6 ms·

If they own a house, they are paying taxes, so they do have significant skin in the game. They pay property taxes despite not using the local schools or most ot

If they own a house, they are paying taxes, so they do have significant skin in the game. They pay property taxes despite not using the local schools or most other city services. As far as not allowing housing as a speculative financial investment, there are some significant unintended consequences there.

pouetpouet 8y ago
way less than poeple living there. Unless there is some sort of a unique land value tax
- VectorLock 8y ago
  Like property tax?
  - seanmcdirmid 8y ago
    Ya, property taxes should act against such behavior, but many places like Vancouver lack one. Not sure about NZ, but it seems like property taxes are more of an American thing. Edit: oops, Canada does have a property tax, and New Zealand has something like it. So it’s just Australia (on first residences) and the UK that don’t. Well, China also. I’ll take my downvotes gracefully.
    - goodJobWalrus 8y ago
      We pay property tax in Ontario.
    - kareemm 8y ago
      Homeowners do pay property tax in Vancouver: https://vancouver.ca/home-property-development/property-tax.aspx https://vancouver.ca/home-property-development/property-tax....
    - deleted 8y ago
      [deleted]
    - lostlogin 8y ago
      There are property taxes here in New Zealand, known as ‘rates’. You can look up what they are for a property and get an idea of the property value on local government websites. https://www.aucklandcouncil.govt.nz/property-rates-valuations/Pages/find-property-rates-valuation.aspx https://www.aucklandcouncil.govt.nz/property-rates-valuation...
      - indemnity 8y ago
        They are absolutely minimal though, works out to about 0.23% of value (aware that’s not the only component) for us in Auckland.
        jly 8y ago
        Yeah, this is a relatively important metric for both investing but also affordability. It shows that there is an apples to oranges comparison in housing prices across markets (discounting currency differences). When calculating the affordability of a home, the total monthly cash flow requirements (housing costs as a percentage of income) are critical. I live in an area where the rates are 10x that of Auckland. A $600k home valuation requires a ~$250 weekly rate commitment vs only about $27 in Auckland - a significant difference. It's still an expensive home by any metric, but considerably more affordable. From a speculation perspective, an investor in Auckland can sit on a very expensive property with almost no cash flow burden, reducing the need to even rent.
user5994461 8y ago
The tenant covers all the taxes and costs through his rent.
- itake 8y ago
  So the property is being occupied, which I don't think they have a problem with. The issue is wealthy investors are coming in, buying up property at above market rate, and then letting it sit empty and driving up the price higher since there is less sellers on the market.
  - user5994461 8y ago
    Doesn't matter if it's rented or not, it drives the price up either way.
    - ben_w 8y ago
      If it’s rented out to a local or sold to a local, the ratio of buildings to locals is the same. Supply or demand (or things outside this context such was wages) has to change for prices to change.
      - moorhosj 8y ago
        You assume that the ratio of buildings to locals is the sole input for real estate prices. If an external rentier enters the market and realizes yield, other rentiers will follow. This increases demand for housing assets, not necessarily housing utility. this is the problem they are trying to solve.
      - user5994461 8y ago
        Foreign buyers increase the supply of cash. It drives buy prices up, which in turns drives rent up slightly.
- jpollock 8y ago
  No, they do not, they only cover a portion. As the owner of a New Zealand investment property... In NZ, ROI on property is targeted to be around 8% [3]. The owner will take that ROI either in capital increase or in rent. [2] If the property is appreciating, the rents will be allowed to slow down. If the property stops appreciating, then the rents increase to maintain the ROI. The entire market is targeted at 8%, particularly the property management companies. Changing the property tax rules changes this equation, with a shift to higher rents. New Zealand is trying everything to remove demand from the housing market. They first brought in new deposit rules (20% min for owner occupier[4], higher for investment properties 35%+[5]), now they've brought in foreign ownership legislation. It might affect the rate of capital increase, but that will only shift the ROI equation towards rental increases. The government is looking at building more housing (FINALLY), but they are finding that all the regulations (houses with heating and insulation cost more!) means they can't do it for less that 600-650k [1]. [1] https://www.interest.co.nz/property/95345/housing-minister-says-because-kiwibuild-homes-are-more-affordable-they-will-be-safe https://www.interest.co.nz/property/95345/housing-minister-s... [2] https://www.interest.co.nz/saving/rental-yield-indicator https://www.interest.co.nz/saving/rental-yield-indicator [3] https://www.yourinvestmentpropertymag.com.au/expert-advice/lindy-lear/rental-yields--are-they-the-best-indicator-of-a-good-investment-178106.aspx https://www.yourinvestmentpropertymag.com.au/expert-advice/l... [4] https://sorted.org.nz/guides/home-buying/buying-a-first-home/ https://sorted.org.nz/guides/home-buying/buying-a-first-home... [5] https://www.rbnz.govt.nz/education/at-a-glance-series/lvr-restrictions-at-a-glance https://www.rbnz.govt.nz/education/at-a-glance-series/lvr-re...
