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This audio programme consists of two hours of audio recording and the 34 page Course Notes booklet given to participants at the March MARKET UPDATE 2013 seminar featuring Olly Newland, Mark Withers and Tony Steindle.

Read a review of the seminar and what was covered here . (Audio sample available.)

The NZ Property Market: A definite upswing
What’s driving it? Where are the opportunities? What’s ahead?

Property investor Olly Newland, chartered accountant Mark Withers, and property law specialist Tony Steindle share insights, advice — and their outlook.

LISTEN IN on an up-to-date, straight-talking session with three genuinely experienced property experts.

Empower Education’s MARKET UPDATE 2013 is a chance for you to gain a practical understanding of the state of the property market & investing environment RIGHT NOW — and to learn how you can make the most of it.

How solid is the upswing? Is it going to last?
What’s working right now? And how & where?
What should a property investor do?
Buy now? Or sell weaker rentals?
Raise your rents or hold them steady?
Are buy-and-flick do-ups worth doing in this market?
How much are the recent tax & law changes actually biting? Or are they cancelled out by other factors like tax cuts & low mortgage interest rates?
What ‘investing rules’ & strategies should you use to benefit from these conditions?

This special session (recorded LIVE 20 March 2013) offers you the benefit of these experts’ wide and up-to-date experience.

CD1
Introduction
Olly Newland
Tony Steindle
CD2
Mark Withers
Olly Newland pt 2
Q&A session

Available as 2x Audio CDs and hard copy of the Course Notes booklet $69 + P&H
or 5x MP3 files and a printable PDF Course Notes booklet $59.

Available for immediate delivery.

Here’s a review of the evening and some of what was covered:
(Listen to a 7 minute audio sample below.)

Olly Newland speaking at MARKET UPDATE 2013, sharing his decades of experience as an investor in all sorts of markets

A good-sized group of investors gathered at the Rendezvous Hotel last Wednesday — a mixture of old and new Empower Education clients. After a welcome and a meet-and-greet Olly Newland opened his first session with a survey of ‘the market’ represented by those of us in the room on where *we* saw the Property Clock.

He described how he’s been an investor so long that he now takes a coldly logical approach to property investing and trading (he actually said he’s had most of the emotion ‘beaten’ out of him). As part of that relentlessly logical approach Olly explained that he regularly analyses a long list of influences — and possible major influences — on the economy and the property market (‘game-changers’ as he calls them) assessing them, at the time, as positive or negative.

He worked through a list of ten or eleven of these influences with us — ranging from the Christchurch construction boom, to the effects of the Auckland Unitary plan and various market statistics — and discussed how he saw their effects in the medium and long term.
Olly shared his view that the NZ economy is not as healthy as some seem to be saying. He described a few of his recent deals and what led him to do them. He talked about the upside and downside of the market right now, and discussed some of his recent dealings with banks, good and bad, and elaborated on financing property deals, sharing his advice.
He discussed commercial property and his recent involvement improving a reasonable-sized retail investment in Auckland and shared his advice for those of us wanting to do the same.

Olly made a number of predictions about the property market in NZ and Auckland (all of which ‘expire at midnight’ he said) and suggested we will see some form of ‘disincentive’ brought in by the government, and we should be ready for that.

Tony Steindle outlined the legal changes that affect residential and commercial investors — as well as some affecting Real Estate agents and others in related fields

Lawyer Tony Steindle recalled Olly’s prediction from a previous talk where he forecast a whole lot more regulation. That one, Tony said, has certainly come true.

Tony described changes to the rules covering Real Estate agents, which he says has made many of them gun-shy about being thought to be ‘misleading’ clients or ‘pressuring’ them … and generally fearful of putting a foot wrong. He detailed some recent findings from the REA Authority disciplinary hearings, noting that while a ‘clean up’ was good to see, it has also taken away some of the flexibility buyers and agents have relied on and were previously able to use to find suitable properties.

