Latest / The SME Stream / Ashley Church: The equation for property investing

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Ashley Church: The equation for property investing · The SME Stream

• 0:01
  Speaker 1: And welcome back to the Weekend Collective. I'm Tim Beveridge.
• 0:05
  Speaker 1: Thanks for your company. Want this is by the way,
• 0:07
  Speaker 1: if you missed the panel, you can go and check
• 0:09
  Speaker 1: it out on the Weekend Collective's podcast. Just look for
• 0:12
  Speaker 1: wherever you get your podcasts, and a good starting place
• 0:15
  Speaker 1: would be iHeartRadio, or you can just listen on Demmand
• 0:19
  Speaker 1: as well, of course, but this is the one Ruth
• 0:21
  Speaker 1: Radio show. I want your calls on eight hundred and
• 0:23
  Speaker 1: eighty ten and eighty text nine to nine to two
• 0:28
  Speaker 1: and joining me. He's he's been he's been coming here
• 0:31
  Speaker 1: on the show for a little bit a little while now.
• 0:33
  Speaker 1: He's a property commentator, investor and his name is Ashley
• 0:38
  Speaker 1: Church Today Ashley, how you going.
• 0:40
  Speaker 2: I'm going good, Tim, How are you?
• 0:42
  Speaker 1: Oh? Not too bad? Actually we've had I've had a
• 0:46
  Speaker 1: few texts about you in advance of coming on thing,
• 0:48
  Speaker 1: just suggesting that you actually know, it was just a
• 0:51
  Speaker 1: super suggesting, given your name and your interest in property,
• 0:54
  Speaker 1: that maybe you could help fund the cathedral in christ Church.
• 0:56
  Speaker 1: But that's a very weak link to some sort of
• 0:59
  Speaker 1: joke that didn't have from me. But there we go.
• 1:01
  Speaker 1: How are you?
• 1:02
  Speaker 2: Yeah, I'm good, I'm good.
• 1:03
  Speaker 1: I'm good.
• 1:03
  Speaker 2: By the way. The answer to your question about how
• 1:05
  Speaker 2: long I have been coming on the show is I
• 1:06
  Speaker 2: think twenty seventeen. Wow, it was a long time ago.
• 1:11
  Speaker 1: That was back with Was that back with the original
• 1:14
  Speaker 1: two teams? It was?
• 1:15
  Speaker 2: It was with Tim Rocksboro and Tim Wilson. Wilson Sorry, yes, yes, yes,
• 1:22
  Speaker 2: one Hey before your illustrious entry to the show.
• 1:25
  Speaker 1: Yes, indeed, indeed, Hey, Look, there's a couple of there's
• 1:29
  Speaker 1: a big announcement for the RBNZ coming up this week
• 1:32
  Speaker 1: on the OCR, and I guess there'd be a lot
• 1:36
  Speaker 1: of people because it sort of ties into our whole
• 1:38
  Speaker 1: question around the equation for property investing and all that.
• 1:41
  Speaker 1: But let's let's kick it off with the discussion on
• 1:44
  Speaker 1: the OCR which is coming this week. Inflation figures are down.
• 1:48
  Speaker 1: This is I had been talking about a couple of
• 1:51
  Speaker 1: weeks ago. People are saying it's not traditionally the date
• 1:54
  Speaker 1: where they would announce a change cut in the cash rate.
• 1:58
  Speaker 1: But simple question for you, because it means a hell
• 2:01
  Speaker 1: of a lot to people have got mortgages? Ye, should they?
• 2:04
  Speaker 1: And will they?
• 2:06
  Speaker 2: They won't? Interesting the comedy about tradition because there is
• 2:10
  Speaker 2: no tradition around this stuff. There's no set rules. It
• 2:12
  Speaker 2: depends on what's going on in the market.
• 2:14
  Speaker 1: Any pattern maybe, okay.
• 2:16
  Speaker 2: Even that I'd defy somebody to find any real pattern
• 2:19
  Speaker 2: in this stuff. He won't, and he won't for a
• 2:23
  Speaker 2: range of reasons that relate to wanting to make sure
• 2:26
  Speaker 2: that he gets that OC figure so it gets that
• 2:28
  Speaker 2: inflation figure under that three percent mark for both non
• 2:31
  Speaker 2: tradable and tradable inflation. However, so I would be stunned
• 2:36
  Speaker 2: if there was an announcement that the o C will
• 2:38
  Speaker 2: be catt At this announcement next week, however, he will
• 2:41
  Speaker 2: give a very dubbish indication that it's either going to
• 2:47
  Speaker 2: be cut later in the year in stronger terms that
• 2:51
  Speaker 2: he's given in the past, or he's at least going
• 2:55
  Speaker 2: to give an indication that the tracking is going to
• 2:58
  Speaker 2: be down and that in itself will be enough for
• 3:00
  Speaker 2: the banks to continue dropping mortgage interest rights. So the
• 3:03
  Speaker 2: effect will be the same as if he had cut
• 3:04
  Speaker 2: the OCR.
• 3:05
  Speaker 1: Because last time, didn't he say that he'd thought about
• 3:09
  Speaker 1: even putting the rate up.
• 3:11
  Speaker 2: Yes, he did. It's just a reason why I think
• 3:14
  Speaker 2: there's a little bit of gainsmanship and brinksmanship that goes
• 3:17
  Speaker 2: on between the governor and the banks themselves. And so
• 3:20
  Speaker 2: the banks have had the ability and the capacity to
• 3:22
  Speaker 2: drop mortgage interest rates for quite some period of time.
• 3:24
  Speaker 2: And if you remember, around about that same time, there
• 3:27
  Speaker 2: was a couple of them that it actually wasn't by
• 3:29
  Speaker 2: a huge amount, but there was a couple of them
• 3:30
  Speaker 2: that had dropped some of their fixed term rates, and
• 3:32
  Speaker 2: I think that was his way of saying to them,
• 3:34
  Speaker 2: carry on with that, and I'll put the rates up
• 3:38
  Speaker 2: and basically deal to you in that way. So I
• 3:40
  Speaker 2: think it was basically just a little bit of game playing.
• 3:43
  Speaker 2: But things have moved on quite a bit since then,
• 3:46
  Speaker 2: and it's obvious that the economies and free fall that
• 3:48
  Speaker 2: were in a pretty bad way. And it's also obvious
• 3:52
  Speaker 2: that he has all but achieved the target that he
• 3:55
  Speaker 2: has to, which is the getting inflation under three percent,
• 3:59
  Speaker 2: and so all of the conditions are right to drop it.
• 4:01
  Speaker 2: But as I say, won't be this announcement will probably
• 4:04
  Speaker 2: be the next one, but it won't matter because on
• 4:06
  Speaker 2: the back of what he does next week, moregin interest
• 4:08
  Speaker 2: rates will drop anyway.
• 4:09
  Speaker 1: Of course, it's easy to have our reckons from the sideline,
• 4:13
  Speaker 1: but if you were in if you were having a
• 4:17
  Speaker 1: significant say or making the decision, what do you think
• 4:20
  Speaker 1: should happen? What would you do?
• 4:23
  Speaker 2: I'd broadly, and I hate to say this because you
• 4:25
  Speaker 2: know I'm not as big as supporter. Broadly, I think
• 4:27
  Speaker 2: he's probably doing it about right. I mean that three
• 4:30
  Speaker 2: percents there for a reason, that one to three percent.
• 4:33
  Speaker 2: So he does have to get it back within that band.
• 4:36
  Speaker 2: And so the pain that we've just gone through, as
• 4:38
  Speaker 2: unpleasant as it was, was necessary. But equally it's time
• 4:42
  Speaker 2: now to do something to loosen it. The problem he's got,
• 4:45
  Speaker 2: he's damned if he does any damned if he doesn't,
• 4:46
  Speaker 2: because if he did make an announcement to drop it
• 4:48
  Speaker 2: next week, an he woned. But if he did, all
• 4:51
  Speaker 2: that means is at the rate at which morgage interest
• 4:53
  Speaker 2: rates would fall would be that much quicker. And that's
• 4:54
  Speaker 2: the last thing he wants to see. He wants an
• 4:56
  Speaker 2: orderly retreat of rates over the next twelve months, so
• 4:59
  Speaker 2: he'll what he wants to without actually having to drop
• 5:02
  Speaker 2: it next week.