zzleeper 8y ago
In many countries, property taxes are local and don't go to schools (which have funding from income taxes i.e. from the state). So it's not like the foreign investors are beneficial in any way, besides maybe paying their bit of water/electricity/police costs (and if they only pay their share, then why bother accomodating all the volatility to house prices they bring?)
- Taniwha 8y ago
  Yes this is true in NZ - property taxes here ("rates") pay for roads, water, street lighting, that sort of thing. Not schools, police, or other stuff done by central govt. Also property taxes here are not tied directly to house valuations - there's a fixed component, plus a component that's calculated from your valuation divided by the sum of the valuations of ALL the properties in the city. That means that if everyone's valuations are doubled your taxes don't change, if your house value goes up faster than the average you do pay more, if it goes up more slowly your taxes go down.
  - lancewiggs 8y ago
    To add to that - the valuations include both the land and the property, and they are itemised.
Tiktaalik 8y ago
The problem with absenteeism is that while taxes are still being paid to maintain city services, the city doesn't function correctly, because there's weak street life. Here's an article about the struggles of retailers in Vancouver's Coal Harbour neighbourhood, which has estimates of around 20-25% empty housing. https://www.theglobeandmail.com/real-estate/at-vancouvers-cold-harbour-a-neighbourhood-hollows-out/article11713598/ https://www.theglobeandmail.com/real-estate/at-vancouvers-co...
- toby 8y ago
  Vancouver has a vacancy tax, which strikes me as a really good idea to avoid these problems. Does anyone know why these aren't more popular?
  - nedwin 8y ago
    I can imagine they're difficult to enforce.
  - refurb 8y ago
    Enforcement? People gaming the system so it doesn’t look unoccupied?
  - ggcdn 8y ago
    I agree with you that it seems like a good idea. However, the vacancy tax is still in its infancy, so we've yet to fully understand its effectiveness or side-effects. A big issue around the housing discussion in Vancouver is the lack of data and amount of misinformation being injected into the discussion.
    - peterburkimsher 8y ago
      The Netherlands has a system where vacant properties may be occupied by squatters after they've been empty for a year. There's an active squatting scene in Amsterdam, particularly OT301 (an abandoned cinema, now an arts centre).
- TheBeardKing 8y ago
saltcured 8y ago
Yes, what is the target problem really? Do you want to ban vacant or mostly vacant housing stock for its constriction of housing supplies? Why only foreign owned? Don't vacant holiday or investment homes of residents have the same impact? Do you also want to ban renter occupied homes where a landlord is profiting excessively? How do you define excessive? Why only foreign landlords? Don't domestic landlords have the same impact? Don't investment trusts have the same impact, regardless of who owns the shares? Or is there a problem with your tax system, so the foreign-consumed profits are not taxed at the source? If you dislike speculative investment, shouldn't you really dislike renter occupied homes where the landlord isn't profiting? They might accept a tenant at a partial loss, as long as it costs less than holding the property vacant, but this behavior depends on their speculative expectation that the future value is worth the holding costs. It is not sustainable for rent to be lower than the total holding costs (taxes, maintenance, depreciation, risk). It is interesting to imagine a strict owner-occupation requirement. Nobody can own a home they don't live in as primary residence. Obviously, that means nobody can own a second home unless you zone some special vacation-home areas. And nobody can become a landlord, owning and operating rental properties. No person and no corporation nor trust. Ignoring the obvious disaster of how to get there from here, how would such an economy work? Does everybody at every income level get access to financing to buy their own home? It's hard to define a similar rule for commercial properties, since corporations can fractionally live in many places and it will be hard to define a minimum occupation density to distinguish real use of a commercial property from token use of a speculative holding. The same problem applies to wealthy home owners---what's the difference between a huge estate/mansion and an apartment building other than resident density? At the other extreme, what about a strict public-owner requirement? What if every property had to be owned by a trust available on open markets? Everyone could buy into shares of every trust, and everyone would pay rent to some trust owning their residence. Everyone could benefit from real estate investment whether they have enough assets to own 1/100, 1, or 100 homes. Independently, they would decide what kind of housing and cost are best for them. What would happen to rents and property values...?
- refurb 8y ago
  Why only foreign owned? Don't vacant holiday or investment homes of residents have the same impact? This happened in BC, Canada. It’s a popular spot for vacation homes for Canadians, this they get slammed with a tax as well. Govt backed down and created exemptions for large swaths of BC.