Tony referred to the work of the new Financial Markets Authority and their decision not to extend the exclusions that allow smallish property syndicates to flourish, and predicted severe restrictions on that market — which some will see as an opportunity. He outlined how the Financial Advisors Act had already been used to exclude a so-called ‘property educator’ from Authorised Financial Advisor status on the basis of a finding of ‘not of good character’.

He outlined the changes and effect of the new Property Law Act and its effects on terminating a commercial lease, loss of landlord’s restrictions on business use of a premises (and a way partially around that), loss of a landlord’s right to distrain delinquent tenants’ property, and meaningful changes in the new edition of the ADLS Commercial lease. He explained the changes are generally much more tenant friendly — and detailed some of the notable changes including rent increases, legal costs and some issues around fixtures, chattels and provisions unimagined before the Christchurch earthquake e.g. what if your building is in the red zone? (All good stuff to know.)

Tony touched on the wording of the new Sales & Purchase agreement including rules affecting GST and novation of the contract. He explained some nasty fish hooks in the building report/expert report provisions (which are NOT obvious!) and described the effect of the new Unit Titles act which, among other things, controls how Body Corps work. Democracy might not be all it’s cracked up to be in a Body Corp.

He referred to the tougher tainting/associated persons rules (for developers) and stressed the importance of having your lawyer and accountant actually talk to each other.
Tony closed off by referring us to his detailed course notes and sharing the trends he observed through the end of the recession, and the effect on investors today of the efforts (in some cases just too damn late) to clean up the dodgy dealings and deal with operators who sucked so much money out of the market during the last boom, and offered his own observations of the market and the deals crossing his desk.

Mark Withers brought participants up to speed with the important changes to the tax laws affecting property investors

After tea and coffee with fruit scones, jam and cream, chartered accountant Mark Withers launched into a typically lively discussion on the theme of coping with the changes to tax that have been pushed down the funnel towards property investors over the last few years. Although Mark definitely came from a ‘You don’t know how lucky you are, mate” glass-half-full point of view, he did concede some of the changes demanded our attention.

The biggest change, ruling out building depreciation claims for rental property gives us ‘a sense of simplicity’ he said, and makes property investing more straightforward as a business proposition.

Mark went through some of the considerations we should look at when buying, urged us to see that trading or dealing in property (buy & flick) is still a viable option, and told us all to calm down when thinking about ‘tainting’. He spent a good chunk of time explaining the new Compulsory Zero Rating (CZR) GST rules — which apply in a surprisingly wide range of property transactions. (This topic featured in the Q&A session of the evening later, too.)

Mark covered off the new ‘mixed asset rules’ which apply to those of us who have charter fishing boats (nope) private jets (nope) and baches (oh-oh) … explaining that the tax department has changed the whole approach to debt-funded holiday homes. The changes mean that most people who have claimed a share of their bach’s expenses against rent received now probably won’t be able to do so. And, rather sombrely, he warned: “If they can do this [ring-fencing losses] to a bach, they can do it to your rental property as well.”
Mark reviewed his experience as an accountant dealing with hundreds of Look Through Companies. He outlined some really important distinctions, some dos and don’ts, cans and can’ts, summarising LTCs as ‘not as user-friendly as the LAQC’ but still able, for the most part, to produce similar tax results.’

Mark closed with what might turn out to be a good news story about how the IRD treats a simple subdivision: based on a discussion paper and draft ruling from the IRD it may be that what’s often been seen in the past as a taxable land transaction (i.e. with 30% or more of your profit on sale going to IRD) will no longer be seen that way. (Well, that’s heart-warming!)

Olly returned for a wrap up — canvassing the implications on the market of the buzzing ‘political’ idea of providing 100,000 houses at $300,000 each. Is there really a shortage at that price bracket?, he asked, citing TradeMe search results. And what does that figure include? He discussed the implications of the rush to raise earthquake ratings on existing buildings, and the *very real effects* on landlords and tenants of the emerging requirements, sharing some of his own experience as an owner of CBD builingds. He offered an alternative plan which takes a longer view of the issues.

