Improvements to the way
property assets are taxed are on the way. These changes might have a confident
spin-off for people looking to buy their first house.
House is currently an extremely tax-effective investment compared to shares
and deposits. Investors in stocks pay tax on their dividends and tax is paid by
those with deposits and bonds on the attention they get. Property owners however
could lower their tax with devaluation loans, to the place where the government
actually ends up spending a reimbursement of $500 million to the owners of the
$200 billion committed to home.
Maybe this generous tax treatment is a contributing factor to your
relationship with housing being an investment articles. We recently
compared the assets held by New Zealand households to those in an example of
other developed nations. This investigation showed that people have far and away
the very best weighting to house with 75-year of our house assets committed to
housing.
At the other end of the size, the results we collected show that New
Zealanders have the smallest allocation to shares of all of the countries in our
sample. We devote only 2% of our savings in direct stocks, less than countries
like Australia where homes have 8% of their money invested in shares, and the
Usa where shares characterize 21-69 of household assets.
It is this heavy reliance on property and lack of diversification into other
assets like stocks the government is probably trying to change using its new tax
policies.
There's no question that the changes may press down property values. When the
changes were first mooted by the Tax Working Group the share prices of the
listed property trusts - property finances that own portfolios of commercial
property that are listed on the stock market - dropped by around 52-41.
All this is good news for people looking to purchase their first house. House
prices may possibly ease from existing levels in the aftermath of any tax
changes, hence making them cheaper.
Over the past few years properties had become very costly relative to
earnings. Historically, average house prices have generally traded at around 3
times the average family income. By 2007 this ratio had hit six times, making
homes unaffordable for many individuals.
The tax changes may not be the only thing evaluating on home prices this
season. The fact that houses look expensive when compared with earnings could
also suggest charges might go decrease from where they're today. All this
ensures that 2010 can be a good time for first home buyers to start out
considering looking for a house.
While there's lots of chat about how over-invested New Zealanders are in
property - and I have added to it here - owning your house can be a smart
investment choice, in our view.The main point of the complete debate about
property and investing is not that property is really a poor investment, but
that New Zealanders are over-exposed to it, and their savings aren't varied
enough into other ventures.
Not only does running a house give you somewhere to live, it gets your money
dedicated to a 'real' property. Home and stocks are what we call 'real' assets
since, unlike fixed income investments like period remains, they provide the
possibility of capital development with time. It is this development providing
you with protection against inflation within the long-term.
Maybe we would do well to copy what people in nations like Denmark,
Switzerland, Canada and many more do with their investment news. By the time
they retire, people in these countries usually own their property freehold, ergo
eliminating the burden of rent from your regular budget. They also have a
diversified portfolio of stocks, fixed income and perhaps some home, which
creates an income they use to supplement their superannuation.
More information can be found on this
article.
Buying a property is a
good first rung on the ladder towards achieving this outcome.