BORROWERS Mortgage Commentary 16 / 2011
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Issue 2011 / 16   9 September 2011

Welcome to the first fortnightly General Finance Mortgage Commentary for 2011.  We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general.  Previous issues of this commentary can be found on our website

The Money Market
This morning (9 am on 9 September 2011) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.91 (unchanged)
1 year swap rate    3.10 (down from 3.16)
3 year swap rate    3.54 (down from 3.65)
10 year bond rate   4.49 (down from 4.52)
Kiwi dollar         0.8327 (up from 0.8290) 

A Capital Gains Tax is Not the Answer
Currently the Labour Party is advocating a capital gains tax. It does not appear to be popular with the electorate or with the Reserve Bank. There are reasons for this. There is no evidence that a capital gains tax makes property more affordable. We just need to look across the Tasman where there has been a capital gains tax since 1984 and property is less affordable there than in this country. As shown across the globe, capital gains taxes do not prevent speculative housing bubbles.  By exempting owner occupied dwellings, a capital gains tax may make matters worse by encouraging people to trade up on their owner occupied properties and purchase more expensive ones.  In this case, the people of this country have got it right - the majority oppose this form of taxation. 

Best Places to Live
A number of international organisations undertake surveys to determine the best places to live in the world. One of these, the Economist Intelligence Unit based in Switzerland, has just completed their survey. Auckland occupies the tenth position, which is positive, and the only other city mentioned in New Zealand, Wellington occupies number twenty three.  For many years Vancouver has been ranked at number one but this year it has been replaced by Melbourne. Sydney, Perth and Adelaide are included in the top ten, together with Vancouver. 

Stamp Duty an Extra Cost in Australia
If you are buying a house in Australia, stamp duty is payable. It does vary from state to state. The New Sales Wales State Parliament, in their recent budget, has reintroduced stamp duty.  For the past few years, it was reduced to zero for first home buyers to keep the market stimulated. This has changed and this exemption will only apply for brand newly constructed dwellings for first home buyers. For those buying an existing flat or dwelling for say $600,000 Australian dollars, stamp duty tax is now payable - it will be around $20,000. Stamp duty is a high impost to charge first home buyers. At least in New Zealand we removed this dreadful tax during the mid 1980’s. 

Spring Market About to Start
Spring and summer are normally the active months for real estate sales. Many market commentators will be looking at the residential real estate market to determine if the economy is really improving. Overseas there has been considerable negative economic news but the coming months will show how things are going in this country. Our view is that there will likely be some upward pressure on house prices, particularly in Auckland. This is due to several factors, including that housing stock available for sale is lower than in the previous two years.  We understand bank credit is easing a little, which will encourage more first time home owners to enter the market.  Fewer new dwellings are being constructed. Many of these first time buyers will have increasing balances in their KiwiSaver accounts which they can look towards as a source of deposits. Houses, over the past few months, have been selling slightly more quickly than a year ago. The next few months will determine if we are correct or not. 

Mortgage Interest Rates
For updated mortgage interest rates, either for new business or applicable to your existing loan, please contact your Lender (below) or the General Finance Limited Loan Administration Department.

As everyone's personal circumstances are different and the tax treatment of their affairs is always determined by their own circumstances, you should not act on any comments made in our Commentary without obtaining your own independent professional advice.

General Finance Limited is a Registered Financial Services Provider, with registration number  FSP8882.