Tony Steindle, Mark Withers and Olly Newland speaking at Empower Education's MARKET UPDATE 2013 (20 March). An audio recording plus Course Notes booklet is available to order now.

We had a time for Questions from the seminar participants — ranging from the GST changes, dealing with previously claimed depreciation deductions when switching to a Look Through Company, simple subdivisions, more GST (sigh), opportunities for investors in planned denser housing areas, and compulsory acquisition of land … before ending the evening.

All in all a good, encouraging night. It was great to get a straight-talking update from these three experts who, whatever we may be doing during the week, invest their time and attention examining the property market, what influences it and keeping up to date with the ‘rules of the game’ — and how they change.

If you missed our latest MARKET UPDATE session, you can still get the benefit of our three experts’ useful insights and advice — we recorded the whole night (presentations and interactive Q&A) and we’re making Audio CDs (two hours of audio) available with the 34 page Course Notes booklet we gave those who attended. The audio files and booklet are also available as digital downloads.

- Peter Aranyi

Listen to a 7 minute sample below: (or MP3 file here. © All rights reserved.)

Audio programme as Audio CDs and booklet or as MP3 files and PDF Course Notes

No matter how often the argument against a Capital Gains Tax is put forward, the subject is still popular among those who, it seems, fail to realise that implementing such a tax will solve nothing. The suggestion comes up again and again, and it has almost become an article of faith for ‘the left’ some of whom seem to imbue a Capital Gains Tax (CGT) with mythic powers to right all social wrongs.

When the Labour Government of the 1970s brought in a version of the tax to curb rampant property speculation, the result was a further rapid rapid rise  in property prices — on top of the 50% rise up until then! Sellers rather withdrew their properties from the market than pay the tax. It follows that Less stock = Higher prices. (This ain’t rocket science.)

The ’Property Speculation Tax’, as it was then called, was abolished a few years later by the Muldoon government, and I am proud to say that I was partly instrumental for that. It was in those days that I first organised public meetings, wrote newspaper articles, gave interviews on TV and radio to quietly and logically explain that that sort of tax would not work. (Well, OK, I argued and lobbied hard against the tax.)

A master stroke in the PR war was a stunt where I ‘sold’ a property to a near destitute Pacific Island family on $10 down and the balance interest free — with a condition of sale that no Property Speculation Tax was payable due to the transaction. If the tax was levied the needy family would be evicted immediately. (Yes, I said it was a stunt.)

This was all over the news, breathlessly, and culminated in a call to Wellington to meet a red-faced and embarrassed Minister of Finance, Bill Rowling. From that chilly meeting flowed changes over the next few months which saw some of the draconian aspects the tax modified. (I’ve written more about this episode in chapter 3 of Climbing the Property Ladder.)

Perception versus reality

There is no doubt that the idea of a Capital Gains Tax becomes at times popular, as the article below ‘Frustrated home buyers want investors to be discouraged’ and myriad others suggest. This is understandable.

Ordinary folk who find themselves locked out of the market by rising prices feel angry. They have a right to be angry. But if they believe the propaganda that a CGT will solve the problem, they’re wrong. It won’t.
It would make it worse. Here’s why:

What riles people is their belief in a fairy tale that there’s a widespread phenomenon of speculators buying properties, then quickly re-selling them, making tens of thousands of dollars of easy tax-free profit. In doing so (the story goes) the speculators are depriving genuine home owners of their start in the property market.

A Capital Gains Tax, they believe, will discourage the buying and re-selling for profit by taxing those profits (if any).

Let’s get the story straight:
(1) The call for a CGT is a populist cry because it appeals to the masses and is promoted by those with a Socialist leaning (e.g. Labour and the Greens and those further to the left). Of course, sensible people know that these parties are using the issue as propaganda just to have a ‘point of difference’ with the ruling right wing National/ACT party government.
In my view, their cry demonstrates the usual envy and New Zealand’s ‘tall poppy’ syndrome at its worst or a loathing of the ‘rich pricks’ as expostulated by then Minister of Finance in the last Labour Government, Michael Cullen (now Sir Michael Cullen, excuse the smirks).

