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[ Bernard Hickey and I are thinking in unison here. ~R ]
All aboard the property rort
By Bernard Hickey Sunday Dec 4, 2011 (NZ Herald)
There’s never been a better time to borrow up to the hilt and buy property.
It’s almost too good to be true – but it’s true.
Interest rates are at record lows and they’re about to go lower. Europe’s turmoil is brilliant because it will force central banks to cut interest rates. This means we can all afford to borrow more and pay higher prices. Banks are also desperate to lend again, even offering 95 per cent loans.
National has just won a second term and Prime Minister John Key will never do anything to hurt property-owners. During the past three years, he has argued against anything that would have a drastic effect on land or property prices. He is particularly reluctant to force the banks into fire sales of houses and farms in case it drives prices down.
He’s also doing very little to improve the supply of land. This has the effect of pushing up prices and creating tax-free capital gains.
National and the councils know what’s good for them and the property developers who support the National Party. There’s nothing better than sitting on a land bank and drip-feeding properties while making tax-free capital gains.
Did I mention the capital gains are tax-free?Any government serious about improving housing supply would simply use government land and cheap government money to build a bunch of houses, but that’s never going to happen under National. Sweet.
Check out this combo: rents up 22.5 per cent in the past four years; house prices up 16 per cent in the past year; interest rates at record lows; housing supply constrained.
There’s no sign we’re going to lose our jobs because China will keep bailing everyone out.
And our government will never let the banks fail. Mate. You can’t lose with property. Ever.
~ D S A.
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In one short article, Bernard touched on 1/2 of the subjects I have been banging on about, or have wanted to expound on.
* National won’t do anything to hurt its support base, regardless of the stupidity of the position.
* Real Estate is a disaster waiting to explode – but we’ll all just use any lever or prop available to shore it on up. Can’t let Property crash…
* The whole sector is distorted beyond belief, but hey, don’t let that stop the musical chairs fiasco we have encouraged.
* Prices for rents and purchase are completely out of hand.
* Just because everyone else is jumping off the bridge, hey, lets us do it too. Pump those low interest rates – woo hoo…
* Introduce a tax regime that would slow down the property market? Not in our lifetimes…
The situation is so farcical it has just stopped being a joke any more.
But here is my prescription – for what that is worth:
- Raise interest rates (dramatically).
- Tax capitol gains
- Discourage property investment – and effectively crash that whole market.
- Wipe out all the people and fortunes based on that business model.
- Build a new model based on government sponsorship of coordinated long range planning for housing and transport and infrastructure.
- Encourage things like KiwiSaver (and even the banks) into funding large scale residential developments. Long term investments that only pay a relatively small return – but which is perfect for Pension schemes/plans. (and any honest Banks)
- Kick the current clowns out of political office. They are corrupt – and corrupting.
- That which cannot be sustained, won’t be – and that would be our current Real Estate markets in case you didn’t get that… They are doomed to crash, better we choose how we take them down, rather than have them crash down on us.
Because crash they will.
… and that would be where the Devils Advocate comes into it…
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