House price growth will slow: Bollard

WARNING: Reserve Bank Governor Alan Bollard warned of the need to avoid a return to a "debt-fuelled housing cycle", as the bank published its Financial Stability Report.

11/11/2009 – BUSINESS DAY

Reserve Bank Governor Alan Bollard warned of the need to avoid a return to a “debt-fuelled housing cycle”, as the bank published its six-monthly Financial Stability Report today.

The report said there had been signs of an easing in lending standards for residential borrowers in recent months, with some banks prepared to offer housing loans at relatively high loan-to-value ratios.

“The housing market is currently strengthening, but we believe house price growth will slow after the current recovery phase,” the report said.

“We would encourage the banks to avoid any return to riskier mortgage lending practices.”

House prices still looked relatively high compared to history, and were still higher as a share of income than at any time before 2005, the report said.

Despite the pick up in housing market activity, household credit growth had continued at low and steady rates.

Slow credit growth may reflect some highly indebted sellers repaying mortgages, as well as households accelerating principal repayments now interest rates were low.

“Overall, the housing market recovery is likely to be limited, and subject to downside risks as interest rates start to rise from very low levels,” the report said.

“Continued weakness in the labour market, along with falling agricultural incomes, could also weigh on the housing market.”

Current low levels of interest rates made mortgages look relatively affordable compared to recent history, particularly if the loan was financed using a floating mortgage, the report said.

But floating mortgage rates would eventually rise as the economy started to recover, possibly placing stress on some first-time home owners who had entered the market at very low interest rates.

Longer term fixed mortgage rates, which were significantly higher, were likely to be a better guide to medium term mortgage affordability.

Dr Bollard said the New Zealand economy and financial system had improved in the past six months as international conditions stabilised, but some risks and challenges remained.

Global recovery had been fuelled by stimulatory fiscal and monetary policy settings which could not be kept in place for ever, he said.

The global banking system also remained vulnerable to further shocks.

“The New Zealand economy needs to live more within its means to reduce its vulnerability to adverse developments in offshore markets,” Dr Bollard said.

While some progress had been made to recover savings and reduce the current account deficit, considerable adjustment was still needed to reduce this country’s vulnerability to external shocks.

Deputy Governor Grant Spencer said further loan losses for banks were likely as unemployment continued to rise through into 2010.

Banks’ recent provisioning and profit results reflected the deterioration in their asset quality during the recession, he said.

The banks remained “very cautious” in credit and funding decisions, and while the Reserve Bank generally supported that approach, it continued to emphasise that banks should not overly restrict lending to the business sector.

In the non-bank sector, further rationalisation and closures were expected as the sector faced the challenge in the coming year of meeting the requirements of the Reserve Bank’s new non-bank prudential regime.

NZPA

Insight into parties involved in a Trust

Asset Protection and Trust Services: Quay Law

In this ”legal hint” I intend to cover Family Trusts and some of the parties involved in a Trust.

Please find below a high level explanation  providing an insight into the three main groups of parties involved in a Trust:

 The Settlors: These are the persons who set up and transfer assets to the trust.

 The Trustees: These are the people who hold the legal ownership of the trust assets on behalf of the beneficiaries. 

 The Beneficiaries: They hold the beneficial ownership in the trust assets and include, amongst others, yourselves, your children and grandchildren. 

 For more information or if you have any further questions on Trusts and Asset Planning, do not hesitate to contact me.

 Ian Mellett BComm LLB H Dip Tax is a Barrister and Solicitor at Quay Law in Remuera, Auckland. Quay Law provides services in Wills and Estate administration, Estate Planning, Trusts and Asset Protection, Relationship Property, as well as Conveyancing, Commercial,  Immigration and other areas of law.

 www.quaylaw.co.nz

What a change of mood can do for the property market?

Extract from the Crockers Market Research Issue 52, November 2009

Last month we reported on the relative high point in net permanent and long term migration levels – with New Zealand’s net gain in population rising, we showed, primarily as result of fewer departures rather than more arrivals. Even with most new arrivals settling in Auckland, current migration patterns are not enough to account for the buoyancy of the local property market. So what is driving it? In our view, it’s latent demand. That is, people who have been putting off buying because of the recession, and who – collectively – have suddenly decided that, recession or no recession, it’s time to get on with life. It’s not that we’ve suddenly all become optimistic. In fact, we’re still worried about the prospect of losing our jobs (market research company Synovate reported in their May ’09 research study that for 33% of New Zealanders their biggest worry was them or the main household income earner losing their job – up from 29% six months earlier). In fact, New Zealand has one of the highest levels of concern in the Western world around job loss, way ahead of closest neighbour Australia. Despite this gloomy mood, the same research shows that people are now getting on with their lives. In November 2008, 23% of those surveys said they were delaying a major life decision. By May this year, this figure had tumbled to just 16%. Of those 16%, most said the two biggest decisions they were delaying were a change of job and buying into the property market. Further research since then, including data from the Westpac McDermott Miller survey, shows consumer confidence has risen despite GDP still failing to reach positive figures. While this confidence may be fragile, there is little doubt that people are bored with the recession, and are trying to turn themselves around attitudinally, as well as financially. The buoyant Auckland property market is perhaps the clearest sign so far that people have stopped delaying the big decisions in life, and are looking positively to the future.

