Your accountant probably won’t charge you to hand you the brochure he/she undoubtedly has pre-printed. The accountant I visited didn’t need more than 10 minutes of time to explain it to me and didn’t charge me a dime.

Ringfencing - This piece of “private slang” was discussed and described by Dr Cullen a year ago to describe separating the treatment of the LAQC for housing from the LAQC in general. It is also fairly common in Australia for some reason. I understood it immediately and I’m from the USA. I apologize for I truly did not “get” that you truly didn’t know what that was.

Finally, the usage of housing as an investment/speculation displaces and destroys the ability of people who simply want a place to live to obtain one. In this regard it is NOT like any of the other investments, businesses or speculations that are available. I am NOT interested in running my own business. I am interested in a house that my family can and will live in, a house that I can improve (and by GOD the houses here need improvement!) and one that I don’t have to worry about being sold out from under me.

I agree that in some ways the US market is unlike the NZ market. In one significant way they are deadly similar. The government is encouraging people to speculate in housing here… differently from the US and perhaps in a more sustainable way, but the effect on people who earn a living and want to buy a house at a price that they can actually afford to pay is similarly devastating.

I don’t have ANY patience with this government for all the lies its told for all the years its told them, and I don’t cut defenders of the current system any slack at all. It is MY tax money that is going to the SPECULATOR’S bank even as he is bidding the price of the house I would like to buy out of reach.

Explain to me the morality of that particular arrangement.

Houses are NOT businesses. They are houses. Making them into a business distorts the market for houses. Gerrit has an answer which I don’t like but which at least gives me an even shot at getting a house. I get the same break as the speculator. This puts MORE money into a market that is already quite stupid in terms of price and I explained that on another thread. I could live with that perhaps. It isn’t going to happen either.

respectfully
BJ

If the market cannot supply housing at a price that people can afford then it is time to interfere with the market.

i suppose you would also say that if the market couldn’t provide adequate food, the government should intervene in that industry too? you appear to have your head wrapped around this issue bliss, which is to say i agree with everything you said & find it consistent with everything i have said. if we are to single out the property market for government actions inconsistent with those applying to other industries we must base our argument on a claim that having people own their own homes delivers a unique value to society (rather than just to the individuals concerned) beyond what the free market is able to measure, and not base our argument on unjustified claims of entitlement or accusations of inequity in the government’s omission of the extraordinary actions which would create special conditions in that market compared with all others.
you would probably suggest if people were going starving, the government should intervene by any one of a number of measures - by giving money or food directly to those people, by subsidising food production, by buying food & selling it cheaply, by regulating food prices or whatever. not by by affecting anger that commercial farmers could claim seeds, fertilizers & labour as expenses while home gardeners couldn’t, & that therefore you were paying the taxes to fund farmers!

at the outset of this discussion it was claimed that the problem was that landlords are able to take all of their losses in the year they are incurred instead of holding them over to a profit-making year. i pointed out that this wouldn’t be helpful to landlords, then someone else explained it pretty differently. then it became apparent this was only a distraction, the main objection was against businesses being able to count business costs as expenses for tax purposes while the same cost incurred by a household did not reduce their tax burden - just the same in the housing sector as it is in all other industries.
those who had made the vague or incorrect comments have not corrected themselves, but implicitly allowed all the contradictory material in this thread to stand. i’ve asked for clarification, quite the opposite of making a point of being poorly informed, but apparently unless i am willing to pay for my accountant’s time to figure out which comments in this thread are right & which are wrong i am guilty of “persisting” in misunderstanding.
perhaps the fault is with those who have failed to address queries & failed to clearly state just what their problem is & why they consider it a problem.
i predict at the end of it all we’ll be left with only two concrete problems: the lack of a capital gains tax; & rent subsidies.
i suspect the use of vague undefined & ill-defined terms & acronyms, and unwillingness to engage, are simply to obscure the fact that some people don’t really have a firm idea of what they want or what the problems are.
yes i did say i “presumed” that ringfenced means abolished, but notice i used a question mark, this is clearly a request for information. evidently it is easier to scathe me for not guessing what this piece of private slang means than it is to simply explain what it means.
on that note let me explain that when i say expansionary or contractionary i’m using the terms technically, not emotionally. i’m not intending that one or the other should imply “good” or “bad” or “like” or “dislike”.

the US market is not comparable to new zealand’s. the US has had very low interest rates for years, we have had the opposite. the US has had risky & odd banking practices, like enticing borrowers with a low initial interest rate set to later go up to a rate beyond what they can afford, forcing them to sell the house. such a loan is tailored entirely toward speculation. (it would be like lending a worker money to invest in the share market. apparently in 1984 banks here began offering people loans to speculate against the $NZ!) the housing bubble there has been as much a credit bubble as anything else. another obvious sign of speculation in the US market but not here, was the development of large quantities of uninhabited housing stock in the US. reduced sale numbers there accompany reduced prices, here if you see reduced sales numbers, that usually comes with increasing prices (before bouncing back again!) indicating a drop-off in willingness to sell, not buy.

Ha ha…very droll.

It will be interesting to hear the justification for these “tax cuts” after years of telling us they are inflationary.

Probably not… I think we’d much rather have actual tax cuts.

Good straight line.

Thanks

BJ

Since you persist in misunderstanding, and make a point of remaining poorly informed, there really isn’t much more to say. Talk to your accountant about how an LAQC can save YOU money on your tax bills. The net effect in some cases is that you can buy the house for nothing at all. The taxpayer’s do ALL the work. That’s less common now than it was, but it still runs close enough to true to make a big difference in people’s decision making process.

