A meeting was called to look at ways of creating a level playing field resulting in a tax reform bill tabled. [ Tax Working Group Report ]
Why it was decided to exclude any representation from property investors, the very people the finger is pointed at, is beyond me. Are they being set up to take the fall for the real culprits of the Real Estate market turmoil?
The less privileged, as they are commonly referred to, may be rejoicing but before they start sniggering should the government implement the “proposed changes” in its current form, they should hold off from throwing a party as they could be the ones taking to the streets in protest.
The tax reform has very little to do with creating a level playing field. It is about revenue gathering.
As to finger pointing, yes property investors that keep buying houses to help with the housing shortage, shame on you.
Sure it has been reported as of 30 November 2009 there are 10,423 people on Housing New Zealand’s waiting list but just because the government have opted to lease from private investors as they simply cannot afford to house that number themselves, you shouldn’t benefit from doing so.
Am I pro property investors? Sure and why wouldn’t I be, but are they responsible for the world recession or the New Zealand property market spiralling out of control?
Not at all and I might add this is not the first time it has happened and listen to this. The same players were responsible on both occasions and to date have never been held accountable, well not in this country.
The first time was back in the 90’s not long after the “share market crash” which brought many to their knees. Mum and Dad investors looked for a safer alternative as a retirement plan and what could be safer than bricks and mortar.
As this caught on, supply and demand kicked in thus fuelling an increase in property values.
Put the finger away, I haven’t finished yet.
At the time lending was capped at 80% and as property values had taken a hit due to the crash many simply didn’t have the equity in their properties they once had.
Credit Analysts could see that it was only a matter of time before properties would be back to at least post crash values so there would be little risk in relaxing lending policy to boost lending/sales so Countrywide Bank took the lead and offered 90% lending.
Most other lenders sat on the fence but after time they couldn’t bare the thought of all the money they were losing so they picked up the ball and were back in the game.
Countrywide then took it a step further. Well it was Citibank actually but theirs was a Clayton’s policy, more of a marketing stunt than a genuine offer but Countrywide’s was the real deal. Punters now only needed a 5% deposit to purchase a home.
This really had a snowball effect and was starting to worry the reserve bank. Out came the big stick as again is their intention, they started flogging the wrong people increasing interest rates, which had little or no effect on the lenders that started the snow ball rolling [ not property investors ] or Joe public.
2004 saw what was described as the beginning of the “Bank Wars”.
BNZ weren’t getting their share of the action from mortgage brokers so decided to take an axe to them and take on the industry single handed. All hell broke loose with all other lenders matching whatever was thrown at them.
Again, the reserve bank became nervous hitting the lenders with a wet bus ticket, which saw all but Kiwibank taking time out. Kiwibank donning a DC3 starting its own battle attacking those from across the ditch.
The Aussies not to be out done still had other weapons of destruction at their disposal. First came a policy change. Rather than using 30/35% of income as a formula to assess servicing criteria they changed to a budget surplus format.
I remember having a loan declined one day and resubmitting it the following day for $150,000 more using the new servicing formula and it was approved.
They did not stop there. Then came 100% lending, no deposit at all required and if you were self- employed you didn’t need to confirm income. Simply put a figure on a piece of paper and wolla, you were in business.
2008 the writing was on the wall, property prices were finally out of control and sales volumes had started to fall dramatically. It was then evident that the weapons of destruction [overzealous lending policies] were taking affect. House prices were simply no longer affordable, so it was time to retrench to the bunkers, back to 80% lending until the dust settles.
As we are about to repeat the cycle this time let’s get it right, change the tax rules and create a level playing field but first, we need a smoke screen , we start by flogging the property investors – sound familiar.
Summary: Banks get off scott free, property investors get flogged and Joe Public think it's great until they can’t find a decent place to rent.
Brian Dalley is a leading Property Consultant | former NZMBA Mortgage Broker, and Real Estate Agent.
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