• 5:02
  Speaker 1: I guess the worry that some economists might have, and
• 5:06
  Speaker 1: just punters who've got their own reckons like me, is
• 5:09
  Speaker 1: that it's I've always thought an analogy. In fact, it
• 5:13
  Speaker 1: might have somebody might have even agreed with me on
• 5:15
  Speaker 1: it is that it's a bit like It's not like
• 5:19
  Speaker 1: you're driving a sports car. It's like steering a freighter.
• 5:22
  Speaker 1: You can take your foot off the power and make
• 5:24
  Speaker 1: it and sort of try and put it in reverse
• 5:27
  Speaker 1: or slow something down. But it's one thing to exercise control.
• 5:30
  Speaker 1: It's another thing for the for the effects of that
• 5:33
  Speaker 1: exercise of control to actually have a have an impact.
• 5:37
  Speaker 1: And I worry that what he's that, you know, things
• 5:39
  Speaker 1: are pretty grim for businesses. I think, uh, you know, power,
• 5:43
  Speaker 1: the costs of power and all that sort of stuff.
• 5:44
  Speaker 1: There's a lot of negative news out there, and you
• 5:47
  Speaker 1: know a bit of a negative vibe. And I just
• 5:50
  Speaker 1: worry that if he doesn't make a change, it's almost
• 5:52
  Speaker 1: keeping the foot on for so long that you know,
• 5:56
  Speaker 1: the foot on the throats. Should I say that it's
• 6:00
  Speaker 1: really have a much more die consequence.
• 6:03
  Speaker 2: That's the balancing act that he's playing at the moment. Interestingly,
• 6:06
  Speaker 2: there's one thing that hasn't happened yet, or certainly hasn't
• 6:08
  Speaker 2: happened to the degree that it needs to. And Tony
• 6:10
  Speaker 2: Alexander talks about this quite a lot, and this is
• 6:13
  Speaker 2: where you reach a point where utility providers and counsels
• 6:16
  Speaker 2: and basically monopoly providers absorb the cost of inflation rather
• 6:20
  Speaker 2: than passing it on. And you kind of have to
• 6:24
  Speaker 2: get to that point to keep to keep the inflation
• 6:26
  Speaker 2: rate down in a sustainable way. So the problem we've
• 6:29
  Speaker 2: had over the last eighteen months is some of those
• 6:31
  Speaker 2: providers from whom you've got to purchase their service whether
• 6:33
  Speaker 2: you want to or not. Counselors being a good example,
• 6:36
  Speaker 2: utility providers being another, have basically just said, oh, inflash
• 6:39
  Speaker 2: has gone up six percent, so we'll just pass it
• 6:41
  Speaker 2: on to the consumer. And it's really irresponsible, and Tony,
• 6:45
  Speaker 2: to his credit's been saying for about nine months. You
• 6:47
  Speaker 2: know that these guys have got to pull their head
• 6:49
  Speaker 2: and they have to do what every other business in
• 6:50
  Speaker 2: the country has been doing. And the risk at the
• 6:53
  Speaker 2: moment is that, given that hasn't happened to the degree
• 6:55
  Speaker 2: that it needs to, and you've got counselors going crazy
• 6:57
  Speaker 2: with the public checkbook, that inflation will take off again
• 7:02
  Speaker 2: if we get a period of dropping interest rates. So
• 7:05
  Speaker 2: that's what he'll be worried about at the moment, he'll
• 7:07
  Speaker 2: be concerned that if he takes his foot off the
• 7:08
  Speaker 2: pedal too soon, that it's going to take off the
• 7:10
  Speaker 2: flip side of that you floate it. Freighter. Analogy is
• 7:12
  Speaker 2: a really good one because it is a freighter. New
• 7:15
  Speaker 2: Zealand's actually done a really good job the or the
• 7:18
  Speaker 2: Reserve Bank's done a really good job of guiding that
• 7:20
  Speaker 2: freighter for you know, nigh on thirty five years since
• 7:23
  Speaker 2: the Reserve Bank Act was enacted in eighty nine or ninety.
• 7:26
  Speaker 2: But this governor and the previous governor are responsible for
• 7:29
  Speaker 2: as much of the damage as they are for the
• 7:31
  Speaker 2: fixing of it. So the reason we're in this position
• 7:34
  Speaker 2: in the first place is because Or put us here.
• 7:36
  Speaker 2: And you know, you can argue it's easy to be
• 7:38
  Speaker 2: wise in hindsight and go back retrospective and you look
• 7:40
  Speaker 2: at how things could have been different in that post
• 7:42
  Speaker 2: COVID period, But the reality remains, he took his foot
• 7:45
  Speaker 2: off the pedal too much. He fueled essentially an orgy
• 7:49
  Speaker 2: of spending and property investment over a short period of time,
• 7:53
  Speaker 2: and we're now dealing with the consequences of that.
• 7:55
  Speaker 1: Yeah, look, I don't know if anyone could argue against
• 7:58
  Speaker 1: Do you think all could argue against that? Do you
• 8:00
  Speaker 1: think if he was honest, I think, say, yeah, I
• 8:02
  Speaker 1: think I might have. Think I might have, you know,
• 8:05
  Speaker 1: could have done better. Yeah.
• 8:07
  Speaker 2: I meant to put this guy in context. He had
• 8:09
  Speaker 2: but for the prior to coming to the Reserve Bank,
• 8:12
  Speaker 2: he'd been running the super Fund and I can't remember
• 8:14
  Speaker 2: for how many years, but he'd done a remarkably successful
• 8:16
  Speaker 2: job of that. You know, he'd increased that fund exponentially
• 8:19
  Speaker 2: over a number of years. So he came into that job,
• 8:21
  Speaker 2: as you know, as a golden headed boy, into a
• 8:23
  Speaker 2: job which I think he was completely unsuited to. And
• 8:26
  Speaker 2: you know, and it's not just what he's done with
• 8:28
  Speaker 2: regard to monetary policy. He's also introduced a degree of
• 8:30
  Speaker 2: wocism into the Reserve Bank, which is just completely inappropriate
• 8:35
  Speaker 2: and which has taken his eye off the ball, the
• 8:37
  Speaker 2: ball being the need to keep inflation under control.
• 8:39
  Speaker 1: Has that to do? Did I say that there is
• 8:41
  Speaker 1: that to do with the makeup of the board or
• 8:43
  Speaker 1: something of the Reserve Bank or the whole strange appointments
• 8:47
  Speaker 1: with people there maybe didn't have quite the requisite sort
• 8:50
  Speaker 1: of monetary policy experience that you might expect.
• 8:54
  Speaker 2: All of that, all of that and if you look
• 8:56
  Speaker 2: at if you look at some of the nonsense that
• 8:57
  Speaker 2: comes out of the Reserve Bank now, and you consider
• 9:00
  Speaker 2: that this is the key organization in our country that
• 9:02
  Speaker 2: keeps monetary policy under control, you would have causes in
• 9:05
  Speaker 2: New Zealander to be very very afraid if this stuff
• 9:08
  Speaker 2: carries on, because it's nonsense.
• 9:11
  Speaker 1: So what does it mean for Actually, we'd like by
• 9:13
  Speaker 1: the way, if if you're listening right now, welcome to
• 9:15
  Speaker 1: the show. My guest is Astuley Church. What should the
• 9:18
  Speaker 1: Reserve Bank do? It's this week when they announce any
• 9:23
  Speaker 1: any or no change in the ocr How do you
• 9:26
  Speaker 1: think they will?
