Latest news with #Infometrics
NZ Herald
2 days ago
- Business
- NZ Herald
The pros and cons of owning rental property in retirement
While term deposits gradually deplete, property preserves capital. Selling may seem practical, but once the money is spent, it's gone. Retaining the property provides a steady income stream while keeping your financial base intact, a crucial advantage for those concerned about longevity or wanting to leave an inheritance. Property also offers flexibility. Retirees can sell when the market is favourable, downsize, or tap into equity if needed. In contrast, fixed-term investments lock up funds and offer little adaptability. Importantly, owning property gives retirees control. It's a tangible, familiar asset not subject to the same volatility or institutional risks as many financial products. In summary, residential property delivers inflation protection, income growth, security and legacy value, all vital advantages that cash-based investments can't reliably provide. A: You're referring to last week's Q&A, in which I said rental property isn't a great investment during retirement, 'unless you are wealthy and enjoy being a landlord, or regard the property as your children's inheritance'. That's because you tie up money in the property you could otherwise spend gradually through retirement. While last week's correspondent said income from their rental was less than they would receive from a term deposit, I didn't mean to imply that proceeds from selling a rental should go into term deposits – as you seem to think. I've said in this column, many times, that it's wise to put retirement savings you expect to spend in the next three years in bank deposits or a cash fund. But invest three-to-10-year money in a bond fund or medium-risk fund, and longer-term money in a higher-risk share fund – in or out of KiwiSaver. I agree that term deposits may not beat inflation, but over the years a share fund will, in much the same way as property. And while shares certainly have their ups and downs, property values have also wobbled. Infometrics data shows that since the year ending March 2005, New Zealand's average house value has risen sharply - 11% to 14% - in five years, and rose a dramatic 24% in 2020-21. But there have also been four years when values fell. Two were in the Global Financial Crisis, in 2009 and 2011, and two were in 2022-23 (-12%) and 2024-25 (-2%). See our graph. True, shares tend to wobble even more. But that's why I recommend putting only longer-term money in share funds, so there's always time to recover before you spend it. On your comment that 'rental income typically increases over the years, especially as housing demand will in time continue to rise', I'm not so sure. A recent article on the Auckland Property Investors Association website says, 'In April 2025, annual rental inflation fell by 0.7% nationwide, with Auckland (-2.4%) and Wellington (-3.1%) leading the drop… The gear is shifting and investors need to pay attention.' It quotes the Ministry of Housing and Urban Development on three factors causing this: 'a surge in completed builds', slower net migration and a high number of rental listings. Other reasons selling a rental before retirement and investing in bank deposits, a medium-risk fund and a share fund – as outlined above - is a good idea: Flexibility. If you suddenly need a large sum for major home repairs, a car, or a hip replacement without a long wait, the cash is there. Being forced to sell a rental fast – dislodging tenants and perhaps accepting a low price – doesn't work well. Diversification. Owning your own home and a rental property doesn't spread your risk well. But if you sell the rental, you can easily spread your money over bonds, international shares and so on. If you love property, put some long-term money in a property fund. You can even dabble in gold or cryptocurrencies – although I wouldn't recommend doing that with more than 5% of your savings. Hassle. Rental property can come with unexpected maintenance issues, tenants who can't or won't pay, and changing regulations. KiwiSaver and similar investments just sit there. Enjoyment! With the money that was sitting in real estate you can travel widely, buy the good seats to shows, eat out often, spoil the grandkids, drive a car you love… And if you're concerned about inheritances, you can still leave plenty – perhaps half or a third of the proceeds from selling the rental. I expect, though, that I won't convince you. It's hard to argue with the first half of your statement: 'Importantly, owning property gives retirees control. It's a tangible, familiar asset not subject to the same volatility or institutional risks as many financial products.' But, as I've noted, property prices and rents are indeed volatile. And how about increasing landlord regulation and possibly tougher capital gains taxes as institutional risks? Rental property often works well, but it's not risk-free. Still, there's a psychological element. Some people just seem to prefer to own 'bricks and mortar'. Perhaps they enjoy DIY maintenance, or like the idea of providing good long-term housing for a family. If that's you, go for it. I hope it works well. What about commercial property? Q: I have read your column for many years and do not recall you ever mentioning commercial property as an investment. A real estate agent once told me that residential property is for people who do not understand commercial property. The tenant pays the rates, insurance, body corp fees etc. I know there are [arguments] for and against, but commercial property investment has done well for me. A: You're right – I don't write much about investing in shops, factories, offices and the like. I don't know a lot about it, and it seems to be an area in which those who know can hoodwink the