COMMENT: The results of the recent OneRoof-Kantar Housing Survey will come as good news to the Government. Don’t get me wrong, it makes for sobering reading – but the Government will feel that the finding that 62% of Kiwis believe that property investors are one of the causes of house prices doubling to $1 million in the last seven years vindicates their relentless attacks on investors.
I say “one of the causes” because the percentages in the survey add up to significantly more than 100% - the top two causes alone equal 114% - which means that respondents were invited to tick as many causes as they wished when completing the survey.
Why does that matter? Because there’s quite a big difference between asking someone to identify “the” cause of the problem versus giving them the opportunity to identify multiple causes and it’s possible that, had the former question been asked, the result may have been quite different. Property investors have been under intense media scrutiny for a long time so it shouldn’t come as too much of a surprise that they would be included as one of several causes of rising house prices amongst a significant number of survey respondents given a multiple choice question.
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But is it true? Is the activity of property investors one of the causes of higher house prices? Unquestionably yes. Property Investors, like the current Government, the previous Government, and first home buyers have all played their part in causing house prices to rise – but none of them are the “main” cause of those increases. That distinction belongs to the Reserve Bank (which, inexplicably, doesn’t appear in the list of culprits) which has driven down mortgage interest rates over the past 30 years, making it possible to borrow more for less. That, more than anything else, has caused house prices to increase and the inverse relationship between lower interest rates and rising house prices is as plain as the nose on your face when looked at with a bit of historical perspective.
But does it really matter? Surely surveys like this one simply provide a snapshot of the public mood and an insight into what people think about the market? Certainly the surveyors have gone to some trouble to match the respondents to the demographic makeup of the nation – a point which Tony Alexander makes well in his recent article on the topic – which means that we can be confident that the survey results reflect what kiwis really think.
But popularity and accuracy are not necessarily the same thing. That point is starkly made in the same survey question where 52% of respondents identified overseas buyers as one of the causes of house prices doubling to $1 million in the last seven years. Why is that significant? Because we have had a foreign buyer ban in place since 2018 – and even prior to that, only 3% of house sales were to foreign buyers. So they’re simply not a factor, yet 52% of respondents have identified them as a primary cause of house prices rising.
Ashley Church: " While it may feel good to blame investors for rising house prices it isn’t actually solving the issues facing the housing market." Photo / Ted Baghurst
Sadly, our statute books are littered with legislation which has been enacted because it scratched a popular itch or signalled a virtuous position and the temptation to use surveys like this to justify even more draconian action against investors is all too real, even when the consequences of doing so could be disastrous.
As I pointed out, last week, in my article about the consequences of punishing property investors, the Government’s various initiatives to make property investment less attractive and to scare investors from the market - which include ringfencing of tax losses, removal of the ability to claim interest as a tax deductible expense, punitive changes to tenancy laws, extending the brightline test and taxing capital gains – already run the very real risk that we will scare investors away at precisely the time that we need even more rental properties than ever.
So while it may feel good to blame investors for rising house prices it isn’t actually solving the issues facing the housing market. To do that we need to deal in facts, not slogans – especially not slogans that feed into the prejudices of a Government that has already demonstrated that it is more interested in optics, than accuracy, when dealing with the housing market.
- Ashley Church is a property commentator for OneRoof.co.nz. Email him at [email protected]
