Source: Radio New Zealand
RNZ
Property investors say new research shows that they contribute significant amounts to the country’s economy – but not everyone is convinced.
Work by Infometrics, commissioned by the New Zealand Property Investors Federation, showed that private residential property investors contributed $24.8 billion to gross domestic product, or 5.9 percent of GDP, and sustained 126,000 full-time equivalent jobs.
Federation advocacy manager Matt Ball said it directly countered the narrative that property investors were unproductive.
“Providing rental housing doesn’t just produce economic activity, it’s an enabler of economic activity throughout the economy,” he said.
“A well-functioning rental market allows workers, students, and families to live where they need to be. Without private investors providing most rental properties, the economy simply wouldn’t operate effectively.”
Infometrics chief executive Brad Olsen said investors were often thought of as one singular group but there was a clear difference between speculators and property investors more generally.
“What we’ve found is that not only is there a substantial level of economic contribution and workforce that are indirectly supported by property investment in New Zealand, but the work that’s coming through, it does provide economic value in terms of places for people to live.
“The new builds that come through, the maintenance and repair spend, that’s a lot of continual year-on-year activity that emerges in the economy.
“That’s not what I think people think of when they think of property investors.”
Infometrics chief executive Brad Olsen. RNZ / Samuel Rillstone
He said investors spent $4.1 billion in the year on maintenance and improvements.
But Council of Trade Unions policy director Craig Renney said if rental housing was owned by people who lived in it, that would generate maintenance work, too.
“Let’s assume someone buys a unit of housing and they have it as a private rental and then they replace the kitchen, great, that creates GDP. But that’s making an assumption that if it was in private ownership as an owner occupied property it wouldn’t do the same thing, which is clearly not a valid thing to hold true.
“A private owner might well maintain it to a higher standard than a landlord.”
Ball said it would not be the case that the properties were all otherwise owner-occupied.
“The rental sector exists and always will, it’s just a question of how big it is.”
Olsen said in some cases there would be an element of displacement.
“But you’re still getting a fairly large amount of work that comes out sort of just constantly year on year.”
He said the research did not take into account what investment activity did to property values.
He said first-home buyers tended not to buy the cheapest properties and investors were sometimes in a different part of the market.
“The sort of flow on effects through to other parts of the economy are important and we see that probably most in terms of the sort of employment effects… we calculated that 109 different industries do see some sort of effect.
“It’s concentrated particularly around construction and given that as a large employer that’s important. But it does go through to other areas and one of the reasons that we approached the analysis the way we did was to try and provide that broader scope of what’s the sort of flow-on effects.
“It’s not just the immediate impact of property investment at day one, it’s where does that go? You know, if you’ve got those 126,000 workers that are supported by property investment, 5 percent out of the workforce, where do they spend their money?
“And then you’ve got the nearly $11 billion or so that was coming through on new builds.”
But Shamubeel Eaqub, chief economist at Simplicity, said there were wider questions to ask, and any industry could be portrayed as being large when set out in the same way.
“The issue to consider is the necessity – provision of housing – versus the margin – where additional capital goes in the economy.
“I don’t think the critique has ever been that no property ownership is good. It’s whether we have disproportionate allocation of capital – we do – that distorts the market and creates efficiency and equity issues.”
Ball said the report had been commissioned to address claims that providing rental accommodation was “unproductive speculation”, or people just buying and selling houses for profit.
“The report shows it’s not.”
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