New Zealand has always had landlords and tenants. We can’t all own our own homes and the state never catered for all renters even with the post-war housing shortages.
Wealthy individuals filled the housing gap during the early years. In the late 1970s property investing hit the mainstream, says Ashley Church, chief executive of the Property Institute of New Zealand.
Church links that sea change to property mogul Sir Robert (Bob) Jones’ books on investing, which were published in that decade. The most famous of these books was Jones on Property . Ordinary Kiwis bought the books and attended the seminars in their droves, says Church. Suddenly residential property investing hit the mainstream.
This in part led to the formation of the New Zealand Property Investor Federation in 1985, which linked together a number of local property investment groups that had sprung up around the country, says King.
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A secondary factor, says Church was the 1987 stock market crash, which scarred share investors for a generation. Unlike the global financial crisis (GFC) of 2008, where Kiwi shares bounced back eventually, the 1987 crash hit New Zealand harder than anywhere else in the world and many share investors lost large chunks of capital .
During the 1990s home ownership rates that had peaked at 73.8 per cent stated to fall. At the same time the government encouraged private rental accommodation with the advent of the accommodation supplement for those on low incomes.
The number of rental property investors rose from 75,000 to more than 200,00 in he 20 years from 1997 and 2007 according to New Zealand Productivity Commission research.
King points out that only seven per cent of Kiwis actually own investment properties and a portion of those are accidental landlords, who have inherited property, moved away and rented out their home, or have been unable to sell.
Hence the chatter about property investment in the media and around barbecues everywhere is often about owner occupied property rather than residential investment, he says. “Most people who talk about property are talking about their own property.”
What’s more, says King, the majority of landlords only own between one and three investment properties, not dozens. A research report by BRANZ in 2017 interviewed 406 landlords who owned 851 rental properties between them. Of those 53 per cent owned one property, and 22 per cent two.
Landlords have many reasons for buying, says King. “In my case I was in my early 20s and we believed there would be no superannuation when we retired. A lot of people had been really put off the share market because the 1987 crash was so spectacular.”
Those landlords who do own a string of properties have often built them up slowly, says King. As a group they tend to be very diligent, hard working people, he says.
Massey University’s Dr Iqbal Syed believes that the reasons Kiwis have become a nation of landlords include all of the above as well as the spectre of risk.
Kiwi investors are by nature conservative and like the safety of property - something that they understand, Syed says.
Property investment is in a sense riskier than a well diversified share portfolio or fund because property can be destroyed and tenants abscond without paying rent. But the government works hard to ensure the property market doesn’t fail.
“The property market is too big to fail,” says Syed. “The government protects the property market therefore protects our individual property investments. It doesn’t do the same thing for the share market,” says Syed.