• 9:27
  Speaker 2: Should they say, as hard as it is to say,
• 9:29
  Speaker 2: they should keep it at the same level for at
• 9:31
  Speaker 2: least another quarter, but they should give and this is
• 9:34
  Speaker 2: what I think he will do, but they should give
• 9:36
  Speaker 2: a pretty clear stere that it's about to come down
• 9:41
  Speaker 2: and that that at the next the next announcement will
• 9:43
  Speaker 2: be to indicate that the the OC will be dropping,
• 9:47
  Speaker 2: and maybe even some some indication of how much that
• 9:49
  Speaker 2: drop might be. And maybe you know, I don't expect
• 9:51
  Speaker 2: it to go this far, but he might an indication
• 9:54
  Speaker 2: of what the trajectory of those drops will be. And
• 9:56
  Speaker 2: as I said before, just just doing that, even though
• 9:59
  Speaker 2: he doesn't drop the right just doing that, you'll see
• 10:01
  Speaker 2: mortgage interest rates drop almost immediately on the back of that.
• 10:04
  Speaker 1: How does that work for the banks if the cash
• 10:06
  Speaker 1: rates still where it is and they drop some of
• 10:08
  Speaker 1: their rates.
• 10:08
  Speaker 2: Because the bank rate's only an indicator, the banks don't
• 10:10
  Speaker 2: have to well, when I say they don't have to
• 10:12
  Speaker 2: be guided by they kind of do have to be
• 10:14
  Speaker 2: guided by it, because the Reserve Bank's got all sorts
• 10:16
  Speaker 2: of tools that it can use against the banks if
• 10:17
  Speaker 2: they don't comply with its wishes. But the banks aren't,
• 10:20
  Speaker 2: but the bank's borrowing them. The vast majority of the
• 10:23
  Speaker 2: bank's borrowing comes from sources other than the Reserve Bank
• 10:26
  Speaker 2: and so, and they're borrowing at much cheaper levels at
• 10:28
  Speaker 2: the moment then they have otherwise been. So they're in
• 10:32
  Speaker 2: a position right now to actually have the capacity to
• 10:36
  Speaker 2: actually drop those rates by quite some significant margin. And
• 10:39
  Speaker 2: I think they're just waiting to do so. And you'll
• 10:41
  Speaker 2: see once there's sort of a clear signal they can
• 10:43
  Speaker 2: do that, you'll see a round of competition take place
• 10:45
  Speaker 2: quite quickly, but already you can see them positioning themselves
• 10:48
  Speaker 2: with respect to bringing those rats down. I think over
• 10:52
  Speaker 2: the last month or so, all of the key trading
• 10:54
  Speaker 2: banks have brought the rats down to some degree. It's
• 10:56
  Speaker 2: some quite significantly, and you'll see that continue.
• 10:59
  Speaker 1: So what point as rhetoric, So rhetoric is enough for
• 11:02
  Speaker 1: them to drop their rates? Yes, it is. Yeah, that's
• 11:05
  Speaker 1: interesting because funny enough, I've got my mortgages coming up,
• 11:08
  Speaker 1: and like many New Zealanders, there's a lot of people
• 11:11
  Speaker 1: who are refixing. I've always gone for the six month period,
• 11:15
  Speaker 1: which hasn't really bitten me too badly, but there's no
• 11:18
  Speaker 1: way I'm always as soon as I see really much
• 11:21
  Speaker 1: cheaper long long distance rates, long term rates, I become
• 11:25
  Speaker 1: very very suspicious.
• 11:27
  Speaker 2: That's the point I was just going to make. So
• 11:28
  Speaker 2: the reason the banks do that, and you'll see it
• 11:30
  Speaker 2: at the moment, you can get sort of anything over
• 11:31
  Speaker 2: about two or three years for five point nine to nine,
• 11:33
  Speaker 2: which is a good percentage point below some of the
• 11:36
  Speaker 2: sort of six month and twelve month rates. And you're
• 11:38
  Speaker 2: absolutely right. The reason they're doing that is because they
• 11:40
  Speaker 2: don't think in twelve months or eighteen months time that
• 11:42
  Speaker 2: rates are going to be at five point nine to nine,
• 11:44
  Speaker 2: they think they're going to be even lower than that,
• 11:45
  Speaker 2: so they're looking to lock in whatever suckers might be
• 11:49
  Speaker 2: prepared to actually to back those numbers in the meantime.
• 11:53
  Speaker 2: So as you say, yeah, when you see those numbers
• 11:55
  Speaker 2: coming down over the longer term, it's a pretty clear
• 11:57
  Speaker 2: sign that the banks are looking to drop their own
• 12:01
  Speaker 2: rates pretty quickly.
• 12:02
  Speaker 1: Okay, cool, right, we want your calls eight hundred eighty,
• 12:04
  Speaker 1: ten and eighty. If you are actually someone who's an
• 12:07
  Speaker 1: interest in these things, which would be most New Zealand
• 12:09
  Speaker 1: as I would imagine, because even if you're not a
• 12:12
  Speaker 1: property investor or a renter or a first home buyer,
• 12:15
  Speaker 1: you might have savings in the bank as well, which
• 12:17
  Speaker 1: is not so much the property issue, but what should
• 12:19
  Speaker 1: the Reserve Bank governor do? But more specifically, if you're
• 12:24
  Speaker 1: someone who's about to either buy a house and take
• 12:27
  Speaker 1: out some lending or a mortgage, or you're about to refix,
• 12:30
  Speaker 1: what are you betting on? What's your tactic going to be?
• 12:33
  Speaker 1: Because I can tell your mine is no specific financial
• 12:35
  Speaker 1: advice and you'd be crazy to take it from me,
• 12:37
  Speaker 1: but I just give that disclaimer I'm going to be
• 12:39
  Speaker 1: going short, so want your cause eight hundred eighty ten
• 12:42
  Speaker 1: and eighty What should the Reserve Bank Governor do this
• 12:46
  Speaker 1: week with the OCR back in the moment, it's twenty
• 12:48
  Speaker 1: and a half past four and welcome back to the
• 12:51
  Speaker 1: weekend Collective. This is the one roof Riadia show. You
• 12:53
  Speaker 1: can take your calls on I eight hundred eighty ten
• 12:54
  Speaker 1: and eighty or text nine two nine two. We're talking
• 12:57
  Speaker 1: about what the plan what the Reserve Bank governor, the
• 13:00
  Speaker 1: Reserve Bank should announce this week with regard to the
• 13:02
  Speaker 1: OCR and what effect it we'll have on things. And
• 13:05
  Speaker 1: my guest is Ashley Church actually got another question just
• 13:09
  Speaker 1: on the way we react to news on things is
• 13:14
  Speaker 1: part of the consideration of the Reserve Bank governor. Like
• 13:18
  Speaker 1: even right now you can find headlines in the sort
• 13:21
  Speaker 1: of property news where there'll be a story about our
• 13:25
  Speaker 1: such and such has sold so much over its value,
• 13:27
  Speaker 1: and it seems that the headlines deal in so much hyperbole.
• 13:30
  Speaker 1: Is that something that the Reserve Bank governor would be
• 13:34
  Speaker 1: nervous about because you know, a little bit of encouragement
• 13:37
  Speaker 1: and all of a sudden things go just potty.
• 13:40
  Speaker 2: Yes and no, I mean he's primarily looking at the numbers,
• 13:43
  Speaker 2: or we should be. But there is this general term
• 13:47
  Speaker 2: which you just syndicated, and it sort of covers all
• 13:49
  Speaker 2: of that, and it's this word confidence, and it's a
• 13:52
  Speaker 2: worry that confidence will get to a point where inflation
• 13:56
  Speaker 2: takes off again. So there's a whole little levers that
• 13:58
  Speaker 2: he's trying to pull. At the moment, those leaders are
• 14:01
  Speaker 2: generally working in the right direction. I inflation is coming
• 14:04
  Speaker 2: back down unto that three percent mark, but he's going
• 14:08
  Speaker 2: to be concerned at the idea that that confidence might
• 14:11
  Speaker 2: get to a point where people start to think, oh, well,
• 14:13
  Speaker 2: everything's okay again and start spending and going you know,
• 14:16
  Speaker 2: going crazy, to use a better term. So so the
• 14:20
  Speaker 2: stuff that you're seeing, which is very subjective and you know,
• 14:25
  Speaker 2: sort of often in the moment, I don't think he's
• 14:27
  Speaker 2: overly concerned about any more than he would have been
• 14:30
  Speaker 2: three months ago, when you know, when we were seeing
• 14:32
  Speaker 2: sort of talk of businesses closing or businesses going under,
• 14:37
  Speaker 2: and that in itself wasn't enough to cause them to
• 14:39
  Speaker 2: drop the right earlier either. So it's sort of a
• 14:41
  Speaker 2: balance of those two things.
