Is Property Investment Productive?

property-investment

The Auckland Property Investment Association hosted a debate last night on the above topic. Auckland Property Investment Association president David Whitburn, argued for property being a productive investment while well know financial commentator Bernard Hickey, argued against.

David Whitburn argued property investors contribute to the economy by creating jobs in the construction industry through the construction of new houses, renovation and ongoing maintenance. This workforce contributes to the economy by paying, taxes such as GST, PAYE and company tax.

David also argued that property investors are helping the government by providing housing for people that cannot afford to own their own house. David said that it would be unrealistic to expect the government to fulfill this function particularly with current government debt levels.

Bernard Hickey countered by acknowledging that construction of homes and ongoing maintenance contribute to the economy but he argued that the price of housing and associated borrowing made it an expensive and unproductive way of creating jobs. Bernard argued that most of the lending was provided through offshore facilities. The return on those borrowings ultimately went back offshore leaving little if any benefit to the New Zealand economy.

Bernard argued that housing was needed for New Zealanders but his vision is that Kiwis should own their houses and housing should not be seen as an investment vehicle. Bernard argued that by relaxing urban limits, the price of land and hence property will come down and Kiwis will be able to afford their own homes.

Bernard acknowledged during question time that it was difficult to suggest other forms of secure investment given the poor returns on bank deposits after tax and inflation, the collapse of the finance companies and the NZX underperforming during the last decade.

At RPC we do not believe that by relaxing urban limits, the price of property will come down. Property prices are determined by the price of land, the cost of infrastructure, council levies and contributions and finally the price of house construction. We believe that ultimately people want to stay closer to the inner city and that is what sets the price of housing.

We also believe that until such time as the government demonstrates it is serious about savings and provide tax incentives for savers, New Zealanders will continue to turn to an investment with a proven track record that has served them well. That investment is property.

Andre Conradie
09 273 7505