(2) Profits made on the turnover of properties is already taxed. If someone buys and sells properties on a regular basis they are already liable for the maximum tax under the present legislation. End of story.

(3) By far the biggest group of ‘speculators’ is the general public — buying and selling their own homes. If you live in your home then sell it for a huge profit it is almost certain you will pay no tax … even of you do so regularly.
I know of many people who buy and sell their own homes on a regular basis for the purpose of making a profit. They rarely, if ever, are bothered by the taxman (and rightly so).
To look at if from the other side for a moment: exempting the family home from Capital Gains Tax (as the Labour Party suggests?) would be a huge blunder if a CGT was ever introduced. It would mean that house price rises would continue unabated. Since the majority — by far — of home sales are made by home owners, any dampening effect would, I predict, go by totally unnoticed.

It is true that without a Capital Gains Tax of any sort New Zealand is an outlier or oddball in the OECD. But rather than just mimic other countries, we need to take a logical approach so that currently tax-free gains are taxed in the case of deliberate profit seeking — but without causing major problems to the market as a whole.

Tax on profits = credits on losses?

The same cries for tax on ‘super profits’ happened in New Zealand in the 1980s when the sharemarket was going through the roof. People were baying for blood because the share speculators were making huge day-to-day tax-free profits. Under mounting pressure, the Government insisted that gains on share trading would be taxed. The ‘joy’ of the masses was short-lived: Along came the sharemarket crash of ’87 and share traders ended up with huge tax credits, giving some of them a tax-free status on everything else they did for many years to come.

It’s no exaggeration to say that there is a risk of serious damage to our property market and our economy in general if a Capital Gains tax is introduced across the board. Look what’s happened in Spain, Portugal, the USA. Greece etc — all of whom have had long standing and draconian CGT taxes.  Despite their Capital Gains Tax they endured enormous booms and catastrophic busts … and the tax will no doubt turn into life time tax credits for many.

What we need (if we need anything at all)

So, what could be done?

(1) Enforce more rigorously taxes on people who buy and sell homes (including their own) as a business. It’s far too slack at present.

(2) On the sale of any property, if the total proceeds are re-invested into another home or investment property then that would be tax free. Any surplus retained would be taxed. There would need to be exemptions for extenuating circumstances such as marriage split ups or entering retirement villages and the like.

(3) Some countries use a sliding tax system which applies to both private and investment properties. Simply put, tax would be applied in full if a property is sold for a profit within 12 months, but the tax would slide downwards over the next ten years to zero, encouraging long-term holding. The paperwork and record-keeping would be horrendous, but perhaps it’s an idea worth considering.

(4) There is some debate on whether “Asian” buyers (i.e. Chinese) are ramping up the market, especially in Auckland, and suggestions that restrictions should be placed on foreign purchasers. I have real difficulty seeing what this will achieve other than scratch the xenophobic itch that many people seem to display.

As I explained on TV 3 News recently (3News: Investor adds to rising housing market predictions ) when a foreigner buys a NZ property, in most cases the money goes into the pockets of  a Kiwi owner, who in  turn can compete back in the same market.

The Australian model seems very xenophobic — banning foreign ownership of rental or speculative property unless it is a new build or it will be occupied for at least 12 months by the owner. (Hence hordes are buying property through friends and family to skirt the rules.) Any such ‘foreign buyer’ restrictions here in NZ will be for political reasons only, and in my opinion, will have little effect.

There was some suggestion that farm sales should be taxed if there are profits made, which I believe could hamper exports and turn the farming community into a major opposition force. It’s increasingly clear that like landlords, farmers operate only secondarily for the lifestyle and cashflow of the endeavour — capital gains is where real end game lies. Likewise with business sales, collectibles, shares and indeed any investment which produces a capital gain.

Any tax pushes price UP

Whichever way you put it, any form of tax imposed feeds into prices. I challenge my readers to name one item that’s gone down in price because its been taxed. There are no such examples as taxes always feed into higher prices.