• 14:42
  Speaker 1: Okay, let's take some calls on it. Dave did I you.
• 14:46
  Speaker 2: Know, Dave?
• 14:48
  Speaker 3: Yeah? How are you good?
• 14:49
  Speaker 2: Mate?
• 14:51
  Speaker 3: I wanted to get your view on the inflation numbers
• 14:54
  Speaker 3: because it seems to me like the when we include
• 14:58
  Speaker 3: the next quarter, we're going to serious we overshoot the
• 15:00
  Speaker 3: two percent target. If you look at the actual numbers
• 15:05
  Speaker 3: on the stats Statistics New Zealand website, the September quarter
• 15:10
  Speaker 3: represents one point eight percent of the three point three
• 15:14
  Speaker 3: inflation and if you look at the subsequent three quarters
• 15:17
  Speaker 3: and the trend, it seems highly unlikely we're going to
• 15:23
  Speaker 3: have a higher inflation figure this coming quarter than the
• 15:27
  Speaker 3: last one, so then we'd go under two percent.
• 15:31
  Speaker 2: So yeah, what Days looking at that?
• 15:35
  Speaker 1: Yeah?
• 15:35
  Speaker 2: So what Days referring to is that these figures, although
• 15:37
  Speaker 2: they come out quarterly, they're actually annual figures. And so
• 15:40
  Speaker 2: what they do is they out they're the average of
• 15:41
  Speaker 2: the last or this quarter plus the previous three quarters,
• 15:45
  Speaker 2: and because those have been going down, they keep the
• 15:49
  Speaker 2: current rate artificial. So what am I trying to say?
• 15:52
  Speaker 2: The current figure will be artificially higher than it might
• 15:55
  Speaker 2: otherwise be because it's also taken into account what the
• 15:57
  Speaker 2: rate was in the previous three quarters. And so Dave's right,
• 16:00
  Speaker 2: if you carry on at the current rate, then you
• 16:02
  Speaker 2: run the risk of that rate going even lower. The
• 16:05
  Speaker 2: one thing that mitigates against that, and this will be
• 16:07
  Speaker 2: the one thing that was that was taken into account,
• 16:09
  Speaker 2: is the fact that there are actually two moving parts
• 16:11
  Speaker 2: in that inflation figure. Ones the non tradable inflation figure,
• 16:14
  Speaker 2: the other ones the tradable inflation figure. The non tradable
• 16:16
  Speaker 2: inflation figures dropped through the Sorry, the tradable inflation figure
• 16:20
  Speaker 2: has dropped through the floor. That's the inflation that we
• 16:23
  Speaker 2: import from overseas that's got dropped right down. But conversely,
• 16:27
  Speaker 2: the non tradable figure is still stubbornly high. And so
• 16:30
  Speaker 2: although his remit, You're quite right, Dave, although his remit
• 16:33
  Speaker 2: is about the average of those two and over that
• 16:37
  Speaker 2: twelve month period, he will be concerned that non tradable
• 16:41
  Speaker 2: figure still being high, and he'll be wanting to get
• 16:43
  Speaker 2: that down as low as possible. So, while I understand,
• 16:46
  Speaker 2: I agree with your point, there is an argument for
• 16:48
  Speaker 2: what he's doing.
• 16:48
  Speaker 1: Yeah, So, Dave, do you do you have a worry
• 16:51
  Speaker 1: that basically he's keeping the foot on the throat just
• 16:53
  Speaker 1: for too long and it's actually going to sort of
• 16:55
  Speaker 1: really die negative consequences because he hasn't been subtle enough
• 16:59
  Speaker 1: with it.
• 17:01
  Speaker 4: Yeah exactly.
• 17:02
  Speaker 5: I mean.
• 17:04
  Speaker 3: When you read the economy, and I'm in business myself, know.
• 17:08
  Speaker 4: How difficult it is at the moment. There's no free
• 17:10
  Speaker 4: cash anywhere, so we're already squeezed as tight as well,
• 17:16
  Speaker 4: very hard. And coming back to that non tradable inflation.
• 17:19
  Speaker 4: So because the interest costs is the last part of
• 17:21
  Speaker 4: it when you look at rates and rents and those
• 17:24
  Speaker 4: things that are driving that non tradable for you, So
• 17:27
  Speaker 4: he can provide some relief there immediately.
• 17:30
  Speaker 2: You know, you're quite right. That's a fair argument. That's
• 17:33
  Speaker 2: a fair argument. I mean, I accept your overall argument
• 17:35
  Speaker 2: that these things need to come down as quickly as possible.
• 17:37
  Speaker 2: I'm just going, I guess I'm talking about what I
• 17:38
  Speaker 2: think he will do when I think they'll keep it
• 17:40
  Speaker 2: for it.
• 17:41
  Speaker 1: What's what's the quarterly inflation right now? It's it's quite low,
• 17:44
  Speaker 1: isn't it in New zeal right now?
• 17:48
  Speaker 4: Four?
• 17:50
  Speaker 1: Yeah? Yeah, okay, yeah, I'll try and take that one.
• 17:55
  Speaker 4: Three quarters.
• 17:56
  Speaker 1: Yeah, no, I appreciate it.
• 17:57
  Speaker 5: Day.
• 17:59
  Speaker 2: Yeah, you think good, good feedback.
• 18:00
  Speaker 1: Mate, I mean when you consider that, I mean, I
• 18:03
  Speaker 1: mean that would be a very good case for giving
• 18:07
  Speaker 1: a little bit of a relie, wouldn't it. But then again,
• 18:08
  Speaker 1: we get views from people like Brad Olsen, who we
• 18:12
  Speaker 1: have an air shade from time to time, said that
• 18:14
  Speaker 1: if if they did cut the rate, heads should roll.
• 18:17
  Speaker 1: So he's got quite a.
• 18:19
  Speaker 2: Strong view on that too, like a man with a
• 18:22
  Speaker 2: strong opinion.
• 18:23
  Speaker 1: Oh yes, we do, don't we. Actually there was another
• 18:28
  Speaker 1: question I had out of that, But you tell you what,
• 18:29
  Speaker 1: I'll save it for a second and we'll go to
• 18:31
  Speaker 1: our next caller, Alan, Good afternoon, afternoon.
• 18:36
  Speaker 6: Just take you off the speaker. Hypothetically, if I was
• 18:40
  Speaker 6: a punter with a few dollars to spare, would now
• 18:43
  Speaker 6: be a good time to put it away for a
• 18:45
  Speaker 6: year or so on a term investment.
• 18:48
  Speaker 1: Without seeking specific financial advice. Actually you got to take
• 18:52
  Speaker 1: on that.
• 18:53
  Speaker 2: Oh yeah, same as you. I mean ibigading myself as
• 18:56
  Speaker 2: an expert on fixed term deposits, except to say that
• 19:00
  Speaker 2: unless you're talking about locking ellen about locking in a
• 19:03
  Speaker 2: rate right now before rates drop, my expectation would be
• 19:06
  Speaker 2: that if the OCA goes down, then your fixed ten
• 19:08
  Speaker 2: rates will go down with it. So so over the
• 19:11
  Speaker 2: next twelve to eighteen months you would expect to see
• 19:13
  Speaker 2: them dropping in the same way that mortgage interest rates
• 19:15
  Speaker 2: will drop. So I think what you were saying is
• 19:17
  Speaker 2: should you take advantage of those rates while they're still there? Yeah,
• 19:21
  Speaker 2: I wouldn't want to comment on that. I don't regard
• 19:23
  Speaker 2: myself as an expert.
