Finance Minister English welcomes jump in investor confidence for rental property if it means more house building; Doesn't see bubble

Finance Minister English welcomes jump in investor confidence for rental property if it means more house building; Doesn't see bubble

By Alex Tarrant

Finance Minister Bill English does not think the property market is returning to bubble territory, and is welcoming signs investors are turning back to property if that leads to more new house builds.

The latest quarterly ASB Investor Confidence Survey released today for the March 2012 quarter showed rental property returned to top spot as the investment believed to offer the best returns for the first time since the start of 2010. Rental property replaced term deposits, which fell to second place above managed investments/superannuation, KiwSaver, public shares, and bank savings accounts.

The ASB Investor confidence index climbed 7 points to a net 12 percent in the three months to the end of March 2012. ASB Head of Wealth Advisory Jonathan Beale said this showed a turnaround in investor attitudes from late 2011, when the December earthquakes in Christchurch and the looming crisis in Europe threatened to topple the local recovery.

“Following the turbulence at the end of last year, 2012 started with a bang, with investor confidence climbing each month until April.  However in recent weeks Greece is back in the headlines as the crisis continues to escalate, and question marks remain about whether this new-found investor confidence will last," Beale said.

“Kiwis’ enduring love affair with rental property has rekindled after 24 months in the cold. A total of 19 percent of investors now believe rental property offers the best returns, rocketing up from 14 percent last quarter. Meanwhile, Term Deposits have taken a 3 point tumble to second place at 16 percent,” he said.

“Our third ranked investment class is most intriguing, however. Managed Investments and Superannuation have soared 4 points to 13 percent, their highest level in four years. Shares have also been climbing every quarter since Q3 2010, now fourth equal with KiwiSaver which is steady at 10 percent. Bank Savings accounts are last at 8 percent.

The low interest rate environment seemed to be influencing investor perceptions markedly.

"Investors appear to be moving away from the traditionally lower risk investment options and searching for those with the potential for higher returns. This is a turnaround from the flock to caution we saw in the midst of the financial crisis, but unsurprising after the performance of share markets and managed funds as markets improved in the first few months of 2012," Beale said.

Good if it means more houses built

Finance Minister Bill English told media in Parliament Buildings on Tuesday that rising investor confidence in the property market was a good sign if it meant more houses were built. He said there was no risk, however, of people getting carried away like in the previous decade.

“You’ve got people out there faced with very low interest rates on their deposits, uncertainty generated by this news from offshore, and in the property market house prices have actually been relatively flat for three or four years," English said.

“We actually do need the property market to pick up because there hasn’t been enough new building to keep up with the demand. You’re going to see a big push in Christchurch, you’re seeing some pressure in Auckland pushing rents up," he said.

"You want it back to normal. If that lifts peoples’ confidence a bit, then that’s ok."

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Bills answer to more building and investment is to roll out more disincentives.
Wasn't he banging on only a short while ago about too much money being invested in property?
Wasn't it he, who introduced tax disadvantges in the last budget specifically aimed against property investment? 
Now he wants the market to "pick up". What next?
Maybe he should introduce a capital gains tax to really incentivise the market?

Is Bill E now realising that the building industry and property investment is critical to NZ's economy? 
Well then he should do something to encourage building and investing (like lowering costs and removing his disincentives!) rather than throwing in disincentives, standing back and wondering why no building is occuring and the economy is tanking while house prices actually rise!
Property people know what the problem is (Olly's been telling us this for years now).  It's a shame the politicians don't understand the fundamentals of market economies.

How is building houses with hot Aussie/Japanese money to sell back and forth with one another with hot Aussie/Japanese money critical to NZ's economy?
It does not provide for any tax benefits in fact the opposite through negative gearing
Would not addressing the core revenue earning business' be the issue
- Developing the South Island's Oil & Gas assets
- Developing West Coast and Southland Coal assets
- Strengthening the hollowed out manufacturing sector
- Fixing the disorganised and choatic meat industry
- Restructure the Forestry industry which the accountants and CHH/Hart have destroyed
- Improving Cruise ship ports access and improving airports in Auckland, Christchurch and  Queenstown 
- Reducing the hostile attitude some nations have to our exports esp. Europe/US tarriffs & quotas
- Improve infastructure - a decent roading system (duel lane motorway from North to South)

Nice dream goldenfox - can't even build a dam on the west coast anymore.

