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Yes, that is definitely how it should be. Unfortunately the normal state of affairs is not the state of affairs in much of suburban New Zealand. I left Auckland

Yes, that is definitely how it should be. Unfortunately the normal state of affairs is not the state of affairs in much of suburban New Zealand. I left Auckland eight years ago, and at the time rent was cheaper than mortgage payments with a ~20% deposit. The housing market is speculative, profits are on capital gains, which until recently were untaxed on land, and still "enjoy" exemptions. I understand for example, that if one holds a property for more than five years, it becomes exempt from capital gains tax. This seems far too easy a loophole to exploit. I suspect, although I'm not certain these days, that there is also a considerable supply problem driven in part by (1) the Christchurch earthquakes (2) a subsequent reassessment of building safety in Wellington resulting in many buildings being deemed unsafe and consequently closed (3) zoning policies.

WalterBright 6y ago
Real estate is not guaranteed to always rise, as I've lost a lot of money doing that. Also, most people don't seem to figure in the cost of owning property when they calculate their gains, for example, omitting the 6% commission when you sell.
- mkingston 6y ago
  I agree that investment in an already very overvalued property market is unwise (except perhaps as part of a diversified strategy..?). Unfortunately, the capital gains tax status of real estate in NZ, and the leverage on your deposit (the bank charges 5% interest, you make 30% gains) and fast-rising real estate prices made and still makes it favorable to pay the 6%, rather than investing in the stock market, for example. This further inflates real estate prices as a speculative asset until you end up in a dangerous bubble that is difficult to escape from. In a sane system, this wouldn't be the case. It's a problem the NZ government has repeatedly failed to solve, presumably because it would be politically risky. Instead it appears we've chosen by inaction to continue the course toward a real estate collapse. I guess perhaps then we'll learn hard lessons about diversification and tail risk..

WalterBright 6y ago

Real estate is not guaranteed to always rise, as I've lost a lot of money doing that. Also, most people don't seem to figure in the cost of owning property when they calculate their gains, for example, omitting the 6% commission when you sell.

mkingston 6y ago
I agree that investment in an already very overvalued property market is unwise (except perhaps as part of a diversified strategy..?). Unfortunately, the capital gains tax status of real estate in NZ, and the leverage on your deposit (the bank charges 5% interest, you make 30% gains) and fast-rising real estate prices made and still makes it favorable to pay the 6%, rather than investing in the stock market, for example. This further inflates real estate prices as a speculative asset until you end up in a dangerous bubble that is difficult to escape from. In a sane system, this wouldn't be the case. It's a problem the NZ government has repeatedly failed to solve, presumably because it would be politically risky. Instead it appears we've chosen by inaction to continue the course toward a real estate collapse. I guess perhaps then we'll learn hard lessons about diversification and tail risk..