7 ms·

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 ow

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...

user5994461 8y ago
This makes no sense. Rents are not linked to the costs of property. They are fixed to as much as local people can pay for a home, roughly 50% of typical household income everywhere in the developed world. The ROI is the +appreciation + rent - expenses. If the property depreciates you have least return on investment. There is nothing you can do about it. You can't increase rent to compensate, people can't pay more rent. Your reasoning is absurd, if you could increase rent you should be doing that right now already.
- dahdum 8y ago
  Rents are definitely linked, until discretionary income for the local people goes to zero they can still pay more. Housing prices also affect mortgage payments, which rise in tandem. Looking it up, I see USA is somewhere around 30% of income [1] as housing cost, while NZ is about 17% [2]. Seems to indicate there is room to grow under tight supply conditions. [1] https://www.businessinsider.com/how-to-save-more-money-2017-8 https://www.businessinsider.com/how-to-save-more-money-2017-... [2] https://www.stats.govt.nz/information-releases/household-income-and-housing-cost-statistics-year-ended-june-2017 https://www.stats.govt.nz/information-releases/household-inc...
  - deleted 8y ago
    [deleted]
sjg007 8y ago
Weird.. you can build a house in the upper midwest USA for 200k. That's land + all of the regulations etc... Condos should be cheaper per unit too. But like everywhere there is a construction labor shortage. I would hope that the kids gets into construction, at least as a summer job or something while pursuing education.
- Max_aaa 8y ago
  A 2.4M 2x4 costs almost 10 NZD here. And that is the cheapest lumber. There are huge markups in the local market on building materials due to a duopoly. It is cheaper to fly to Australia buy NZ made siding there and ship it to NZ than to buy it locally.
  - sjg007 8y ago
    huh... sounds like an opportunity to ship over some containers from China.
- seanmcdirmid 8y ago
  Finding young unskilled apprentices for construction work is easy, finding experienced skilled journeymen is hard because most of them leave the field during each construction bust. You just can’t make a career out of construction with the current boom and bust way the cycle is going.
  - user5994461 8y ago
    You can absolutely have a career in construction, as I know many people who have. The challenge is health. It's a very demanding line of work where you have to carry weight, wake up in the early morning and work in the cold. People don't want to work like that. It's very hard on the body and you're broken when you reach your 50's.
    - sjg007 8y ago
      I think a lot of things can be improved here with technology both in materials and for doing the actual work where the risk is lower so your body isn't completely shot.
sitharus 8y ago
As another New Zealander with an investment property I thought the government closed the loss-making rental loophole s few years back. You can’t use rental losses to offset personal tax so why would you rent at a loss?
- jpollock 8y ago
  http://taxpolicy.ird.govt.nz/news/2018-03-29-issues-paper-loss-ring-fencing-rental-properties-released#statement http://taxpolicy.ird.govt.nz/news/2018-03-29-issues-paper-lo... Not yet, but soon. They did tighten up the rules around businesses that _never_ make a profit a while ago (I seem to remember). CONSULT YOUR ACCOUNTANT.
pixelbash 8y ago
About the insulation thing, to be clear, it's just a heat pump and a certain R number in the floor and ceiling (correct me if I'm wrong). Pumps cost <5k to install and insulation isn't that much more if done while building. Double glazing isn't mandatory either. What I'm trying to say is walking into a house here in winter still doesn't feel like a place in say, Northern Europe. I don't think it's that onerous. Sources: Partners brother in law is a builder, parents just had heat pumps installed, our landlord just installed underfloor insulation and it's currently 12 degrees C in the house.

user5994461 8y ago

This makes no sense. Rents are not linked to the costs of property. They are fixed to as much as local people can pay for a home, roughly 50% of typical household income everywhere in the developed world. The ROI is the +appreciation + rent - expenses. If the property depreciates you have least return on investment. There is nothing you can do about it. You can't increase rent to compensate, people can't pay more rent. Your reasoning is absurd, if you could increase rent you should be doing that right now already.

dahdum 8y ago
Rents are definitely linked, until discretionary income for the local people goes to zero they can still pay more. Housing prices also affect mortgage payments, which rise in tandem. Looking it up, I see USA is somewhere around 30% of income [1] as housing cost, while NZ is about 17% [2]. Seems to indicate there is room to grow under tight supply conditions. [1] https://www.businessinsider.com/how-to-save-more-money-2017-8 https://www.businessinsider.com/how-to-save-more-money-2017-... [2] https://www.stats.govt.nz/information-releases/household-income-and-housing-cost-statistics-year-ended-june-2017 https://www.stats.govt.nz/information-releases/household-inc...
- deleted 8y ago
  [deleted]

sjg007 8y ago

Weird.. you can build a house in the upper midwest USA for 200k. That's land + all of the regulations etc... Condos should be cheaper per unit too. But like everywhere there is a construction labor shortage. I would hope that the kids gets into construction, at least as a summer job or something while pursuing education.

Max_aaa 8y ago
A 2.4M 2x4 costs almost 10 NZD here. And that is the cheapest lumber. There are huge markups in the local market on building materials due to a duopoly. It is cheaper to fly to Australia buy NZ made siding there and ship it to NZ than to buy it locally.
- sjg007 8y ago
  huh... sounds like an opportunity to ship over some containers from China.
seanmcdirmid 8y ago
Finding young unskilled apprentices for construction work is easy, finding experienced skilled journeymen is hard because most of them leave the field during each construction bust. You just can’t make a career out of construction with the current boom and bust way the cycle is going.
- user5994461 8y ago
  You can absolutely have a career in construction, as I know many people who have. The challenge is health. It's a very demanding line of work where you have to carry weight, wake up in the early morning and work in the cold. People don't want to work like that. It's very hard on the body and you're broken when you reach your 50's.
  - sjg007 8y ago
    I think a lot of things can be improved here with technology both in materials and for doing the actual work where the risk is lower so your body isn't completely shot.

sitharus 8y ago

As another New Zealander with an investment property I thought the government closed the loss-making rental loophole s few years back. You can’t use rental losses to offset personal tax so why would you rent at a loss?

jpollock 8y ago
http://taxpolicy.ird.govt.nz/news/2018-03-29-issues-paper-loss-ring-fencing-rental-properties-released#statement http://taxpolicy.ird.govt.nz/news/2018-03-29-issues-paper-lo... Not yet, but soon. They did tighten up the rules around businesses that _never_ make a profit a while ago (I seem to remember). CONSULT YOUR ACCOUNTANT.

pixelbash 8y ago

About the insulation thing, to be clear, it's just a heat pump and a certain R number in the floor and ceiling (correct me if I'm wrong). Pumps cost <5k to install and insulation isn't that much more if done while building. Double glazing isn't mandatory either. What I'm trying to say is walking into a house here in winter still doesn't feel like a place in say, Northern Europe. I don't think it's that onerous. Sources: Partners brother in law is a builder, parents just had heat pumps installed, our landlord just installed underfloor insulation and it's currently 12 degrees C in the house.