babes in the wood! I've heard of people doing really well in commercial property – like you. But I've also heard of a few whose property value plunged. And I'm sure there are others who don't talk about it. One way to reduce the risk is to invest in a commercial property fund that holds several properties. You get diversification and hopefully expert management. But, as discussed recently in this column, there can be problems getting your money out when you want it. And, just like residential rental property, I reckon tying your money up in commercial property in retirement is not a great idea – for much the same reasons. Managing care payments Q: We have a managed investment of $1 million. My husband, who has Alzheimer's, will soon go into residential care costing approximately $100,000 a year. Should I separate out the $100,000 at the time of entry to care? We have rental properties as well, so I am not anticipating running out of money. These don't provide a lot of income. I don't know how to manage our money in this regard. A: And I'm sure you have a lot else running through your mind at this difficult time. Some readers will criticise me for including your letter, given that you are much better off than most people. But you still need a financial plan. And, as always, I hope other readers will find this Q&A helpful. I suggest setting up your money as described in the first Q&A, with three years of care costs and other spending money in bank deposits or a cash fund, and so on. Then, every year or so, move another $100,000 plus spending money from higher risk to medium risk, and from medium to low risk. Your current managed investment will probably be medium or high risk. Ask the provider. You could use that fund as part of your plan. You might also consider selling your rental properties after reading the above Q&A! If all of this feels too complicated, find a good financial adviser. I recommend advisers whose only reward is payment from you, in the form of fees. Other advisers, who are paid salaries or receive commissions for placing your money in certain investments, might be free or cheap. But they may not act in your best interests. I used to run a list on my website of advisers who charge fees. A while back I passed the list on to MoneyHub, which now runs it. You can see the list at Please note that I don't know any more about these advisers than how they charge for their services. But there are tips there on selecting someone. Info for retirees Q: We are recent retirees, and have noticed that there has been a lot in the media of late regarding living with superannuation only, or what is available to top that up. We are in our 70s, have no children, a mortgage-free home and are debt-free. Unfortunately we do not have a great amount in savings. We are looking at any financial plans that are available to supplement the superannuation. We do not like at all the concept of reverse mortgages – even though they have a Government guarantee. Can you recommend any other plans that may supplement our super payments? A: Firstly, there is no government guarantee on reverse mortgages. Still, the main providers – Heartland Bank and SBS Bank – are regulated by the Reserve Bank. And given they are lending you money, as opposed to your investing money with them, I don't see how there's any risk. The only worry, really, is that you borrow a large amount early in retirement and, through compounding interest, the debt gets uncomfortably big. But the value of your house will almost certainly rise too, over the years. And the reverse mortgage lenders are pretty careful not to lend an amount that is likely to lead to later problems. A reverse mortgage can work really well for people in your situation. But if I can't persuade you to look further into it, there may be government help for you beyond New Zealand Super. This page on the Work and Income website lists what is available: It includes info on the SuperGold card, the accommodation supplement – which can include help with homeowner costs, the disability allowance, temporary additional support, the Community Services Card and payments for residential care. I also recommend you go to and sign up for the Seniors Newsletter, emailed monthly, which has all sorts of info that might help you. When debt doubles Q: Last week you said it's not uncommon for someone to repay more than twice the original mortgage over the years, because of compounding interest. Contrast that to credit card debt, Mary. Perhaps you need to roll out the Rule of 72 again, this time concentrating on the doubling time for credit card debt. A: Good idea! The Rule of 72 is really handy for giving us a pretty accurate idea of compounding interest. Some examples: If an investment has doubled in, say, nine years, divide nine into 72. The investment return is about 8% a year. If you know the return on an investment is, say, 6%, divide six into 72. It will take about 12 years for your investment to double. As you point out, this can also be applied to a debt: If the debt has doubled in nine years, the interest charged is 8%. If you're being charged 6%, and you make no repayments, your debt will double in 12 years. It's important to note the 'you make no repayments' bit. With a mortgage, you make regular repayments, which reduce the interest compounding. (The exception is reverse mortgages). And hopefully, with credit card or other debt, you are also making repayments. With no repayments, a debt can grow alarmingly, given that credit card interest rates are often around 20%. If we divide 20 into 72, we find that a 20% debt with no repayments will double in about three and a half years. And then double again, and so on. It's not pretty. * Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@ Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.