The building industry may be critical but I doubt property investment is.  How many property investors such as yourself built your "investments"?
Did the boom period of property speculation/investment increase corresponding new builds at the volume required to meet demand?
If not, why would it encourage it now?

I've developed a fair amount of property, some of which has been kept as investments.  However a quadrupling of development contributions about 4 years ago and changes to tax rules meant we abruptly stopped any new developments then (compounded by the weak economy and now by eqs).
The boom in prices was followed by a lagging construction boom, so I'm not sure what your second point is.

lol, Big Daddy. Well at least you can rely on Key not to introduce a CGT! For that you need to turn to the Left-wing’s agenda in the Labour Party and their economically bewildered and confused henchman, and the Major of Athens, David Shearer. We need more houses built in New Zealand!!? I know, let’s put on a CAPITAL GAINS TAX!
The economic depth of thinking of the Left in this country, amply demonstrated by many who post comments to this board as well, reminds me very much of Thai bar and hotel owners. When the tourist numbers drop, they put their prices up and charge the few tourists that they do have more. Why? Becuase they have less business and they need to make up for the lost income!

Not having a CGT does not seem to have helped either. So maybe it is not a key factor in all this.
HP says it is mainly about costs at the city fringe- allowing the city to grow affordably ie at the cost of converting land to residential use.
Others say we have had a major problem with the govt loosing control of the money supply completely into the hands of debt generating banks.
I have more of a problem with taxes when they really start to create distortions- a so the arguement is that a lack of  tax (CGT) maybe does the same thing.
High GST is not a help, high PAYE is not a help either. Businesses actually need money circulating not just going to pay off debt.
A land tax will happen in NZ - because it will be one of the few things they have left to tax after they have strangled everything else.

There is a slight flaw in your logic, David B.  A capital gains tax is only to be paid out on a (breathless hush) ..... capital gain!  So if you make a loss, no tax.  And if you make a profit, a very modest tax, about half of normal tax.  How is that a disincentive?
Landlords seems to only be able to do business in NZ if they are in effect heavily subsidised by the taxpayer - ie, able to claim all expenses, but no need to pay tax on the gains.
Plus, when I look around the vast majority of domestic building is for own-your-own buyers.  Landlords largely buy established homes, using their privileged tax status to shut out young home buyers. 
Some countries in the OECD have a housing glut, others a housing deficit.  Since virtually all of them have a CGT, the tax argument seems irrelevant to the true causes.

A couple of sentences sort of sum this up for me, the first being English's regarding NZers long stnading love affair with rental property, then yours regarding landlords buying established homes using privileged tax status to shut out young home buyers
This whole phenomenon really only got going in the late eighties early nineties and prior to that and for a while after while properties began their rise into the stratosphere pricewise compared to peoples earnings, home ownership was the norm.
It has been over these years, from Roger Douglas at the beginning to now when almost nothing in the way of assistance for low earners and first time buyers exists that this imbalance now exists.
Of course landlords claiming on upkeep, depreciation from every other taxpayer in the country should cough up at the end when they sell, by way of a capital gains tax, of course they should
And of course, I may be biased, but I would rather see things in place that favour the home owner not the damned landlord. We'd be far better off without so many of them

Exactly Chris J.
Bill E is one uninspiring politician 

uninspiring, clueless and desperate...
Lets face it if the economy doesnt start to pick up the mantra of supluses by 2014/5 goes bye bye...elections chances? oh dear....
I used to work with a watch engineer on a russian built ship, the engine temp was controlled manually (the automation was stuffed) so you had to balance various valves 1/4 turn at a time...but at the end of the watch you had to record these temps in a log book....funny thing a short while after handing over some values usually showed significant he had porked the system to give the numbers so the logs looked good.....dynamically the system was screwed but the point in time was great.....I used to spend the next 4 hours getting the balance right again....BE is looking to do the same I think....

Why not privatise the government ?

Quintessentially Walter, that's the idea currently...privatise the bits you want and give it back to Labor to run the bits you don't .
 And they thought we were dumb........gees eh..?

brilliant suggestion

Which is what merry olde England has done , with its hundreds of quangos ......
....... the system gives " jobs for the boys " ......
And takes the power of the democratic system away from the citizens . Quango members are not answerable to the voters .....
..... is that really what you want , Walt ?