pouetpouet 8y ago

way less than poeple living there. Unless there is some sort of a unique land value tax

VectorLock 8y ago
Like property tax?
- seanmcdirmid 8y ago
  Ya, property taxes should act against such behavior, but many places like Vancouver lack one. Not sure about NZ, but it seems like property taxes are more of an American thing. Edit: oops, Canada does have a property tax, and New Zealand has something like it. So it’s just Australia (on first residences) and the UK that don’t. Well, China also. I’ll take my downvotes gracefully.
  - goodJobWalrus 8y ago
    We pay property tax in Ontario.
  - kareemm 8y ago
    Homeowners do pay property tax in Vancouver: https://vancouver.ca/home-property-development/property-tax.aspx https://vancouver.ca/home-property-development/property-tax....
  - deleted 8y ago
    [deleted]
  - lostlogin 8y ago
    There are property taxes here in New Zealand, known as ‘rates’. You can look up what they are for a property and get an idea of the property value on local government websites. https://www.aucklandcouncil.govt.nz/property-rates-valuations/Pages/find-property-rates-valuation.aspx https://www.aucklandcouncil.govt.nz/property-rates-valuation...
    - indemnity 8y ago
      They are absolutely minimal though, works out to about 0.23% of value (aware that’s not the only component) for us in Auckland.
      - jly 8y ago
        Yeah, this is a relatively important metric for both investing but also affordability. It shows that there is an apples to oranges comparison in housing prices across markets (discounting currency differences). When calculating the affordability of a home, the total monthly cash flow requirements (housing costs as a percentage of income) are critical. I live in an area where the rates are 10x that of Auckland. A $600k home valuation requires a ~$250 weekly rate commitment vs only about $27 in Auckland - a significant difference. It's still an expensive home by any metric, but considerably more affordable. From a speculation perspective, an investor in Auckland can sit on a very expensive property with almost no cash flow burden, reducing the need to even rent.

user5994461 8y ago

The tenant covers all the taxes and costs through his rent.

itake 8y ago
So the property is being occupied, which I don't think they have a problem with. The issue is wealthy investors are coming in, buying up property at above market rate, and then letting it sit empty and driving up the price higher since there is less sellers on the market.
- user5994461 8y ago
  Doesn't matter if it's rented or not, it drives the price up either way.
  - ben_w 8y ago
    If it’s rented out to a local or sold to a local, the ratio of buildings to locals is the same. Supply or demand (or things outside this context such was wages) has to change for prices to change.
    - moorhosj 8y ago
      You assume that the ratio of buildings to locals is the sole input for real estate prices. If an external rentier enters the market and realizes yield, other rentiers will follow. This increases demand for housing assets, not necessarily housing utility. this is the problem they are trying to solve.
    - user5994461 8y ago
      Foreign buyers increase the supply of cash. It drives buy prices up, which in turns drives rent up slightly.
jpollock 8y ago
No, they do not, they only cover a portion. As the owner of a New Zealand investment property... In NZ, ROI on property is targeted to be around 8% [3]. The owner will take that ROI either in capital increase or in rent. [2] If the property is appreciating, the rents will be allowed to slow down. If the property stops appreciating, then the rents increase to maintain the ROI. The entire market is targeted at 8%, particularly the property management companies. Changing the property tax rules changes this equation, with a shift to higher rents. New Zealand is trying everything to remove demand from the housing market. They first brought in new deposit rules (20% min for owner occupier[4], higher for investment properties 35%+[5]), now they've brought in foreign ownership legislation. It might affect the rate of capital increase, but that will only shift the ROI equation towards rental increases. The government is looking at building more housing (FINALLY), but they are finding that all the regulations (houses with heating and insulation cost more!) means they can't do it for less that 600-650k [1]. [1] https://www.interest.co.nz/property/95345/housing-minister-says-because-kiwibuild-homes-are-more-affordable-they-will-be-safe https://www.interest.co.nz/property/95345/housing-minister-s... [2] https://www.interest.co.nz/saving/rental-yield-indicator https://www.interest.co.nz/saving/rental-yield-indicator [3] https://www.yourinvestmentpropertymag.com.au/expert-advice/lindy-lear/rental-yields--are-they-the-best-indicator-of-a-good-investment-178106.aspx https://www.yourinvestmentpropertymag.com.au/expert-advice/l... [4] https://sorted.org.nz/guides/home-buying/buying-a-first-home/ https://sorted.org.nz/guides/home-buying/buying-a-first-home... [5] https://www.rbnz.govt.nz/education/at-a-glance-series/lvr-restrictions-at-a-glance https://www.rbnz.govt.nz/education/at-a-glance-series/lvr-re...

zzleeper 8y ago

In many countries, property taxes are local and don't go to schools (which have funding from income taxes i.e. from the state). So it's not like the foreign investors are beneficial in any way, besides maybe paying their bit of water/electricity/police costs (and if they only pay their share, then why bother accomodating all the volatility to house prices they bring?)

