The New Zealand Property Market disaster - and solution?

Houston, we have a problem. You don’t know about us, but we’re a little country at the bottom of the world that has a huge and growing inequality issue. It’s not race, but homes. You’ll know a little about what I’m going to say, but spend the 2.5 minutes to read on, I have an idea. And some people aren’t going to like it.?

So what’s the problem - a growing, but now peak housing affordability issue. We’re literally the lowest in the world, if you invert it, we’re leading the world. House prices are nearing 12X the median income. Up from 3X just over 20 years ago. But unlike our world leading medal tally at the Olympics, for example, this is a dirty little not-so-secret. It's a statistic that no-one is crowing about.??

My own situation for transparency - it’s here for you to see on Linkedin, but to break it down. I invest in a range of asset classes - but NOT residential property. I own some commercial and industrial properties. These are rented to businesses who employ staff and pay taxes. I also work with entrepreneurs who want to buy their own building; I go in on one side of the transaction with them on the other. I’ve added significant value to every building I own. I have equities, a little crypto and am ‘long’ in the Angel investment space in New Zealand. I have been able to do this as I’ve started several companies that employ people, deliver products and services and pay taxes.?

I’m going to lay out my reasoning and then suggest a solution.?And hope my friends still want to be that way after reading this!

1. So, I believe residential property is NOT an investment class, it is the place that we live, raise our families, love, get old, and die. And it should be both considered so, and treated this way by our government. Developers or people who add significant value to a house - this IS an investment as demonstrable value is being added.
2. Buy, rent and hold. No, no, just no. I’m not implying that this is in any way illegal, but rather it's immoral - if you choose to define morality as “for the greater good” - which I clearly am. I know of one successful baby boomer business person who thought NOT to school himself in equities, venture investment, crypto, commercial property or ANYTHING else. He took his business profits and bought over 100 homes. Which are all rented. And no real value added to any of them. Maybe a lick of paint. And this ‘smart’ investor has seen his wealth increase by 30+% in just the last year… while helping increase the divide between the haves and have nots.?
3. We’re staring into an abyss of poverty (see www.thefacts.nz for data) for the majority of New Zealand, where most are unable to enjoy the opportunity of owning their own home. If you understand our founding European fathers, they collectively left the UK and Europe to escape the massive inequality (aka Class System) that existed. They were butchers, bakers and candlestick makers and they wanted a better life for themselves and families. They wanted to own a home. And for generations this was a reality. And now, unless you own a home today, or you have a ‘property investor’ in the family, or wealthy parents - you will rent your home forever. This just doesn’t seem right to me.?
4. Government laziness, lies, not following through on election promises (I mean really, Labour you should be embarrassed of yourselves - losing your capital gains tax opportunity) plus the huge conflict of interest that exists; many politicians own multiple homes. How can we expect them to pass legislation that will cost them wealth? It just won’t happen.?
5. I’m reminded of the tragedy of the commons - where people who are left to self manage the volume of their grazing cattle in a late 1600’s Boston public space. The reality is that people didn’t take only what was enough for themselves, they take all they can. Kind of like Marxism (Communism) - which is why this form of governing failed.?

So what’s the solution? If we agree on the points I’ve raised above, therefore the only solution is a financial penalty? This is a complicated and nuanced arena, and appreciate I’m simply making a suggestion here that COULD work, but would need a huge amount of finessing.

Note - this doesn’t apply to developers. We need these risktakers:?

• Income and Sale (Capital Gains) Tax; the longer you’ve held the (non primary residence) property, the higher the tax rate you pay on it. If you've overleveraged you’ve probably been greedy. And the greedy should realise those penalties.?
• Any provable alterations or developments are tax deductible - if you add value, you realise the benefit of this deduction?
• Introduce a cumulative effect, for every 10x properties you own, your tax rate increases by 10% net?

I suspect if you own multiple homes this will incense you. If you own one or none, probably not. So, for transparency's sakes, please - indicate which you are if you choose to comment.

New Zealand - politicians and residential property investors - well done. You’ve made Aussie banks and Real Estate Agents rich, and our children destitute.?

Thanks @geoffneal for your help on this, plus data insights!

Disclaimer

My wife and I own a modest apartment. I rented for 6 years before this (marriage dissolution and travel). I’ve owned my own home for 20ish years. During the GFC when my timing was terrible, I owned my (then) current home and couldn’t sell my previous one. As soon as the market recovered I sold the secondary property.?