Brian Fallow's extraordinary opinion piece against rental property owners demands a reply. His view has been fixed since he became a journalist and there appears to be no way that they will change. However New Zealand deserves to hear the complete story.
Fallow states that the "fundamental, physical imbalance between the supply of and demand for housing... is driven by growth in the population on the one hand and growth in the housing stock on the other".
Although this statement is absolutely correct, he proceeds to ignore it and argues that "Investors are the key to driving up house prices", which is the subheading to his article.
He puts forward four main reasons to back up his opinion:
Property investors are certainly a segment of all property buyers, but they are not price setters in the main. There is a limit to what tenants can or want to pay for a rental property. Like any business, rental property providers have to respond to their customers, meaning they cannot pay too much for a property. The more they pay the higher the cost of providing the property, the greater the amount needed to top it up, the greater their risk and the lower their return.
Many members of Property Investor Associations around the country have expressed dismay at the prices that home owners, who have formed an emotional attachment to a property, are willing to pay.
In 2012, investors in Auckland made up a very low proportion of total buyers, so this is a low point to start from. As there is a historically higher proportion of tenants in Auckland, a higher number of rental properties are required and hence a higher number of property transactions will be by investors.
Statistics can often be used to paint a picture that the writer wants to portray. Below is a graph showing property buyers from 2012. It shows that nationally, investors went from about 35% of purchasers in 2013 to 39% in 2016, while first home buyers remained the same at about 20%. However if you started in April 2014, you would say that investors were constant at 39% and first home buyers increased from 17% to 21%.
Investors buy property to rent to tenants, so they are a critical part of housing New Zealanders. If you restrict investors from buying rental properties you restrict the supply of rental properties for tenants.
Many people claim that rental property has a tax advantage, but it simply isn't true. In fact tax rules are harsher on rental property than all other investments or businesses.
To his credit, Fallow appears to have accepted this fact in recent years and stopped making that claim. However he now says that the application of the tax system favours property, and therefore needs to change.
This is not how tax policy should be made. Share holders and business owners can claim losses and pay no capital gains tax unless they are traders. The rules are exactly the same for rental property owners and property traders.
Rental property owners have many disadvantages over other investments and businesses. It is up to the individual to evaluate these advantages and disadvantages to determine where and how they are going to invest.
If the advantages for rental property owners are so great, why do only 7% of the population own rental property? Why do more people own shares and businesses than rental property?
The final argument Fallow makes is that banks prefer to lend on property than other asset classes and this should be addressed. Banks are independent organisations who deal in money. They have many years of experience in judging risk when deciding on who they will lend their money to and how much they will charge.
Banks know that shares, businesses and other assets are a higher risk than property. What they view as a higher risk should not be controlled simply because some people prefer one form of investment over another.
The truth is that it takes all types of investments to have a successful economy. It includes shareholders, depositors, small business owners, farmers and rental property owners.
There will always be a need for rental properties and there will always be a need for rental property owners. Yes, we do compete with first home buyers and movers to buy property, but we do so because tenants need somewhere to live. It is wrong to prioritise first home buyers over tenants.
It is false argument to say that making it hard for rental providers will not make it harder for the tenants that need a home.
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