• 19:23
  Speaker 1: In No, we did, Alan, We did have one of
• 19:26
  Speaker 1: the guys from Harbor Asset Management on speaking about the
• 19:31
  Speaker 1: bond market, and if you want to go and check
• 19:33
  Speaker 1: out our podcast, there's some comments around you know that.
• 19:36
  Speaker 1: But it did seem that some of the conversations shifted
• 19:39
  Speaker 1: to maybe looking at those options as well. But there's
• 19:41
  Speaker 1: certainly no specific financial advice from us. Sorry, we have
• 19:45
  Speaker 1: to sit on the fence so obscurely. Yeah, because actually
• 19:51
  Speaker 1: there was I think it was about a month or
• 19:53
  Speaker 1: six weeks ago we had a chat with one of
• 19:55
  Speaker 1: the guys because the bond rates had increases, had increased,
• 19:58
  Speaker 1: and it was something where people it's not so sexy,
• 20:01
  Speaker 1: but for those who just want cash in the bank
• 20:03
  Speaker 1: sort of stuff, it was something that was coming into
• 20:06
  Speaker 1: play a bit more often. You know the thing that
• 20:08
  Speaker 1: I mean earlier caller Dave, who's in business and things,
• 20:12
  Speaker 1: and this is just a general comment sort of question
• 20:15
  Speaker 1: to throw at you, Ashley. One of the things that
• 20:18
  Speaker 1: and it's not it's not particularly helpful to dwell on
• 20:22
  Speaker 1: it too much, But I do find that the euphemisms
• 20:26
  Speaker 1: that economists use kind of kind of heartless. They talk about, oh,
• 20:31
  Speaker 1: we have that there's going to be a little bit
• 20:32
  Speaker 1: of pain, and there's going to be a bit of
• 20:35
  Speaker 1: discomfort in things, and what that pain actually looks like
• 20:38
  Speaker 1: is people who can't make their mortgage payments or who
• 20:40
  Speaker 1: lose their jobs and things. And I just wonder if
• 20:43
  Speaker 1: there's a slight sort of disconnect to the point that
• 20:46
  Speaker 1: it makes it easier for them to be a little
• 20:49
  Speaker 1: bit harsh when maybe they should consider that, you know,
• 20:54
  Speaker 1: that the loss of livelihoods and all that sort of
• 20:57
  Speaker 1: stuff is a bigger deal than just there's going to
• 21:01
  Speaker 1: be a bit more pain.
• 21:03
  Speaker 2: Yeah, I think that I agree with you. I suspect
• 21:05
  Speaker 2: it's probably something that happens, you know, sort of when
• 21:09
  Speaker 2: they come through a sort of varsity et celebrate that
• 21:12
  Speaker 2: there are acronism acronyms and things that they do. They
• 21:15
  Speaker 2: pick up this sort in common usage, and also they
• 21:17
  Speaker 2: use that parlance because it's sort of generally understood by
• 21:20
  Speaker 2: the market. So you can you know multiple economists can
• 21:23
  Speaker 2: can can talk and be saying essentially the same thing.
• 21:25
  Speaker 2: But I agree with you when when lives are at
• 21:28
  Speaker 2: stake and people's personal circumstances or at stax, sometimes it
• 21:31
  Speaker 2: comes across as you know, a little bit not really
• 21:34
  Speaker 2: reading the room unfortunate.
• 21:38
  Speaker 1: I mean, you can understand they dwelled on the individual
• 21:40
  Speaker 1: circumstances the people that they wouldn't be able to get
• 21:42
  Speaker 1: out of bed and make a decision every day, Yes,
• 21:45
  Speaker 1: and quarterly inflashmoke, producers confirm with zero point four percent.
• 21:49
  Speaker 1: So yeah, you know it's pretty large, is good. And
• 21:53
  Speaker 1: by the way, that podcast that I refer too was
• 21:55
  Speaker 1: on the twentieth of July. People want to check that out.
• 21:58
  Speaker 1: As with any of our podcasts, are always good to
• 21:59
  Speaker 1: listen to, but that was one specific one. Right, let's
• 22:02
  Speaker 1: we're going to move to extend this conversation. But I
• 22:06
  Speaker 1: thought just a look at a couple of texts. One
• 22:07
  Speaker 1: says here we always get people who boast that they
• 22:10
  Speaker 1: fixed for five years on two point nine to nine.
• 22:12
  Speaker 1: That was for Mary who probably listened to the One
• 22:14
  Speaker 1: Roof pod podcast or show radio shows some stage where
• 22:19
  Speaker 1: we were probably saying that's not a bad rate for
• 22:21
  Speaker 1: five years.
• 22:23
  Speaker 2: So Mary, I was talking about that the other day.
• 22:26
  Speaker 2: It's interesting because I didn't. I mean, I, like most
• 22:28
  Speaker 2: people thought it was going to go even lower. And
• 22:31
  Speaker 2: you know, if it had a little bit of foresight
• 22:32
  Speaker 2: and actually fixed at the time, and you know, I
• 22:36
  Speaker 2: guess sort of the idea of if only would probably
• 22:39
  Speaker 2: occur to a lot of people.
• 22:40
  Speaker 1: But yeah, we've we've all got if only. You know,
• 22:45
  Speaker 1: for me, it's if only Hamilton. Look, let's talk. I'm
• 22:49
  Speaker 1: gonna put this question as a general one, where at
• 22:52
  Speaker 1: what point does this person says, should I break my
• 22:56
  Speaker 1: recently fixed mortgage rate of eighteen months at six point
• 22:59
  Speaker 1: eight nine to a six month at six point nine
• 23:02
  Speaker 1: to nine would I be charged to break for if
• 23:04
  Speaker 1: I go slightly high to get better rates in six
• 23:06
  Speaker 1: months time?
• 23:09
  Speaker 2: That specifically, because every bank's got a different policy that,
• 23:12
  Speaker 2: and there's several moving wheels on that. What I would
• 23:15
  Speaker 2: suggest is, rather than talking to the bank about that,
• 23:19
  Speaker 2: is talk to a mortgage broker. Go to a mortgage broker,
• 23:22
  Speaker 2: a reputable one, and they'll be able to get to
• 23:25
  Speaker 2: give you some pretty good advice and also give you
• 23:26
  Speaker 2: some scenarios and what the various different costs will be
• 23:29
  Speaker 2: as a result of breaking this is keeping it a
• 23:31
  Speaker 2: little it's current rate until it expires.
• 23:33
  Speaker 1: Yeah, because you can, you can jump back, and I mean,
• 23:35
  Speaker 1: I don't use a mortgage broker at the moment just
• 23:38
  Speaker 1: because our mortgage is, you know, a reasonably low level.
• 23:41
  Speaker 1: In fact, actually, of course it was the guy I've
• 23:43
  Speaker 1: chatted to that you recommend it, But I remember chatting
• 23:46
  Speaker 1: with him about it, and I said, the bank's offering this,
• 23:47
  Speaker 1: and he goes, oh, yeah, that's pretty good. Just go
• 23:49
  Speaker 1: with that, which was very simple advice. High high team.
• 23:55
  Speaker 1: I'm a hound a second, let me just clear that
• 23:58
  Speaker 1: high collective team. I'm forty four, I have twenty seven
• 24:00
  Speaker 1: K and my husband and I have no kids one
• 24:02
  Speaker 1: hundred and fifty five combined income. Oh, should we just
• 24:06
  Speaker 1: give up on owning a house? Both three generations of
• 24:11
  Speaker 1: non high owners, both sides of the family. Funny thing
• 24:14
  Speaker 1: is that was something we discussed in our meeting before
• 24:17
  Speaker 1: the show about at what stage people should give up
• 24:20
  Speaker 1: or I would say not at forty four.
• 24:24
  Speaker 2: No, definitely not at forty four. And there are other options.
