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We Cannot Survive On An Economy Based On Property

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Contributor:
Brian Dalley
Brian Dalley

I would like to challenge Dr Ganesh Nana the BERL Chief Economist on that statement, “We cannot survive on a property bubble. We cannot survive on an economy based on property.”

We are only a small island nation located in the middle of nowhere with dairy, produce and technology our main export earners. Manufacturing is not really an industry that is going to save us. Therefore, what is he, Dr Bollard and all those others chasing their tails like demented cats proposing?

Frankly, I am growing tired of the people steering the good ship SS New Zealand Economy throwing anything to do with property overboard thinking that will save the ship from sinking.

I cannot see the point if all we are left with is a scuttled ship.

We cannot invest in one of our main export earners Fonterra only the farmers have that privilege.

Bryan Gaynor points out the banks are more willing to lend people money to buy property, rather than buy gold or shares.

OK I guess that rules out gold and shares. Shares, you would be a brave person to leap into the arena within the next 12 months. Gold, who is going to help you pay for your investment whilst you wait for it to grow in value and can you really blame lenders for wanting to invest in a sure thing?

Gareth Morgan gets a little savvier saying property is undoubtedly a good investment, “but” that is helped by tax breaks that favour property over other investments.

Unfortunately he doesn’t go on to say - “but” it is the only investment that I can think of where you can borrow 100% of the purchase price and someone else tenants will help you pay down the debt whist you wait for your investment to increase in value which over time it surely will as basic economics support that theory.

Then comes the comment from those scuttling the ship, if you keep investing in property we will take away your tax benefits.

Sorry I snigger at that comment.

The Government have opted to lease property from private investors, as they cannot afford to build the number of houses required to house those already on their waiting list. (See an example of such opportunities here.)

Surely if one puts their hand up to help why not offer a sweetener, after all there are other offshore options. My advice to those steering the ship, stop and turn the ship around and rethink what you are doing as the property bubble will not burst any time soon.

Even if tax benefits are reduced, I do not believe it will have a great impact, as the people in for the long term are there to establish income-generating assets rather than rely on the Government when it comes time to retire. 

The simple fact is the property bubble is very unlikely to get much bigger due to constraints on affordability.

What we do need, and sooner than later, is the work force returning to the building industry, which indirectly is the largest employer in the country.

Brian Dalley is a leading Property Consultant | former NZMBA Mortgage Broker, and Real Estate Agent.  You can read more of his views and opinions on his website www.propertyprofit.co.nz.

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