It isn’t the case that owning a house is a business. We don’t buy houses so we can set up businesses, we buy houses to live in them. Favoring the investor over the owner-occupier IS government intervention. It permits the business model to run roughshod over the family model. It is a mistake.

Just as your presumption that ringfenced means abolished.

Is it my imagination? Maybe everyone went out and tied one on and is posting while drunk. How on earth can you get that I mean abolished when I very clearly VERY clearly said ringfenced. ?

Nor is dropping back from having the highest interest rates in the world exactly an “expansionist” policy… or don’t you see those interest rates as being symptomatic of a problem? You don’t mean to tell me you LIKE Cullen’s policies do you ?

Bubbles are fragile? What an amazing thing to say. These bubbles are always quite sturdy as they are being inflated… as long as the government supports them by shielding the malinvestments from consequences using taxpayer dollars. When the government stops doing that, either because it won’t or because it can’t, that’s when things get delicate… and it still can take longer than anyone believes from the time the bubble becomes obvious to the time when it finally succumbs to a pinprick of reality. We saw the housing collapse coming 2 years ago in the USA. It was an obvious call… the fundamentals were wildly out of whack… but it just kept going because money kept being created and pumped into it.

It doesn’t stop until the money stops being pumped in.

The market IS ALREADY being interfered with.

BJ

the market isn’t doing stupid things, but quite rational, indeed unavoidable things,

Markets do not have brains. They can only do stupid things! Duh!

Markets are especially good at one thing, price discovery.

Markets do not care about equitable distribution. Famine is not a market failure. It is a market failure if there is food in the warehouses, but if all the farmers grow cotton for the foreign market and the locals starve because there was never enough food planted, that is not a market failure.

But it sure is an economic failure.

My point is that markets are not be all and end all in economics. They are useful in certain situations and useless in others.

Housing is a human need and IMO right. If the market cannot supply housing at a price that people can afford then it is time to interfere with the market.

Eg., a state housing programme.

peace
W

The only reason the market is doing stupid things is because government is doing stupid things.

the market isn’t doing stupid things, but quite rational, indeed unavoidable things, in bringing the price of housing up as the population goes up. maybe the government is doing stupid things in bringing the population level up.
simply allowing a business to function as a business, paying tax on profits, & not singling out a specific industry for different treatment is not stupid.
as i say, if you wish to argue for a special treatment in the case of the housing market, you will need to make your argument based on the social desirability of government intervention, not on faux-righteous anger or “fairness” arguments.

You haven’t talked to an accountant yet…. HAVE you.

to ask her what in heck you are talking about? funnily enough no… i thought discussing it with you seemed a more appropriate solution.

Dropping interest rates is only possible if the LAQC is ringfenced as well

ah, so expansionary monetary policy is responsible as long as laqc is abolished…. i presume you do mean abolished when you say “ringfenced”? here’s a tip, if you’re no longer sure you know what you mean, or you’re no longer sure you want your “interlocutor” to know what you mean, try obscuring your meaning by using several slightly or completely different words in a row, separated only by / -& use … as your only other punctuation - even where entirely unnecessary! along with copious use of “eh?” it’s guaranteed to make readers first go crosseyed then lose all interest in finishing reading your post!

the new zealand housing market has none of the characteristics of a bubble. bubbles are fragile - investors who know they only got in on speculation that prices would keep rising tend to flee once that rise shows signs of stopping. yet we’ve had slowdowns from time to time, we’ve had alarmist warnings from politicians, but prices then go right on rising. it’s been going on for years - must be the sturdiest bubble in history.

With the LAQC they pay mortgage out of income PLUS tax deductions for a variety of losses. The net effect can be quite substantial. You haven’t talked to an accountant yet…. HAVE you.

Dropping interest rates is only possible if the LAQC is ringfenced as well. Otherwise it can’t be done. Dropping interest rates kicks some of the money out of the system. Ringfencing makes it necessary for investors to consider the actual income available from the property and not buy on price speculation. Taken together they change a lot of things, like the “value” of the dollar here. Why do we have the highest interest rate in the civilized world?

Your accountant may well have a complete pre-printed colour brochure of just how this works which he can hand you. It isn’t unfamiliar territory for them.

Let me point out something about people who “realize that if they don’t bust a gut to buy a house now”…

That phrase has been used for the past 6 years in the US to justify people borrowing far beyond their ability to repay. The bubble here is smaller, but no less a bubble and people who are buying houses that they can’t afford without continuously refinancing against an appreciating asset (the habit here, I know), and without using my tax dollars as a crutch, need to be flushed out of the system. The only difference between here and the USA in this respect is that the first home buyer doesn’t get ANY breaks here.

However, if you buy a house at a stupid price you are stuck with that price, no matter WHAT the market does. The situation in the US tells us that overpriced houses and speculation do eventually kill the market even with the government tax breaks.

Gerrit offers that I should get the same breaks… which doesn’t quite solve my problem with the prices but at least allows ME to afford them. You provide the advice that I should just find the money and do it because house prices only go up. Which is not true and I have seen the counterexample to that claim in gory detail.

The only reason the market is doing stupid things is because government is doing stupid things. The connection could not be clearer.

respectfully
BJ

property prices may have outstripped rent for now, but that is only to be expected in a market where most everyone realizes that if they don’t bust a gut to buy a house now, they may lose the chance forever.

and i repeat people only pay rents out of actual income… and they only pay mortgage servicing out of actual income. so you have no point.

places far away, where monetary policy is less responsible and hot money can be created…. My answer is to… drop the interest rates

well make up your mind!