A Capital Gains Tax would only encourage people not to sell — thereby reducing supply and creating a greater shortage than ever. The laws of economics are crystal clear:

Supply more of any item and it becomes cheaper.
Reduce  the supply and it becomes dearer.

Maybe, cynically speaking, punitive taxes should be applied to those who don’t sell! (Now that would be interesting.) That would certainly bring down prices  with a thump and probably ruin a lot of people in the process, so that scenario seems extremely unlikely as well.

Yet I see some in the media keep pushing the same ‘Poor first home buyers’ line because such anguish makes for interesting reading e.g.:

Frustrated home buyers want investors to be discouraged
By Susan Edmunds
20.1.13

Georgia Wilkinson and Dylan Ewing have frequently been outbid by investors as they try to buy a house in Auckland’s Herne Bay. Photo / Getty Images
When looking for a first home, it’s hard enough having to contend with all the other young families wanting their first step on the property ladder.

But it’s all that much tougher bidding over a property an investor has bought, done up and wants to flick on for a profit.

That’s the experience of Georgia Wilkinson and Dylan Ewing, a young couple looking for their first home in Auckland.

They’ve been searching unsuccessfully for a house for six months and they are certainly not the only ones wanting something done to cool the heated home ownership scene.

A Key Research-Herald on Sunday poll of 1000 people showed 55.2 per cent support the idea of a capital gains tax on residential investment properties, although most of those said it depended on the level of tax payable.

The proposal – part of the Labour Party’s policy platform – is intended to discourage investors from putting all their money in real estate, making more housing available to families looking for homes.

At one auction recently, Wilkinson and Ewing didn’t even bother bidding.

link: NZ Herald

As an example of other countries which have far reaching Capital Gains Taxes, we need to look no further than Australia
and read through a website which details how and when a CGT is applied. (Note the understandable similarities with the NZ proposals.)

http://www.capitalgainstax.com.au/what-is-a-cgt-event/

The UK has tougher rules on CGT and indeed tax includes much in the way of personal items not only homes:
http://www.hmrc.gov.uk/cgt/possessions/basics.htm#2

And on property:
http://www.hmrc.gov.uk/cgt/property/basics.htm#2

The subject gets murkier when you look see how the USA treats CGT:
http://www.irs.gov/uac/Ten-Important-Facts-About-Capital-Gains-and-Losses

Take a while to scroll through these websites and you’ll realise that if and when a CGT is introduced it won’t just stop at speculators doing up and flicking houses. It could well end up on your front door and touch much more than you think. Once such a tax is introduced, it becomes the thin edge of the wedge and can be built up  more and more as time goes by.

Stamp duty

And just to add to the debate: Remember that Stamp Duty still exists (look at your cheque book) and can be introduced with little fanfare if any ruling party decides.  Stamp duty is one if the easiest taxes to police as it will be based on the value of the item transacted. The appeal of Stamp Duty, to the socialists complaining about the unfair burden of GST on the poor, is that with Stamp Duty, the rich will pay more, the poor will pay less or next to nothing.

Don’t laugh. Stamp duty was common on all sorts of transactions, as well as property in the recent past.  It  remained on commercial property until the late 1990s – I know because I paid my fair share of it and felt the pain.

It was also charged on commercial premises leases, and many types other types of invoices. Changing the rate from 0% as it is currently, to a real number is relatively easy to do.

If this is what the people want – the politicians will surely oblige. That’s democracy for you.

Olly Newland
March 2013
www.ollynewland.co.nz
© 2013 Olly Newland. All rights reserved. See Olly’s books and audio products.

The property market is changing and changing fast. As never before, obtaining sound independent advice is needed to prosper in this changing environment. Get the benefit of Olly’s experience: Click here for details of his Property Mentoring Programme and consulting services.

Coming up: MARKET UPDATE™ 2013: Yes, it’s a boom. (Shh!)
Click here for full details and to book your seats.