• 24:27
  Speaker 2: I mean, we haven't got time to canvass them today,
• 24:28
  Speaker 2: but there are you know one option? And I think
• 24:30
  Speaker 2: you and I've talked about it on the show in
• 24:31
  Speaker 2: the past. As I'm assuming the person's in Auckland or
• 24:35
  Speaker 2: Wellington are some way where housing's quite expensive, is looking
• 24:38
  Speaker 2: to buy an investment property and a location outside Auckland
• 24:41
  Speaker 2: or Wellington, so you've still got a piece of real estate,
• 24:43
  Speaker 2: you don't necessarily live in it. I'd have to go
• 24:46
  Speaker 2: through those numbers and actually have a look at what
• 24:48
  Speaker 2: conceivably what they could do. But no, the short answers
• 24:50
  Speaker 2: don't give up and at forty four, as you say
• 24:52
  Speaker 2: to them, circumstances can change substantially over a relatively short
• 24:55
  Speaker 2: period of time, So keep pushing yes.
• 24:59
  Speaker 1: And actually the reason sounds so familiar is it's actually
• 25:02
  Speaker 1: a topic. The reason it is because it is actually
• 25:04
  Speaker 1: what we're going to be discussing with Lisa Dudson on
• 25:06
  Speaker 1: Smart Money tomorrow, So that Texter tune in tomorrow because
• 25:10
  Speaker 1: we are discussing exactly that at what point you change
• 25:14
  Speaker 1: your plans on whether you're going to be an owner,
• 25:17
  Speaker 1: occupyer and all that sort of thing. Yeah. Hey, now
• 25:20
  Speaker 1: what it does tie into, Ashley is the question that
• 25:23
  Speaker 1: I've teased a little while ago Before that we got
• 25:26
  Speaker 1: into the one roof is the question about the equation
• 25:32
  Speaker 1: for investing at the moment. And there's a story I
• 25:37
  Speaker 1: think it's in the New Zealand Herald piece where the
• 25:43
  Speaker 1: low rates of yield are becoming you know, it's harder
• 25:48
  Speaker 1: and harder. You're having to subsidize the mortgage a bit more,
• 25:51
  Speaker 1: in other words, how much landlords have to borrow and
• 25:54
  Speaker 1: how much they get out of the rental, and that
• 25:56
  Speaker 1: the rental yield gap, apparently in this article is about
• 26:00
  Speaker 1: four percent, is the largest in fifteen years. And my
• 26:02
  Speaker 1: simple question was, does the equation for property investing suck
• 26:06
  Speaker 1: right now? Okay, so let's just do it, but it
• 26:08
  Speaker 1: just unpack it to unpack that unpack Ye, So the
• 26:13
  Speaker 1: first part of it.
• 26:13
  Speaker 2: So the article you talking about is written by Anne Gibson,
• 26:16
  Speaker 2: and I didn't read it because I'm not a subscriber
• 26:18
  Speaker 2: of the Hero, but I saw enough of the first
• 26:24
  Speaker 2: sentence to understand what she was talking about. So this
• 26:26
  Speaker 2: is this is based on and I'm I don't think
• 26:29
  Speaker 2: An suffers from this, but a lot of other people do.
• 26:30
  Speaker 2: This idea that property investors are fat cats and making
• 26:33
  Speaker 2: lots of money and when rents go up, you know
• 26:35
  Speaker 2: the sort of bathing and goat's milk.
• 26:37
  Speaker 1: And you know wonderful goat's milk.
• 26:41
  Speaker 2: The days, the days of rent covering the costs of
• 26:45
  Speaker 2: owning and a rental investment property, you probably have to
• 26:48
  Speaker 2: go back to the mid to late eighties to the
• 26:50
  Speaker 2: last time where that was possible. In most parts of
• 26:52
  Speaker 2: New Zealand. It just doesn't exist anymore. So property investors,
• 26:56
  Speaker 2: when they own a rental investment property, invariably suburize that rental,
• 27:01
  Speaker 2: which means that the rent that comes and simply doesn't
• 27:03
  Speaker 2: cover the cost of the mortgage interest and the rates,
• 27:05
  Speaker 2: and the maintenance and a whole range of other things.
• 27:07
  Speaker 2: So every rental property investor in New Zealand, not everyone,
• 27:11
  Speaker 2: but the vast majority of them are actually subsidizing their tenants.
• 27:14
  Speaker 2: So that's the first thing to get across. So what
• 27:16
  Speaker 2: she's talking about is the fact that that equation's got
• 27:19
  Speaker 2: particularly bad, certainly since two thousand and twenty two, when
• 27:23
  Speaker 2: the rates started going up as a result of the
• 27:26
  Speaker 2: two things actually, this massive increase in mortgage interest rates
• 27:29
  Speaker 2: and the fact that the last government basically took away
• 27:32
  Speaker 2: the ability to claim interests as a tax coductable expense.
• 27:35
  Speaker 2: So you had this double whammy where it got hugely
• 27:38
  Speaker 2: expensive to own a property. So the reason that landor
• 27:42
  Speaker 2: was that you might say, we why would you own
• 27:44
  Speaker 2: a property right now under those circumstances, And indeed, why
• 27:47
  Speaker 2: would you own a property at any time if you're
• 27:50
  Speaker 2: not making enough money on the property to actually cover
• 27:52
  Speaker 2: the cost of owning that property. The reason is capital growth.
• 27:54
  Speaker 2: So there's a truism in this country that property for
• 27:58
  Speaker 2: forty years basically doubled them every ten years. It's probably
• 28:01
  Speaker 2: taking a little longer now, maybe twelve or thirteen years,
• 28:04
  Speaker 2: but it will still double every twelve or thirteen years.
• 28:06
  Speaker 2: So probably investors buy and are prepared to shell out
• 28:11
  Speaker 2: for the cost of owning a property to a greater
• 28:12
  Speaker 2: extent than they're actually earning income off that property, because
• 28:15
  Speaker 2: they expect that property to go up in value and
• 28:17
  Speaker 2: that's where they make their gain on the property over
• 28:19
  Speaker 2: the long term. And that equation is no different now.
• 28:22
  Speaker 2: And I think the expectation is that rates are going
• 28:24
  Speaker 2: to come down soon and some of that pain will
• 28:25
  Speaker 2: fall away.
• 28:27
  Speaker 1: It is interesting to hear you say twelve or thirteen years,
• 28:29
  Speaker 1: because it wasn't that long ago. That not quitting youn necessarily,
• 28:33
  Speaker 1: but it used to be eight years and then it
• 28:35
  Speaker 1: sort of shifted out a bit. But it does feel that.
• 28:38
  Speaker 2: That's not entirely true to that's seven or eight years
• 28:40
  Speaker 2: that you were talking about. So in any given ten
• 28:43
  Speaker 2: year period, property would double in a seven or eight
• 28:47
  Speaker 2: year period, but it would sit flat and do nothing
• 28:49
  Speaker 2: for two or three years, of which three of those
• 28:53
  Speaker 2: years it wasn't doing anything. In the other seven it
• 28:55
  Speaker 2: was doubling.
• 28:56
  Speaker 1: Okay, Yeah, that sounds like every ten or eleven years, then, doesn't.
• 28:59
  Speaker 1: It's just that when it happens, when it starts to grow,
• 29:02
  Speaker 1: it's an eight year cycle. It's sort of what you're
• 29:04
  Speaker 1: saying pretty much. Yeah, okay, yeah. Actually, the interesting that
• 29:10
  Speaker 1: there's an interesting tax if I was going to be
• 29:12
  Speaker 1: too a little bit bofferish on bofferiche on this is
• 29:16
  Speaker 1: that if that is an interesting one because if you
• 29:19
  Speaker 1: are it's almost getting to the stage where the inland
• 29:23
  Speaker 1: and revenue because you know, if you actually do buy
• 29:26
  Speaker 1: a property, no matter how long you keep it for,
• 29:28
  Speaker 1: if you bite with the intention that you're that the
• 29:31
  Speaker 1: money you make will be from capital gain, that's actually
• 29:35
  Speaker 1: the test for paying tax on it. Isn't it not
• 29:37
  Speaker 1: any more? It used to be.
• 29:39
  Speaker 2: So that's why the bright line test came in in
• 29:40
  Speaker 2: the first place. That's why National introduced it because prior
• 29:43
  Speaker 2: to the bright line test, they used to have something
• 29:45
  Speaker 2: called the intention rule, which I think is what you're.