Otago Daily Times
4 days ago
- Business
- Otago Daily Times
Tourism, primary sector behind strong Otago economy
The evidence continues to mount that Otago's economy is outperforming the rest of New Zealand. Figures released yesterday by Statistics New Zealand show Otago had the lowest rate of unemployment in the country in the past quarter. Unemployment was 3% in Otago, compared with an average rate of 5.2% across the country. The average national rate of unemployment was 5.1% in the March 2025 quarter and 4.7% in the June 2024 quarter. In contrast, Otago's level of unemployment was only slightly up on the March quarter's 2.7%, and the same as it was at June 2024. Infometrics chief economist Brad Olsen attributed Otago's performance to a strong tourism economy and buoyant primary industries sector. "The fact that the likes of international arrivals into Queenstown are sitting at 150%-160% of pre-pandemic levels ... better than any other international airport in the country — all of that is a real gain. "We know as well that the primary sector more generally is helping and that's going to be supporting the likes of beef, dairy, meat more generally, horticulture." The number of people employed in Otago remained steady at 154,700 compared with the previous quarter of 155,700. In comparison, the number of people employed in Auckland dropped from 994,000 to 984,000. There was enough of a shift in the Otago economy to imply "people think that there are odds-on better opportunities than a year ago in Otago", Mr Olsen said. Business South chief executive Mike Collins said the figures did not totally surprise him, although sometimes Statistics New Zealand information was a bit volatile due to the small sample size. "We're certainly seeing a little more light." Things had quietened down after the period of "crazy demand" for skilled labour, post-Covid, he said. Recruitment had been replaced for employers by more bread-and-butter concerns such as consumer spending and consumer confidence. His organisation was keen to get even more data so they could provide more accurate results and get a better feeling for local trends. "We've always been trying to work out what settings could change to really stimulate more consumer confidence and spend." The ODT has recently also reported Otago's small businesses were finding a way to increase sales while North Island centres went backwards. A small business report by accounting software company Xero showed sales in Wellington and Auckland were down, while Otago was leading the pack with sales up 3.9% year-on-year for the June quarter. Strong commodity prices and soaring food and fibre exports helped power Otago to a strong start to 2025, the province taking the third top spot in ASB's Regional Economic Scoreboard for the March quarter. Mr Olsen said Otago was in the right position economically. "Given where things are sitting at the moment ... you'd be hoping that over time that better labour market then also translates through into spending and confidence, leading to investment to keep momentum going."
