Funny, the way the market responds and the way that everyday people are affected.
I have been doing some open homes on a mortgagee sale and over the last 3 weeks have met 3 couples who sold in early 07 fearful of a significant fall in the market value of their homes. Media was full of the coming property storm and the subsequent pickings to be had as the flood of property hit the market, desperate vendors without options there to be taken advantage of. To be fair there was an 8 month period where canny people who sold right could maybe find a good buy if all their moves were timed well but other than that it didn’t really happen and the majority of people are not that canny.
The young couples I met have all ended up suffering significant loss, are out of pocket and have to accept reduced options. It seems unjust to me, particularly as most of the ‘expert commentators ‘have largely recanted their extreme positions and yet are not held to account. No big stories in the media about that .
We have listed in the last 2 weeks 7 properties currently rented by perfectly good long term tenants. People who have made a home in, and looked after investment property owned by very ordinary folk. Why are they coming to market? I know that almost all of them will be sold as a result of the uncertainty over a capital gains tax .Where’s the surprise? I am confident this will occur more frequently as investors decide to exit the market. Inevitably stock, already in short supply, will shrink and rents go up as demand outstrips supply.
The opposite of the result sought.
Clearly the Government is in need of new sources of income, tax receipts will be materially reduced and expenditure expectations are increasing daily.
I believe that if a capital gains tax is applied to property, shares, paintings, in fact any investment activity,(and it must be applied to all investment vehicles) we will see money invested in overseas instruments followed by the investors. There will be a large/continuing fall in the construction of new homes, should investors abandon the market, if the Australian experience is anything to go by.
Houses currently in existence are unlikely to become any more affordable as far fewer new homes will be built and homes are already in short supply. New homes carry huge tax content, in some cases a greater sum than the cost of the land. This money also needs to be replaced before any recovery from a CGT is counted. Currently we are building 12,000 fewer homes, even at the median values that will account for close to $ 1billion in lost GST and levies.
Perhaps the focus ought to be on ensuring there are attractive alternative investment options in NZ and a more transparent investment environment, one that sees a degree of accountability and integrity, maybe then investors may be tempted back.
A major source of potential growth and income must come from educating the young; rewarding their successes and making them endure the consequences of failure. The recent contretemps with the bus drivers is a stark reminder of the falling relative value of unschooled labour. Nowhere in the duration of the dispute were there any mention that the drivers might obtain the higher wages they sought if they undertook further education and some responsibility for a future they desired.
That is the direction in which long term revenues should be sought.
October 14 2009 03:27 pm | Uncategorized