GST: accounting for land and other high-value assets

Hon Peter Dunne
Minister of Revenue
Thursday, 5 November
Media Statement

Dunne: Proposed GST rule changes on sales of land, high-value assets

Law changes to the GST rules on sales of land and other high-value assets are the focus of a discussion document released today by Revenue Minister Peter Dunne.

“The proposals target sellers and buyers in transactions involving high-value assets. In these transactions GST revenue can be lost by the government from a small minority of taxpayers deliberately using differing GST accounting treatments or winding up a vendor company so that no GST is paid.”

“A conservative estimate puts the loss of GST revenue from the property development sector through such activities at about $50 million a year, and probably growing,” Mr Dunne said.

“That is clearly unacceptable and will be stopped.

“The discussion document seeks public feedback on proposals for stopping these activities, as well as for clarifying a range of other GST issues for high-value transactions and making them more consistent – which is in everyone’s best interest.

“The main proposal is to introduce a mechanism known as a domestic reverse charge, whereby the obligation to account for GST in transactions involving land, other assets worth more than $50 million, and those involving ‘going concerns’, would be shifted from the seller to the buyer.

“As well as addressing revenue risk, the reverse charge would benefit businesses by removing cash flow concerns for the parties to a transaction in the period between GST payment and input deduction. It would also reduce the risks to sellers of an unexpected GST liability arising when, for example, a transaction is incorrectly zero-rated as a going concern.

“Other changes proposed in the discussion document are aimed at making it easier to account for the taxable and non-taxable use of assets on which GST is paid. Specifically, the existing change-in-use adjustment would be replaced by an approach that would apportion input tax deductions in line with the actual use of goods and services.

“Similarly, the discussion document proposes clarifying the boundary between residential accommodation, which is GST-exempt, and commercial accommodation, which is not. That would ensure better consistency of GST treatment of equivalent types of accommodation.

“These are some of the proposed changes set out in this very timely discussion document. I urge all interested parties to have their say on the workability of the proposals and the draft legislation that accompanies the text,” Mr Dunne said.

Submissions close on 18 December.

The discussion document, “GST: accounting for land and other high-value assets”, is available at www.taxpolicy.ird.govt.nz.

Source : Scoop Independent News

Which Assets should I transfer into my trust?

 

Trust and Asset Planning. Call Quay Law for all Trust and related services. Ph - (09) 523-2408

 

 

Assets of any value can be transferred to a Family Trust.

If you are of the opinion that a particular asset needs to be provided with the relevant protection that a Trust can provide then that asset should be transferred into a Trust.

In most situations, you would assess the asset’s value – would this value increase over time.  If this was so then obviously the asset and its capital gain over time are worth protecting.

It is essential that your most important assets are protected.

For expert advice on Trust and Asset Planning please call Auckland Lawyer, Ian Mellett.

The team at Auckland Law Firm, Quay Law are proud of our record and of serving our clients.  We look forward to working with you no matter what your legal requirements may be.

NZ business confidence levels out

Robert Smith | Wednesday October 28 2009 – 03:50pm

Source: The National Business Review

An easing in confidence in the service, retail and manufacturing sectors has seen overall business confidence in October drop 1% from September to 48%, after reaching levels not seen in a decade last month.

The latest Business Outlook report from the National Bank shows the construction industry is the most confident, with 75% of businesses surveyed predicting better times ahead in that sector.

Looking at their own performance, 31% New Zealand businesses are predicting a stronger result in the future, also down 1% on the September figure.

The October result follows a massive jump in confidence last month, when overall confidence jumped from 34% to 49%, with the latest result showing confidence stabilising at elevated levels.

Profit expectations are also on the rise, with 12% expecting a better bottom line over the coming year – the highest reading in five years, according to the bank.

Investment intentions were also up 4%, but employment intentions dropped another 2%, indicating a lack of conviction when it comes to committing cash to employment and investment as firms focus on balance sheet consolidation and de-leveraging.

The report noted that with momentum improving across the economy it was “inevitable that interest rates will rise from the extraordinarily low levels they currently reside”, although it also conceded that the degree to which it occurs and its timing remained subject to debate. 

Research information presented by Bayleys

Please click on the link to find  the recent presentation by Bayleys research department on the Counties region as provided to Quay Law by Peter Migounoff

Counties Presentation Oct 09

Sales & Leasing, Commercial & Industrial

B +64 9 298 2525 | D +64 9 295 1185 | M +64 274 920 788 | F +64 9 298 4762 | www.bayleys.co.nz

Bayleys Real Estate Limited MREINZ, Counties.  A Member of Bayleys Realty Group. 6 O’Shannessey Street, Papakura, Auckland, New Zealand

Spotlight to fall on tax-dodgers

By GRAHAME ARMSTRONG – Sunday Star Times

Finance minister Bill English has signalled the government will next year get tough with tax-dodgers by closing loopholes that allow wage earners to avoid paying their share of tax.