1News
5 days ago
- Business
- 1News
How New Zealand's tax system compares with other countries
In recent months, Treasury, Inland Revenue and an organisation representing accountants have suggested New Zealand needs a rethink of its tax settings. Inland Revenue said taxes would have to increase to cope with an ageing population and CPA Australia said a capital gains tax should be considered. But do you know how much the average person in New Zealand pays, and how that compares to other countries? Infometrics calculated the average tax bill of a household with two median income earners, earning $72,900 per person before tax, not including any Working for Families credits. Chief executive Brad Olsen calculated that they would pay $39,800 to the government, made up about $14,100 in income tax each, and $11,600 in GST. They might pay another $3800 a year in local government rates. ADVERTISEMENT Infometrics principal economist Brad Olsen. (Source: 1News) "Central government still collects the vast majority of money from households - at still over 90% of total funds collected by central or local government going to the Beehive coffers. The proportions have shifted slightly, in 2023 when we ran this same exercise, around 93% of tax or rates collected went to central government, and 7% to local government. "In dollar terms, we estimate that our median household scenario would be paying around $985 more a year in rates than in 2023, but $3182 more in income tax and GST." Rates rises were more noticeable because households received a direct notice in the mail telling them what they had to pay, Olsen said. "In contrast, most households don't track — or get a demand for — their taxes from central government. For income taxes, PAYE workers never see their income tax as their employer withholds the tax and pays it to IRD. For GST, you don't directly tally up your GST and pay it to the government — it's all part of your daily spending. The difference in how you pay — and how noticeable that payment demand is or not — does behaviourally contribute to how we talk about these various increases. "We spend a lot of time, fairly, on rates increases. That's reasonable scrutiny. But we spend a lot less time on tax payments than rates payments, even though tax payments are 10 times larger than rates payments. "That's also true, in my mind, around current discussions on rates capping. Presumably if it's good enough for central government to impose on local government, it would be good enough for central government to tax-cap itself? For every dollar of additional rates paid in the last three years, tax paid by a household has increased by $3.23." ADVERTISEMENT As people earn more through the PAYE system, their income tax bill increases. A report by consultancy OliverShaw in 2023 said those in the top two tax brackets at the time made up 21.2% of taxpayers and paid 68.5% of income tax in the 2021 tax year. Those earning $180,000 to $300,000 constituted less than 2% of taxpayers, but paid 9.3% of income tax. But while the dollar value of GST paid is higher for wealthier people, it may make up a smaller proportion of their income because they may save more, or put money into financial assets that do not incur GST. The morning's headlines in 90 seconds, including the West Auckland builder sentenced over massive meth haul, fire on a commuter train, and how Bluey could teach kids about resilience. (Source: 1News) Some wealthier people may also be able to earn income in ways that does not attract as much tax. Simplicity chief economist Shamubeel Eaqub said people might be surprised to see that New Zealand is among the lower-taxed countries in the OECD. On a measure of tax-to-GDP, in 2023, New Zealand had a ratio of 34% compared to the OECD average of 33.9%. ADVERTISEMENT He said the country was only on the higher side of average because many countries had some significantly lower taxes on specific things, such as Ireland's low corporate tax rate. On an income tax wedge basis, New Zealand was third-lowest in 2024, behind Chile and Colombia on a comparison of total tax as a percentage of labour costs. Shamubeel Eaqub says there will still be some shocks, especially for those with mortgages. (Source: Breakfast) "There is no right or wrong number when it comes to taxes," Eaqub said. "If we want less public service, we pay less tax, if we want more public services, we pay more." He said many countries had much higher tax bills — France has tax at almost 44% of GDP, Denmark at 43.4% and Italy at 42.8%. "Italy has to but that's why younger people are leaving. There's a cost — if you tax a lot and make younger people poor they might go somewhere else. You can't arbitrarily increase taxes if you're not giving the value people are looking for. You need to maintain the legitimacy of the tax system." New Zealand workers tend to shoulder more of the tax bill than those in other countries, because income tax on individuals makes up such a large proportion of the total tax take. ADVERTISEMENT "We have big areas where we don't have any tax," said Council of Trade Unions policy director and economist Craig Renney. "There are no capital taxes, no social security taxes. It means New Zealand's taxation structure looks very different to the majority of developed economies around the Western world. We tend to over-emphasise GST and PAYE. Labour is a smaller share of tax in other jurisdictions." Any conversation about tax changes needed to get away from winners and losers and instead encourage people to consider what outcomes could be gained from higher revenue, he said. "The way we historically structure tax conversations does not help." New Zealand's corporate tax rate is now one of the highest in the OECD, at 28%. NZ Initiative chief economist Eric Crampton said reducing the government's structural deficit would require a mix of reducing spending, boosting economic growth and increasing taxes. "I would focus on spending before looking at taxes. Increasing revenue to cover the cost of current spending should depend on decent evidence that current spending delivers substantial value. ADVERTISEMENT "If the government demonstrated that higher tax revenue was needed, increasing GST while shifting income tax rates and thresholds to compensate could make sense. Inland Revenue has been looking at different options for ensuring lower-income households would not be made worse off if GST increased. GST captures spending that comes from income that is harder to tax when it is earned, including income from capital gains, as well as spending by tourists. "But first priority ought to be ensuring value-for-money in spending, especially where an ageing population increases fiscal pressure."