A revised, updated and expanded edition of Olly Newland’s best-selling book The Rascal’s Guide to Real Estate. (Full details here)

The Rascal's Guide to Real Estate — Revised, updated and expanded (click to enlarge)

Order your copy here NOW and get it rushed to you exclusively from Empower Education. For more details and to order click here.

Click to read the full article on www.realestatemonitors.com.au

Originally from Neil Jenman’s website

This month’s issues offers a free report from Olly Newland on auction tips …

Almost on a daily basis websites are full of angry people accusing ‘speculators’ of ramping up the price of property — supposedly pushing it out of reach for ‘the poor’ and first home buyers.

'The Tax Gatherer' 1540 - Marinus Van Reymerswaele (click to enlarge)

‘Bring in a Capital Gains Tax!’ is the cry, or there are calls to ‘restrict’ lending for property purchases, or to ‘punish’ investors by removing tax advantages, or to flood the market with more undeveloped land. Some even want the government to tax gains that have not even been realised.

This cacophony of shrill envy aimed towards property investors is almost exclusively driven by those who cannot comprehend this market reality: where someone has actually taken the plunge, bought a property of some kind and then — whether immediately or over time — made a profit.

However let me tell you that it’s not ‘speculators’ who are driving up the price of property. Indeed, they are more likely driving *down* the price of property! For speculators can only really thrive by fierce haggling in order to buy at bargain prices.

Read the rest of Olly’s column at www.OllyNewland.com

Olly is one of the contributors to Commercial Real Estate Investors Guide — Making money as a commercial property investor in New Zealand — available here.

I have always been surprised by how some people react when I suggest they should investigate commercial property investment because it provides a very a good alternative to residential investment.

It’s “too complicated”, they say. Or “too hard to understand” is another common response, as well as fear of vacancies with a consequent loss of income.

Yes, I agree, residential property is the more “liquid” of the two forms of investment, but successful residential investment is, in my view, the hardest subject to master by a country mile.

We all know the advantages of residential property and they are persuasive, that has to be said, but let me give you some of the disadvantages — just for the sake of the argument.

The main problem with residential is that it’s “political” in every sense of the word. From one day to the next there is a steady drum beat, criticising those who own or invest in residential property.

The media run one story after another on overcrowding, shortage of rentals, rising rents, unfair profits, and lately pressure  to introduce a capital gains tax or reduce so-called ‘tax rorts’.

It’s no wonder that there is a growing rental crisis, and increasing homelessness, all aided and abetted by the recent tax disadvantages which have, as expected, had the exact opposite effect from what was intended.

All this was predicted by me for over a year or more. And let me quietly tell you something else in the strictest confidence mind  you. Draw close, I don’t want to shout. …

Read the rest of Olly’s column at www.OllyNewland.com

Olly is one of the contributors to Commercial Real Estate Investors Guide — Making money as a commercial property investor in New Zealand — available here.

Olly features in the March 2012 edition of NZ Property Investor magazine

Investor, best-selling author and Authorised Financial Advisor Olly Newland features in the latest edition of NZ Property Investor Magazine.

The article ‘Real Estate’s Rascal Looks Ahead‘ (a play on Olly’s book The Rascal’s Guide to Real Estate) is well worth a read.

Olly has a scan of the article over on his website available as a PDF.

AUGUST 2011: World financial markets react with turmoil due to the US credit rating downgrade and sovereign debt crisis — shedding value and displaying a nerve-wracking volatility that makes many question their investment strategies. What is the way forward? How will these world events affect our local property market? How should investors react — and how should YOU react?

Olly Newland has lived through many such troubled times. While Olly would never say he ‘knows it all’, in this 13 minute audio interview he outlines his view of the current financial crisis, he discusses the ‘change in the times’ brought on by this increased market volatility, what it heralds, and suggests what steps you could take to protect yourself.

Listen here:

or download an MP3 file here (13 minutes 6.7MB):
Olly Newland – How to respond to the global crisis

© 2011 Empower Leaders Publishing Ltd. All rights reserved.

Related: Olly’s book Lost Property relates his experience in previous financial market convulsions and important lessons he drew from those times.