Editorial: Housing investors as scapegoats


Say something often enough and the utterance – true or not – can eventually be accepted as reality.

Such as it is with property investors and their role in New Zealand’s house prices. New Zealand is the seventh most expensive country in which to buy a house, only less expensive than France, Japan, Luxembourg, Switzerland, Israel and South Korea.

This week, a poll of 1000 New Zealanders found almost two thirds of respondents believe property investors are a key reason for that. The OneRoof-Kantar Housing Survey was conducted as part of a OneRoof investigation into the causes of the escalating real estate market.

The fact of the matter is that property investors have played a key role, but that’s not the whole story. As economist Tony Alexander pointed out, New Zealanders have transformed their homes and the homes of others into investment portfolios largely because the government encouraged them to do so.

The lack of a capital gains tax; a decade of few new builds; and a prolonged period of positive net migration have all conspired to pressurise the market. Sir John Key’s National government campaigned on reversing the brain drain from New Zealand and did it so successfully (almost 60,000 net gain in 2015) that it overwhelmed our housing stocks.

That’s not to say governments haven’t tried to push back the tide. There have been loan-to-value ratios, Brightline tests, high density-enabled plans for Auckland, a building boom, a nationwide foreign buyer ban, a failed KiwiBuild scheme and tax changes to target property investors/speculators.

Yet through it all, prices have steamed upward, and smashing through more records since Covid arrived. Measures to prevent the economy from collapse such as quantitative easing (described as printing money), mortgage deferral schemes, funding for lending and the removal of LVRs have stoked the boiler.

Many property investors got into the market for an extra home as a safe superannuation option, and some investors remained happy with that. But some found the maintenance and tenancy were worth the effort and grew their portfolios. This is how a market works.

Prices have also been affected by issues outside investors’ control. The “leaky homes” saga is one, leading to more expensive construction and consenting practices. Significant decreases in interest rates over the past 30 years is cited by economists as the main driver.

Reserve Bank governor Adrian Orr now says the prices are unsustainable and pose a threat to financial stability. He believes a “long-term fix” to ensure a well-functioning housing market is to ensure new homes can be built when needed.

Progress is being made. There were 41,028 new homes consented in the March 2021 year, finally beating the record of 40,025 set back in 1974. The number is continuing to increase. Net migration for this year is expected to be around 10,000.

The anguish for people currently unable to get on the property ladder is real. But it would be wrong to paint as culprits those who simply and astutely read the market to provide for themselves, their families and tenants.

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