Scoop
02-08-2025
- Business
- Scoop
How Bad Is The Tariff News For NZ, Really?
, Money Correspondent New Zealand has been hit with a higher tariff rate than Australia on exports to the US - but economists say the situation could have been worse. It was revealed on Friday that New Zealand exports would have a 15 percent tariff applied, up from 10 percent announced earlier. Australia remains at 10 percent. Brad Olsen, chief executive at Infometrics, said that was a clear challenge for New Zealand. "There is now a wedge between us and Australia." There were other parts of the world that previously had a higher tariff rate that were now on the same level as New Zealand, such as Europe. "Wine, for example, under the original tariffs, we might have had a slight advantage. Now we don't." But he said it was not necessarily true that the country would have been better off had it negotiated a deal. He said New Zealand did not have a lot to "give up" in those negotiations, and it could have ended up being costly. "I'm a little bit surprised by comments, including from the opposition's trade spokesperson, that the government failed to achieve a lower tariff rate. "The comments seem to make the implication that New Zealand could have found a way to come up with a trade agreement that might have given us a lower tariff rate. "That might be true, but we have no idea what we would have had to give up to achieve that… some of what had to be given up by other countries to get a 15 percent tariffs rate is consequential - Japan and other countries had to give up to half a trillion dollars of further investment into the US." He said the impact on New Zealand's trading partners might not be as bad as had been expected, which should prove positive for the economy. "It will be slightly more challenging to export to the US from a New Zealand point of view, but our trading partner activity might not be hit as bad as was feared in April. That's probably a net benefit for us." Mike Jones, chief economist at BNZ, said the increase was not unexpected given indications of the past few weeks. "It's obviously unhelpful for NZ exports into the US, particularly how we line up with those coming from Australia and the UK, given the lower 10 percent baseline tariff rate for those countries. "Beef and wine exports could be affected. It's interesting in this context that we've seen the NZD/AUD exchange rate fall a little today in the wake of the announcements." Kelly Eckhold, chief economist at Westpac, said he thought New Zealand was in roughly the same position as in April. "On one hand, the tariff is higher, so there is a bigger direct cost, but it's a bit lower for a lot of our trading partners, so it's better for the economy than would otherwise be the case." He said how the lingering elements of uncertainty played out over the coming weeks would be important. "The legal basis of these tariffs, whether they're going to be able to continue or need to be replaced with a different type of tariff, is an issue. And the sectoral tariffs have not yet really been negotiated. "While I don't think these things affect the sort of goods New Zealand trades with the US, there may be some impact on our trading partners." He said it seemed strange that the US was calculating tariffs based on which countries exported more than they imported. "The concept that US authorities have had of countries ripping them off by selling more stuff to America than they're been buying is quite myopic. "We're only talking about goods trade here, we buy a lot of services from the US. "In large part, the trade imbalance is a cyclical rather than a structural story. "In the last few years, the economy has been relatively weak compared to the US. We're not sucking in as many imports, and the exchange rate has been lower than would normally be the case, which has encouraged export revenues. "I would have thought trade policy metrics like tariffs would be determined on the basis of structural, not cyclical factors. "All those things could easily be the other way around in a few years' time."
