5 ms·

When vancouver adopted a %15 non-resident house purchase tax, prices and demand dropped a lot. Maybe nz wants to adopt something similar, combined with singapo

by mahyarm 10y ago

When vancouver adopted a %15 non-resident house purchase tax, prices and demand dropped a lot. Maybe nz wants to adopt something similar, combined with singapore's for citizen public house purchase program.

EdwardDiego 10y ago
We really do, the amount of foreign money in our housing market is quite scary (China is prominent in the internal debates, but there's a lot of money flooding in from the UK also, not to mention all the cashed up ex-pats coming home), as locals are ultimately competing against the entire world for property. A capital gains tax or land tax would be a good idea also. But our incumbent government is very reluctant to do any of that. Some people would suggest that large donations from foreigners with financial interests here may have influenced their thinking, but in reality most of it appears to be catering to the Kiwi baby boomers who a) own a large proportion of the "investment properties" (did I mention no capital gains tax?) and b) are the largest voting bloc. As their perception of their wealth is intrinsically tied to property values, anything that would depress property value increases would be politically bad. Same reason we're not doing anything about the pending state funded superannuation crisis - we don't even means test the bloody thing, which means that millionaires and paupers alike get the same level of government money when they hit 65 - but touching national superannuation is political suicide. This does imply an onus on the non-baby-boomer generations to get more involved in politics and start voting way more than they (we) do. I'm also starting to think that five year terms instead of our current three year might be worth a shot, as our politicians are very much focused on short-term never the long.
- briandear 10y ago
  A capital gains tax a good idea? No -- that would decrease market liquidity and make the problem even worse. France has high capital gains taxes and it means that people are less willing to sell houses because capital gains taxes eat the profit, so people tend to hang on to houses in the hope that in many years they'll appreciate enough to make swallowing the capital gains hit worth it. I have a place in France that I'd consider selling but I am not interested in giving the government a huge percentage of the profit. Meaning if I take a risk in buying and renovating something, my profit has to make the whole affair worth it. If I'm giving the government 34.5% of my profit, if my house was bought at €500k and my target profit is €100k, then that means I have to sell the place at roughly €635k instead of €600k. That knocks many potential buyers out of the market, thus means that the house won't sell as quickly. That also means that my capital is tied up in the house instead of moving the market in some other deal or otherwise putting that money into the economy some other way. The net gain from a capital gains tax is actually a negative when you count the lose of market liquidity resulting from capital gains taxes. Increasing the price of something lowers demand. If you increase the price of selling, less people will sell, causing house prices to increase. Capital gains taxes are always a bad idea. Capital liquidity is critical for an efficient economy. The only people who support capital gains taxes are typically people with little capital -- they don't actually understand how it works and the stunting effect it has on an economy.
  - hga 10y ago
    Note also that capital gains are seldom if ever indexed for inflation, certainly not in the US. So you're frequently paying a big tax on purely paper gains.
  - EdwardDiego 10y ago
    > A capital gains tax a good idea? No -- that would decrease market liquidity and make the problem even worse. Depends on the level. At the moment, the big problem is that nearly all of NZ's capital goes into housing - the significant tax advantages (no tax on your profits and LAQCs/LTCs) are one factor in this - inflating the price of living, and starving our businesses of capital to grow and actually be productive with. I'd ask you why it's a good idea for an economy that profit from running a company is taxed along wit the incomes of all your workers, but not the profit from trading houses - especially as a lot of our property investors are rolling by on the minimal amount of capital necessary - their debt is liquid more than their capital.
- mahyarm 10y ago
  Unoccupied property taxes? You want to really disincentivize using housing as a bank account and instead incentivize housing as a business.
shostack 10y ago
How has that impacted recent local buyers who perhaps stretched to buy? I feel like I'd be livid and feeling very trapped if I bought right before that happened and was put underwater as a result.
- mahyarm 10y ago
  Most local buyers cannot afford the multi millions required to buy, the rental equivalent was much cheaper per month and they knew it was a volatile market going in. It's like getting angry at the central bank for raising interest rates during a stock bubble.
randomdata 10y ago
Vancouver recently implemented the tax. 1. Prices tend to be sticky. Someone who thought he could get $1M a couple of months ago is still going to try and get $1M now. The time to sale may not be immediate like in the past, but as long as the seller is willing to wait, the prices can remain high for a long time. There has not been a significant drop in price yet, and it is too soon to tell where the market will go. 2. Sales have slowed, but it is not yet clear why. It may be that foreign investors pulled out, but it may be that the locals stopped buying because they thought foreign investors would pull out. Similarly, it may be that the locals have stopped buying because they fear a government that changes the rules on a whim. Once these questions start to become more clear, and confidence is restored, we may quickly see a return to the way it was. Again, it is far too soon to tell.
closeparen 10y ago
Does this also apply to people moving in?