The IRD says the government is missing out on $300 million a year because of wage earners who squirrel away money into trust accounts to avoid paying the top income tax rate. More is lost because of earnings that are “sheltered” by a company created solely to avoid tax.

The IRD, in its latest submission to the Tax Working Group, says the problem is that New Zealand’s multitude of tax rates is encouraging bad behaviour.

It said the trust account and company tax rates were too far out of line with income tax rates. Taxpayers were placing income in a trust account, paying 33 cents for every dollar earned, rather than the top rate of 38c. Another common ploy was for individual taxpayers to “shelter” their money by creating a company so that they paid 30 cents of every dollar earned in tax rather than the top rate.

The IRD says that when the top income tax rate of 39 cents (now 38 cents) was applied to earnings of $60,000+ in 2000, a flood of taxpayers rearranged their finances to avoid the new regime.

English said large-scale “legitimate avoidance behaviour” by higher-income earners undermined the goodwill of lower-income earners.

“It’s quite telling that there has been virtually no growth in the number of people paying tax on $1 million of annual income, since the 39 cent top personal tax rate was introduced 10 years ago.

“As a country, we want families, businesses, accountants and lawyers looking at how to unlock greater income and productivity, not working out how to minimise their tax.

“We don’t want people spending their time and resources trying to avoid tax. We also don’t want IRD devoting all its time to chasing tax and compliance issues.”

The IRD also advised the working group that last year the losses claimed by people with rental properties were $575m more than the income declared from residential rentals.

This meant that the government lost a further $150m in revenue despite a doubling in the total value of all rental properties.

The Tax Working Group, with representatives from Treasury, Victoria University and Inland Revenue, has so far put forward proposals to cut income tax rates, with extra revenue collected from an increase in the GST and the imposition of a capital gains tax on property.

The group’s work will culminate in a public conference hosted by the university in December.

English said the government would consider the group’s findings in the New Year and “any changes will be signalled in Budget 2010″. “Equity and fairness” would be central to any reform.

New Zealand’s tax system was distorted, English said, not just in what was taxed but what was not taxed. “Most people would see it as unfair that speculators can reap large tax-free gains while low and middle-income workers are taxed on every dollar they earn.”

Prime Minister John Key also hinted yesterday that tax reform could also mean some tax cuts for wage earners.

While ruling out tax cuts promised before the last election, Key was reported in the the Dominion Post saying some tax relief could still form “part of the mix”. “Wholesale, unfunded tax cuts look highly unlikely and irresponsible. But making savings in one area to potentially promote tax cuts in another [is different].”

Your Will is Law

 

Lawyers in Auckland : Quay Law

 

NO WILL?

Dying intestate can be costly.

If you die without a will or your will is deemed to be invalid, then you are said to have died intestate. In this event, administration of your estate is entirely determined by legislation and not you. Your wishes are not relevant.

IS YOUR CURRENT WILL OUT OF DATE?

We recommend that you review your Will regularly. By way of example. Some wills include specific bequests to particular heirs e.g. my house (address) to “A” and my shares (company name) to “B”. Do you still own that house at that address and those shares in that company?

Ph (09) 523 2408 | Fx (09) 523 2409 Email  quaylaw@quaylaw.co.nz   

www.quaylaw.co.nz  www.lawyerinauckland.co.nz

Housing market indicator firms in September

NZPA | Wednesday October 21 2009 – 11:28am

An indicator of the housing market firmed in September, led by Wellington and Auckland. The Mike Pero Mortgages — Infometrics property cycle indicator lifted to 6.99 last month from 6.66 in August. The indicator runs from minus-10, showing a strong downturn, to plus-10, showing a strong upturn. It moved into positive territory in May, with a reading of 0.34, after 20 negative monthly readings. By June the indicator was up to nearly 4, and in July was close to 6. The indicator looks at three main figures from the Real Estate Institute of New Zealand — changes in the number of houses sold, changes in price, and the time taken for houses to sell. Mike Pero Mortgages chief executive Shaun Riley said growth in house sales held firm in September at 39 percent a year. The median house price rose to $350,000, up 6.1 percent on September last year, and just 0.4 percent below the peak recorded in November 2007. The time taken for houses to sell, eased to a two-year low of 33 days in September, one day fewer than in August, he said. Once again Auckland and Wellington were showing strong signals and were leading the market according to the indicator, Mr Riley said. Wellington led the country with a reading of 8.41 in September from 7.79 in August, while Auckland was at 8.27 last month from 7.50.

http://www.nbr.co.nz/node/113747