1News
01-08-2025
- Business
- 1News
How bad is the tariff news for NZ, really?
New Zealand has been hit with a higher tariff rate than Australia on exports to the US – but economists say the situation could have been worse. It was revealed today that New Zealand exports would have a 15% tariff applied, up from 10% announced earlier. Australia remains at 10%. Brad Olsen, chief executive at Infometrics, said that was a clear challenge for New Zealand. "There is now a wedge between us and Australia." ADVERTISEMENT There were other parts of the world that previously had a higher tariff rate that were now on the same level as New Zealand, such as Europe. "Wine, for example, under the original tariffs, we might have had a slight advantage. Now we don't." But he said it was not necessarily true that the country would have been better off had it negotiated a deal. He said New Zealand did not have a lot to "give up" in those negotiations, and it could have ended up being costly. "I'm a little bit surprised by comments, including from the opposition's trade spokesperson, that the Government failed to achieve a lower tariff rate. "The comments seem to make the implication that New Zealand could have found a way to come up with a trade agreement that might have given us a lower tariff rate. "That might be true, but we have no idea what we would have had to give up to achieve that… some of what had to be given up by other countries to get a 15% tariffs rate is consequential – Japan and other countries had to give up to half a trillion dollars of further investment into the US." ADVERTISEMENT US President signs an executive order for new tariffs on a wide swath of US trading partners to go into effect in seven days. (Source: 1News) He said the impact on New Zealand's trading partners might not be as bad as had been expected, which should prove positive for the economy. "It will be slightly more challenging to export to the US from a New Zealand point of view, but our trading partner activity might not be hit as bad as was feared in April. That's probably a net benefit for us." Mike Jones, chief economist at BNZ, said the increase was not unexpected given indications of the past few weeks. "It's obviously unhelpful for NZ exports into the US, particularly how we line up with those coming from Australia and the UK, given the lower 10% baseline tariff rate for those countries. "Beef and wine exports could be affected. It's interesting in this context that we've seen the NZD/AUD exchange rate fall a little today in the wake of the announcements." 'Quite myopic' ADVERTISEMENT Cranes and shipping containers are seen at a port in Busan, South Korea, Thursday, July 31, 2025. (Source: Associated Press) Kelly Eckhold, chief economist at Westpac, said he thought New Zealand was in roughly the same position as in April. "On one hand, the tariff is higher, so there is a bigger direct cost, but it's a bit lower for a lot of our trading partners, so it's better for the economy than would otherwise be the case." He said how the lingering elements of uncertainty played out over the coming weeks would be important. "The legal basis of these tariffs, whether they're going to be able to continue or need to be replaced with a different type of tariff, is an issue. And the sectoral tariffs have not yet really been negotiated. "While I don't think these things affect the sort of goods New Zealand trades with the US, there may be some impact on our trading partners." He said it seemed strange that the US was calculating tariffs based on which countries exported more than they imported. ADVERTISEMENT "The concept that US authorities have had of countries ripping them off by selling more stuff to America than they're been buying is quite myopic. "We're only talking about goods trade here, we buy a lot of services from the US. "In large part, the trade imbalance is a cyclical rather than a structural story. "In the last few years, the economy has been relatively weak compared to the US. We're not sucking in as many imports, and the exchange rate has been lower than would normally be the case, which has encouraged export revenues. "I would have thought trade policy metrics like tariffs would be determined on the basis of structural, not cyclical factors. "All those things could easily be the other way around in a few years' time."