• 29:47
  Speaker 1: I thought it was still there regardless the bright.
• 29:49
  Speaker 2: Line test replaced it. So the intention rule, basically, what
• 29:52
  Speaker 2: used to happen was that there was on how long
• 29:55
  Speaker 2: you could own a property before it was regarded as
• 30:00
  Speaker 2: to a point where it was regarded as an investment
• 30:02
  Speaker 2: property rather than a property that was bought for capital
• 30:04
  Speaker 2: gains purposes. And what used to happen was the IID
• 30:06
  Speaker 2: would sometimes do an audit and they'd trawl back over
• 30:08
  Speaker 2: ten or so years, and then they'd take somebody to court,
• 30:12
  Speaker 2: or they'd they'd hit them with the capital gains tax.
• 30:15
  Speaker 2: They and the party would take them to court, and
• 30:17
  Speaker 2: invariably the IID would lose because that test was too oblique.
• 30:22
  Speaker 2: So in twenty sixteen or seventeen and whenever it was
• 30:26
  Speaker 2: that National broad and National broad in the two year
• 30:27
  Speaker 2: bright line test, and the purpose of that was basically
• 30:30
  Speaker 2: to say, this is the line in the sand if
• 30:32
  Speaker 2: you own a property for less than two years and
• 30:34
  Speaker 2: you sell it, then you pay capital gains tax on it.
• 30:36
  Speaker 2: Because clearly you're not there as an investor, you're a trader.
• 30:38
  Speaker 2: But if you own it for more than two years
• 30:39
  Speaker 2: you're a property investor. That pretty well, not pretty much.
• 30:42
  Speaker 2: It did away with the old intention test. That intention
• 30:45
  Speaker 2: test is now gone. The two year test is the
• 30:47
  Speaker 2: only test.
• 30:48
  Speaker 1: Excellent, No good stuff. Right, Let's take a moment. Will
• 30:51
  Speaker 1: you back if you want to give us your reckons
• 30:53
  Speaker 1: and what the property? You know, how the equation is
• 30:56
  Speaker 1: working for you if you're a property investor as well,
• 30:58
  Speaker 1: because you are having a sub your investment. If you
• 31:02
  Speaker 1: ever borrowed a lot, buy a lot, give us a
• 31:04
  Speaker 1: call on one hundred and eighty ten eighty. But also
• 31:06
  Speaker 1: the question of what's going to happen this week with
• 31:08
  Speaker 1: the OCO, what should happen and what will happen? Possibly
• 31:12
  Speaker 1: different things. News Talk said, be it's eighteen minutes to
• 31:15
  Speaker 1: five news Talk. Zai'd be with Tim Beverage. My guests
• 31:20
  Speaker 1: is actually church. Actually actually I've got quite a few
• 31:23
  Speaker 1: texts saying that the intention test is not superseded. It's
• 31:26
  Speaker 1: still there if you buy it. But in fact I
• 31:29
  Speaker 1: think we might have been able to call on that, Ashley.
• 31:30
  Speaker 1: But let's see where we go.
• 31:31
  Speaker 4: Ray.
• 31:32
  Speaker 5: Hello, right, I'm just reading exactly ringing exactly about that
• 31:37
  Speaker 5: were not superceeded? Yeah, and how do we know it's
• 31:42
  Speaker 5: I've just gone all the way through it with a
• 31:43
  Speaker 5: property accountant.
• 31:45
  Speaker 1: Okay. And if they said, yeap, what have they said
• 31:48
  Speaker 1: to you?
• 31:48
  Speaker 5: They said, And if you follow them on Facebook a
• 31:54
  Speaker 5: property chat group, you'll see them constantly saying that rule apply.
• 32:01
  Speaker 2: So very interesting. So you know something that I don't
• 32:04
  Speaker 2: on that. I'm going to check into that.
• 32:06
  Speaker 5: Yeah, I think, Yeah, you speak to the guy that
• 32:09
  Speaker 5: miss accountants, but I think probably.
• 32:12
  Speaker 1: The thing is that pragmatic.
• 32:14
  Speaker 4: Yeah.
• 32:15
  Speaker 1: I think if you went to the tax department and
• 32:18
  Speaker 1: told them that you had bought a property with the
• 32:21
  Speaker 1: intention of making money out of the capital gains even
• 32:23
  Speaker 1: though you have gone beyond the broke line or whatever,
• 32:25
  Speaker 1: I think you Yeah that mind you.
• 32:26
  Speaker 2: It's a question Pray have to say if that's correct,
• 32:29
  Speaker 2: and I'm not doubting what you say. It kind of
• 32:31
  Speaker 2: makes a nonsense of the bright line test.
• 32:33
  Speaker 1: Because everyone who buys property is for capital gains.
• 32:39
  Speaker 5: Slippers.
• 32:41
  Speaker 2: Yeah, and that was the purpose of the bright line test.
• 32:44
  Speaker 2: The argument was that if you were holding a property
• 32:46
  Speaker 2: for more than two years and you were a trader,
• 32:47
  Speaker 2: you were a pretty lousy one, so and therefore you
• 32:51
  Speaker 2: were an investor. So if the intentional test still applies
• 32:55
  Speaker 2: to me, that suggests that the bright line test actually
• 32:58
  Speaker 2: doesn't make any sense. So I'm going to do a
• 32:59
  Speaker 2: bit of recent tions. Then I appreciate you you're calling them, yeah.
• 33:02
  Speaker 5: Because you'll even find in Australia the same thing occurs.
• 33:07
  Speaker 5: You have to say you have bought it against as
• 33:10
  Speaker 5: a hedge against inflation.
• 33:12
  Speaker 2: Yep.
• 33:12
  Speaker 5: You can't say you make you bought it intentionally to
• 33:16
  Speaker 5: capital gains because because.
• 33:18
  Speaker 1: In reality, unless most people buy it for capital gains,
• 33:22
  Speaker 1: Let's be honest, I mean everybody does. I mean, that's
• 33:25
  Speaker 1: it's almost the big delusion, isn't it.
• 33:27
  Speaker 5: Rayyah, it's stupid. You know, either we have capital gains
• 33:33
  Speaker 5: tax or we don't.
• 33:34
  Speaker 1: Yeah, well, I agree, that's agree that I agree, Yeah,
• 33:38
  Speaker 1: I agree. Actually, you know what, I just the capital
• 33:41
  Speaker 1: the gains doesn't actually have me reaching for the smelling
• 33:43
  Speaker 1: salts on property because if there's still a lot of
• 33:45
  Speaker 1: money to be made, the fact that I have to
• 33:47
  Speaker 1: pay tax on it's just well, you know, I still
• 33:48
  Speaker 1: want to make the money. So where we go.
• 33:51
  Speaker 2: You know, my view on this has always been.
• 33:54
  Speaker 1: Sorry Ray first and then Ashley, Sorry Ray.
• 33:55
  Speaker 5: Where you go, as long as you're not paying it
• 33:58
  Speaker 5: at your marginal rate and they take into account inflation
• 34:03
  Speaker 5: when you purchased it, like in Australia now, it used
• 34:05
  Speaker 5: to be that you had a base rate and then
• 34:08
  Speaker 5: there was an inflation bit that was added to your
• 34:11
  Speaker 5: base rate, you know, for how many years you sold it.
• 34:14
  Speaker 5: But that became too difficult. So what they did is
• 34:17
  Speaker 5: they turned around. They said that it's only fifty percent
• 34:20
  Speaker 5: of it is taxable as.
• 34:21
  Speaker 1: A capital, just so there's no arguments about inflation. Yes,
• 34:24
  Speaker 1: because you don't want to be taching.
• 34:25
  Speaker 5: Should make it easier because the other ones had to
• 34:28
  Speaker 5: keep making calculations every year based on what the percentage
• 34:33
  Speaker 5: was for about ten years ago in the inflation factor
• 34:36
  Speaker 5: since then.