FYI, here's English getting a bit confused about what gets counted in the current account deficit and what doesn't

Well that was fun!
Here's my take on it.  All the National Ministers have become so used to the style of purposeful intent NOT to answer questions directly - which the Speaker has come under some considerable amount of ciriticism for allowing.  So, Bill's first incorrect answer was largely because while the question was being asked his mind was thinking only in terms of weasle-word evasion techniques (in this case the completely unrelated BERL report), and he accompanied that with disagreement regarding the major premise of the question - followed by a joke about Labour.  Standard practice however, altogether trying to be too clever.    
Russell then called the point-of-order and the Speaker tried to flog him off - suggesting he ask a further supplementary question .. but then changed his ruling to allow for the same question to be asked a second time (good on you Russell for sticking to your guns).  But the Speaker's re-ruling threw Bill as the evasion tactic was no longer available to him ... so he had to re-answer the question wrong.  Did he know it was wrong ... yes I think so.  Of course Winston's point-of-order was a good one - and I did like the Speaker's comment about he and Winston, being a mere mortals, might not understand Bill's answer either but a no is a no (i.e. a technically wrong answer is a technically wrong answer).
So now dear Bill is really up to the creek without a cabbage boat ... and has to then say he's actually a financial illiterate!!!!  Gotta love it :-)  thanks for sharing, Alex!

Boy,are we in trouble now?

....while we top up with non-english speaking immigrants who may or may not contribute to our society over the years, but will definitely contribute to a burden on the health system with their aged parents in tow.

....... I sometimes think that the Honourable Wild Bill is a non-english speaking immigrant ...
He certainly hasn't contributed to a healthy economy and full employment for our society over the years ....

When the govt planned something, the opposite will happen.. crump sold my house too early! 
Nevermind - Ther'll be another day.

Talked to a builder today who reckoned that compliance/ health and safety/ tax costs were 40% of the cost of a new house. The councils have taken their golden goose and deep fried it.

Its called extortion, where you have to hand over immense amounts of money to be able to do what you should be able to do for minimal cost. The current consent and code of compliance system is a complete rort. Lots of pigs at the trough, creating as much beurocracy as they can in order to justify their ongoing jobs extorting as much as they can from the home builder. It is no wonder there is a housing shortage. The extortionate councils and their rorts are the major cause of the housing shortage, they should be ashamed of themselves.

Yes, and high time that rortous situation was addressed as well, maybe then it would be feasible to get back to the building of more modest housing instead of all the confounded McMansions that have sprung up everywhere because it's no longer cost effective to build smaller homes

Auckland Council is currently writing the new Unitary Plan which will largely determine how much houses cost in the future.  This is supposed to respond to the 2011 Draft Auckland Plan which  has the goal of increasing affordable and diverse housing...
However it also has the goal of improving the subjective 'quality' of housing...
As this plan is develops it will set up a process whereby higher density & affordable housing is encouraged as long as the applicant works with Council to ensure that quality is also prioritised.  This process will be very expensive and the 'quality' expectations will be much higher than existing housing provides (a Ponsonby villa won't have acceptable 'outlook' etc.).  Any project that manages to get Consent it will no longer be affordable.

I've submitted to the CCC on precisely this unaffordability point:  the money shot:
My submission, in summary, is this:
The Council has caused, continues to perpetuate, and remains oblivious to the social, cultural and economic effects of, a new-housing affordability crisis in Christchurch.
What do I wish as an outcome in the DAP?

  1. Full disclosure to new-housing buyers of the total Council impost in their section+house price, including imputed interest at IRD rates from the date of every such impost:  an Itemised Bill;
  2. Disclosure in the DAP of the average totals for DC, Consent fee, and Sundry Levy, by class of section (Residential/Industrial/Commercial/Other)

It won't do a blind bit of good, because it's much too transparent and accountable, but I intend to torment them in person, so the possibility of turning one or two faces around the table to the light, is always there.

No talk from English about investing in gold and silver. What a clutz.

No, investing on gold and silver is a gamble on appreciation with no actual return until you sell. You are just specualting you can find a mug to pay you more than you paid for it....