Taniwha 8y ago
Yes this is true in NZ - property taxes here ("rates") pay for roads, water, street lighting, that sort of thing. Not schools, police, or other stuff done by central govt. Also property taxes here are not tied directly to house valuations - there's a fixed component, plus a component that's calculated from your valuation divided by the sum of the valuations of ALL the properties in the city. That means that if everyone's valuations are doubled your taxes don't change, if your house value goes up faster than the average you do pay more, if it goes up more slowly your taxes go down.
- lancewiggs 8y ago
  To add to that - the valuations include both the land and the property, and they are itemised.

Tiktaalik 8y ago

The problem with absenteeism is that while taxes are still being paid to maintain city services, the city doesn't function correctly, because there's weak street life. Here's an article about the struggles of retailers in Vancouver's Coal Harbour neighbourhood, which has estimates of around 20-25% empty housing. https://www.theglobeandmail.com/real-estate/at-vancouvers-cold-harbour-a-neighbourhood-hollows-out/article11713598/ https://www.theglobeandmail.com/real-estate/at-vancouvers-co...

toby 8y ago
Vancouver has a vacancy tax, which strikes me as a really good idea to avoid these problems. Does anyone know why these aren't more popular?
- nedwin 8y ago
  I can imagine they're difficult to enforce.
- refurb 8y ago
  Enforcement? People gaming the system so it doesn’t look unoccupied?
- ggcdn 8y ago
  I agree with you that it seems like a good idea. However, the vacancy tax is still in its infancy, so we've yet to fully understand its effectiveness or side-effects. A big issue around the housing discussion in Vancouver is the lack of data and amount of misinformation being injected into the discussion.
  - peterburkimsher 8y ago
    The Netherlands has a system where vacant properties may be occupied by squatters after they've been empty for a year. There's an active squatting scene in Amsterdam, particularly OT301 (an abandoned cinema, now an arts centre).
TheBeardKing 8y ago

saltcured 8y ago

Yes, what is the target problem really? Do you want to ban vacant or mostly vacant housing stock for its constriction of housing supplies? Why only foreign owned? Don't vacant holiday or investment homes of residents have the same impact? Do you also want to ban renter occupied homes where a landlord is profiting excessively? How do you define excessive? Why only foreign landlords? Don't domestic landlords have the same impact? Don't investment trusts have the same impact, regardless of who owns the shares? Or is there a problem with your tax system, so the foreign-consumed profits are not taxed at the source? If you dislike speculative investment, shouldn't you really dislike renter occupied homes where the landlord isn't profiting? They might accept a tenant at a partial loss, as long as it costs less than holding the property vacant, but this behavior depends on their speculative expectation that the future value is worth the holding costs. It is not sustainable for rent to be lower than the total holding costs (taxes, maintenance, depreciation, risk). It is interesting to imagine a strict owner-occupation requirement. Nobody can own a home they don't live in as primary residence. Obviously, that means nobody can own a second home unless you zone some special vacation-home areas. And nobody can become a landlord, owning and operating rental properties. No person and no corporation nor trust. Ignoring the obvious disaster of how to get there from here, how would such an economy work? Does everybody at every income level get access to financing to buy their own home? It's hard to define a similar rule for commercial properties, since corporations can fractionally live in many places and it will be hard to define a minimum occupation density to distinguish real use of a commercial property from token use of a speculative holding. The same problem applies to wealthy home owners---what's the difference between a huge estate/mansion and an apartment building other than resident density? At the other extreme, what about a strict public-owner requirement? What if every property had to be owned by a trust available on open markets? Everyone could buy into shares of every trust, and everyone would pay rent to some trust owning their residence. Everyone could benefit from real estate investment whether they have enough assets to own 1/100, 1, or 100 homes. Independently, they would decide what kind of housing and cost are best for them. What would happen to rents and property values...?

refurb 8y ago
Why only foreign owned? Don't vacant holiday or investment homes of residents have the same impact? This happened in BC, Canada. It’s a popular spot for vacation homes for Canadians, this they get slammed with a tax as well. Govt backed down and created exemptions for large swaths of BC.