by mahyarm 10y ago

EdwardDiego 10y ago

We really do, the amount of foreign money in our housing market is quite scary (China is prominent in the internal debates, but there's a lot of money flooding in from the UK also, not to mention all the cashed up ex-pats coming home), as locals are ultimately competing against the entire world for property. A capital gains tax or land tax would be a good idea also. But our incumbent government is very reluctant to do any of that. Some people would suggest that large donations from foreigners with financial interests here may have influenced their thinking, but in reality most of it appears to be catering to the Kiwi baby boomers who a) own a large proportion of the "investment properties" (did I mention no capital gains tax?) and b) are the largest voting bloc. As their perception of their wealth is intrinsically tied to property values, anything that would depress property value increases would be politically bad. Same reason we're not doing anything about the pending state funded superannuation crisis - we don't even means test the bloody thing, which means that millionaires and paupers alike get the same level of government money when they hit 65 - but touching national superannuation is political suicide. This does imply an onus on the non-baby-boomer generations to get more involved in politics and start voting way more than they (we) do. I'm also starting to think that five year terms instead of our current three year might be worth a shot, as our politicians are very much focused on short-term never the long.

briandear 10y ago
A capital gains tax a good idea? No -- that would decrease market liquidity and make the problem even worse. France has high capital gains taxes and it means that people are less willing to sell houses because capital gains taxes eat the profit, so people tend to hang on to houses in the hope that in many years they'll appreciate enough to make swallowing the capital gains hit worth it. I have a place in France that I'd consider selling but I am not interested in giving the government a huge percentage of the profit. Meaning if I take a risk in buying and renovating something, my profit has to make the whole affair worth it. If I'm giving the government 34.5% of my profit, if my house was bought at €500k and my target profit is €100k, then that means I have to sell the place at roughly €635k instead of €600k. That knocks many potential buyers out of the market, thus means that the house won't sell as quickly. That also means that my capital is tied up in the house instead of moving the market in some other deal or otherwise putting that money into the economy some other way. The net gain from a capital gains tax is actually a negative when you count the lose of market liquidity resulting from capital gains taxes. Increasing the price of something lowers demand. If you increase the price of selling, less people will sell, causing house prices to increase. Capital gains taxes are always a bad idea. Capital liquidity is critical for an efficient economy. The only people who support capital gains taxes are typically people with little capital -- they don't actually understand how it works and the stunting effect it has on an economy.
- hga 10y ago
  Note also that capital gains are seldom if ever indexed for inflation, certainly not in the US. So you're frequently paying a big tax on purely paper gains.
- EdwardDiego 10y ago
  > A capital gains tax a good idea? No -- that would decrease market liquidity and make the problem even worse. Depends on the level. At the moment, the big problem is that nearly all of NZ's capital goes into housing - the significant tax advantages (no tax on your profits and LAQCs/LTCs) are one factor in this - inflating the price of living, and starving our businesses of capital to grow and actually be productive with. I'd ask you why it's a good idea for an economy that profit from running a company is taxed along wit the incomes of all your workers, but not the profit from trading houses - especially as a lot of our property investors are rolling by on the minimal amount of capital necessary - their debt is liquid more than their capital.
mahyarm 10y ago
Unoccupied property taxes? You want to really disincentivize using housing as a bank account and instead incentivize housing as a business.

shostack 10y ago

How has that impacted recent local buyers who perhaps stretched to buy? I feel like I'd be livid and feeling very trapped if I bought right before that happened and was put underwater as a result.

mahyarm 10y ago
Most local buyers cannot afford the multi millions required to buy, the rental equivalent was much cheaper per month and they knew it was a volatile market going in. It's like getting angry at the central bank for raising interest rates during a stock bubble.

randomdata 10y ago

Vancouver recently implemented the tax. 1. Prices tend to be sticky. Someone who thought he could get $1M a couple of months ago is still going to try and get $1M now. The time to sale may not be immediate like in the past, but as long as the seller is willing to wait, the prices can remain high for a long time. There has not been a significant drop in price yet, and it is too soon to tell where the market will go. 2. Sales have slowed, but it is not yet clear why. It may be that foreign investors pulled out, but it may be that the locals stopped buying because they thought foreign investors would pull out. Similarly, it may be that the locals have stopped buying because they fear a government that changes the rules on a whim. Once these questions start to become more clear, and confidence is restored, we may quickly see a return to the way it was. Again, it is far too soon to tell.

closeparen 10y ago

Does this also apply to people moving in?