation to reality.
> Now that may be a good thing in terms of getting people into their own homes...
Apparently that is what people want; if you want to convince them otherwise go for it.
> It doesn't in Australia, so why should it here? You really cannot answer that question.
If you will notice earlier I pointed out why an Australian style CGT was insufficient. And a post from Moz implied it might be worse than useless.
>I'll get back to you in another 30yrs time.
excuse me for getting philosophical here but that is a bit like saying "god must exist because so many people convert just before they die" (he may exist but that definitely isn't why)
or "1+1 doesn’t equal two because it might be useful to me in the future if it equalled 3".
Posted by Anonymous : 8/22/2006 02:40:00 PM
BTW I am also ok with the government confiscating your properties as per your suggestion - I am just concerned about political side effects.
Posted by Anonymous : 8/22/2006 02:43:00 PM
>>>>BTW I am also ok with the government confiscating your properties as per your suggestion
At that point you just gave up and ran off defeated. Bye bye.
Posted by Anonymous : 8/22/2006 10:03:00 PM
Logix?
what are you talking about?
Posted by Genius : 8/22/2006 10:48:00 PM
You seem to have entered an argument make a lot of points,
as the debate stands appear to be wrong/misleading/lacking understanding/hypocritical (and other such errors) on many of them (all the consequential ones),
and don't seem to dispute those points anymore
and then declared your own victory...
and as an attempt to escape from the conversation suggested that I want to exit it instead.
You are a strange boy. I guess your confusion is just a result of your cognitive dissonance that we exposed a little earlier.
BTW "ran off defeated" how childish are you? When have you ever had a debate where you have said to the other guy "You defeated me, well played!". Its a debate, not a game of marbles.
Posted by Genius : 8/22/2006 11:08:00 PM
We WERE having a debate, but when you stated "I am happy for the govt to confiscate your property"....I felt it best to draw a line under this to stop you from embarrassing yourself further and more cogently, from me wasting more of my time with you. I've made all the points I feel like making, I really do not feel inclined to repeat them just because you missed them the first time.
You are less than 30 yrs old. Sometime in the next few decades your understanding will change. Depend on it. I recall MANY years ago having a very similar discussing with a very wealthy man (whom I love and respect greatly), with me taking a similar kind of line to the one you have just run by me. I realise now that back then I was simply not ready to hear what he was trying to tell me and I still rather cringe when I think about it... and more importantly...how many years I wasted in denial of what he was trying to get me to understand. It is an experience we ALL have at some time or another. Now lets just roll this up politely...you are a perfectly intelligent person and I am sure you don't eat puppies before breakfast. We just have different experiences of life and different concepts that we are applying to this problem.
Posted by Anonymous : 8/22/2006 11:49:00 PM
Logix -
1) you seem to propose that the government have a system where there was no freehold land - it would be impossible to do that by buying property (prices would tend to infinity) so it would require some sort of confiscation (probably with remuneration). Didn't you think of that?
That in itself would, lets us say, "not go down well" with either the citizenry or the international community or the economy. BUT I think the system in places like HK/Israel works ok (it is just the change that would hurt). Of course it is a bit funny making me explain your own theory back to you.
> I've made all the points I feel like making
and yet you keep talking, belying your comment. But I appreciate your not thinking I eat puppies, even when it comes down to winning an argument but not a debate. I'm sure you don't either.
As to our old age - I think yours was probably the generation of individualism - collectivism will have the reigns of power in time.
Posted by Genius : 8/23/2006 07:59:00 AM
Genius and Logix - thanks for the rather amusing read, this is what blogging is all about :D
Logix - your point about "Talk to a real-estate agent sometime...they will tell you that buyers and sellers in the say <$300k range and those >$600k live in two different worlds with not much in common." is extremely valid and worth repeating. However this is because it works against your own actual argument.
Most rental properties (not all) sit in the same market as the first home buyers market.
So making it attractive for people to invest in rental properties *does* restrict the ease to get into the market.
To both:
The restriction of capital gains tax to only investment property is what is the current issue. A deffered CGT already exists on sale of investment property where that was bought with the intention of resale at a profit.
The deductions in interest etc is then what gives the investor *in the same housing market* an unfair advantage over the "first time buyer". As they are able to borrow their funds at a far lower rate.
Logix: Your point about higher rents making it harder to get into the market is also fallacious when you take it to the extreme you have.
Part of the reason people are now able to buy property is because they have found their rent approaching the levels of a mortgage repayment. If the rental rates increase without an increase in capital values then this is accentuated.
Posted by Unknown : 8/23/2006 09:12:00 AM
Here's my (perhaps too simple?) take on it...
Will a capital gains tax lower prices? I dont know.
But I think it WILL lead to a considerable reduction on house-price inflation... ie. reduce the increase...
Why?
Simply, people with enough spare cash to invest, currently predominatly choose rental housing, because a large part of the return is un-taxed.... an advantage over just about any other investment opportunity...
When all investment opportunities are taxed similarly, more investors will choose to look elsewhere, and reduce demand for investment properties.
Basically, a CGT will make other investments look more attractive, and thus, less money will be invested in the one that just had its huge advantage removed. Not only will this benefit future owner-occupiers, it will also benefit many other businesses that have trouble attracting capital.
Posted by Anonymous : 8/23/2006 09:12:00 AM
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