• 34:37
  Speaker 2: That's what I was just going to make. I'm just
• 34:38
  Speaker 2: going to make the same point that Ray did. So
• 34:40
  Speaker 2: the Fortunately it never went ahead. But the plan that
• 34:43
  Speaker 2: Labor had was to introduce it at the marginal text rate.
• 34:47
  Speaker 2: But if you were going to do it, my view
• 34:48
  Speaker 2: has always been over got a problem with the capital
• 34:50
  Speaker 2: gains text provided you meet to conditions. One of those
• 34:52
  Speaker 2: conditions is that should only be levied at the point
• 34:54
  Speaker 2: of sale, and the second one is it should be
• 34:56
  Speaker 2: universal and it should be a really low rate. So
• 34:58
  Speaker 2: if you said, hey, it's a two percent capital gain
• 35:00
  Speaker 2: tacks on everybody when you sell your property, regardless of
• 35:03
  Speaker 2: whether it's a private home or an investment property, I
• 35:06
  Speaker 2: think most kibis might grumble, but that accepted. The problem
• 35:10
  Speaker 2: with what was being proposed was that it was so
• 35:12
  Speaker 2: draconian and it was so punitive that no sane person
• 35:16
  Speaker 2: could have accepted it.
• 35:17
  Speaker 1: Hey, by the way, Ray, just a completely unrelated thing.
• 35:20
  Speaker 1: You mentioned the Australian market. There's there a little bit
• 35:22
  Speaker 1: of a twang there for you with an Australian accent
• 35:24
  Speaker 1: or what.
• 35:24
  Speaker 5: I picked that up too, Yeah, been here for two years.
• 35:28
  Speaker 1: Wow, Well, congratulations for hanging on to that accent.
• 35:31
  Speaker 2: They go to you all blacks.
• 35:33
  Speaker 4: Ray.
• 35:40
  Speaker 1: Actually, I tell you what, people like Ray can have
• 35:42
  Speaker 1: a great time at the Olympics though, because Australia do
• 35:44
  Speaker 1: pretty well at the Olympics, and then you've got the
• 35:47
  Speaker 1: cream on the top with the performance of our newsald athletes.
• 35:50
  Speaker 1: So she she'd be loving it. Hey, look, we'll be
• 35:52
  Speaker 1: back in just a moment. One roof of Property of
• 35:54
  Speaker 1: the Week is next ten to five. Yes, welcome back
• 35:57
  Speaker 1: to the One roof radio show. By the way, somebody
• 35:59
  Speaker 1: sent me a link actually to the Land Revenue site
• 36:01
  Speaker 1: which does confirm that actually the bright line test is
• 36:04
  Speaker 1: just one way that you end up paying capital gains.
• 36:06
  Speaker 1: But if you buy it with the intention of selling
• 36:08
  Speaker 1: your property, it says clearly you will be up for
• 36:11
  Speaker 1: of course it's the big, it's the big you'll be
• 36:13
  Speaker 1: up for capital at gains tax. But of course it's
• 36:16
  Speaker 1: the big sort of fib isn't it really that everyone
• 36:18
  Speaker 1: pretends that they're not. I'm just doing it for the
• 36:20
  Speaker 1: rental income. Anyway. Right now it is six and a
• 36:23
  Speaker 1: half minutes to five, which means it is time for
• 36:27
  Speaker 1: the one roof Property of the Week, which is going
• 36:30
  Speaker 1: to be announced in style just by me today. I
• 36:33
  Speaker 1: think anyway, the wond roof Property of the Week. I
• 36:37
  Speaker 1: think we've sent a link to you on that, haven't we, Ashley.
• 36:40
  Speaker 1: In fact, I've got a check of actually still there.
• 36:42
  Speaker 1: We've just got a couple of technical issues. Anyway, The
• 36:45
  Speaker 1: one roof Property of the Week, which we always enjoys.
• 36:48
  Speaker 1: It's like taking a little holiday just to go and
• 36:49
  Speaker 1: look at someone else's property. Is ten Beard Lane, b
• 36:53
  Speaker 1: aid in Lake Hayes, Queenstown, and it's stunning piece of property.
• 37:00
  Speaker 1: It's architectural villa set in a private location in the
• 37:03
  Speaker 1: hills above Lake Hays near Arrowtown. It's described as having
• 37:08
  Speaker 1: a timeless design sitting on naturally in the exquisitely landscaped
• 37:11
  Speaker 1: contours with established gardens and orchard and resort like fire
• 37:17
  Speaker 1: pit on the front lawn, solid timber floors, Italian tiles,
• 37:20
  Speaker 1: wooden joinery throughout. This property also comes with a shared
• 37:23
  Speaker 1: common ground with adyllic ponds, walking tracks, a tennis court
• 37:27
  Speaker 1: and more. And actually I can tell you that the
• 37:28
  Speaker 1: grounds are the first thing that stood out to me
• 37:30
  Speaker 1: is it just is an amazing looking property with and
• 37:35
  Speaker 1: the fire pit itself actually looks kind of appealing itself anyway,
• 37:38
  Speaker 1: and it can be yours for a cool Well, don't
• 37:42
  Speaker 1: take this as being you know what exactly what it's
• 37:46
  Speaker 1: going to go for, but the value that it is
• 37:48
  Speaker 1: estimated at on the one roof site is three point
• 37:52
  Speaker 1: nine million. Three point nine to five million is the RV.
• 37:56
  Speaker 1: But it looks like the RV is maybe a couple
• 37:59
  Speaker 1: of years out of date as well, so it looks
• 38:01
  Speaker 1: like quite an expensive property. Of course, Queenstown property has
• 38:03
  Speaker 1: been all the rage, of course, bucking all the trends,
• 38:06
  Speaker 1: just continues to grow. Anyway, Ashley, I think we've still
• 38:09
  Speaker 1: got you there, have we certainly we have got you there. Well,
• 38:15
  Speaker 1: I think you've you've got you can have another piece
• 38:17
  Speaker 1: you could you could contribute somewhere about be careful about
• 38:20
  Speaker 1: your intention to buying property. Taxman might be chasing you.
• 38:24
  Speaker 2: Well, that's runs. Let's locked down in for a chat
• 38:27
  Speaker 2: at some stage when I've done a bit more research
• 38:29
  Speaker 2: and fascinated.
• 38:31
  Speaker 1: Good on you and you've been and joining the Olympics.
• 38:35
  Speaker 2: I have I wasn't actually going to watch them, but
• 38:36
  Speaker 2: I have to say I've got caught up on it
• 38:38
  Speaker 2: and watching some of the wins. It's interesting you should
• 38:39
  Speaker 2: mention in Australia because I was looking at the other
• 38:42
  Speaker 2: day at the if you canbine the New Zealand and
• 38:43
  Speaker 2: Australian medals and you can bind our populations, man, we
• 38:46
  Speaker 2: punch above our weight.
• 38:47
  Speaker 1: To Ohs and Queens of the world. Yeah, and we
• 38:50
  Speaker 1: got totally.
• 38:51
  Speaker 2: I think we've got so far ahead of most of
• 38:53
  Speaker 2: the rest of the world in terms on a per
• 38:54
  Speaker 2: capita basis that it's not funny.
• 38:56
  Speaker 1: Yeah, good stuff. Hey, thanks so much for your time, mate,
• 38:58
  Speaker 1: and we'll look forward to next time.
• 39:00
  Speaker 2: Go to the all Blacks talking latter.
• 39:02
  Speaker 1: Oh that's right, the all Blacks will be chatting with
• 39:04
  Speaker 1: where we might be chatting about that, Thanks Ashley. Right, well,
• 39:06
  Speaker 1: we'll be back with the parents squad us next. John
• 39:08
  Speaker 1: Cowen joins us, talking about how do you guide you
• 39:11
  Speaker 1: kids through their subject and career choices just in case
• 39:15
  Speaker 1: they're heading for a life of poverty and misery. What
• 39:18
  Speaker 1: does that matter? Just personal happiness? Anyway, back soon. It
• 39:21
  Speaker 1: is coming out to three minutes to five news Talks
• 39:23
  Speaker 1: at b