Bernard Hickey calls it the ‘Dark Heart of NZ’s Political Economy‘, and it’s the Real Estate Pimps protecting their golden goose while Governments simply import fake growth from exploiting migrant workers but not taxing the rich to pay for the infrastructure…
The failure of yet another pre-fabricated house builder1 and a legal threat2 against our biggest council to force more greenfields development are two more signs, if we needed them, that our economy and society are now just a residential land market with bits tacked on.
These two latest events again demonstrate the massive skew in our tax settings in favour of housing land ownership has so changed the DNA of our political economy that nothing really changes without the removal of that skew. They also show the election debate we’re having has yet again failed to address the three elephants in our societal room:
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- residential land will have to be taxed and business investment incentivised to change the land-seeking, inequality-widening and low-capital-investment biases now embedded throughout our economy, politics and society;
- our infrastructure financing and taxation systems are totally broken and inadequate at both central and governmental level, yet no politicians want to have honest conversations with each other or voters about how to fix it by increasing taxes and/or user-pays charges; and,
- the bipartisan and accidentally-on-purpose Government policy settings enabling and encouraging population growth of 1.5-2% per annum through migration of guest workers dominates our economic and societal outlook, and remains undebated and unacknowledged.
…none of this is being acknowledged or debated…
The dominant way that house builders, land owners, land bankers and households make outsized profits and capital gains in Aotearoa-NZ is to buy more land, preferably with a big mortgage, and wait. They don’t need to build a house efficiently, or any house at all. They don’t need to build a profitable business or invest in shares in someone else’s business. It’s always, always about the business of driving up land values and using mortgage debt to increase the leveraged returns, which aren’t available from other investments.
Home owners and land bankers just need that land zoned residential, and can then wait for the leverage, time and the failure of central and local Government to build the infrastructure to cope with regular 1.5-2% population growth to deliver the rents and untaxed capital gains to make the owner far richer than they ever be from saving wages or profits.
Working in a job or profession or investing in a business or managed fund is a mug’s game, compared to the leveraged, spectacular, government-guaranteed, ongoing and tax-free capital gains on residential land. The differences in incentives between investing equity in leveraged-up land and investing equity in unable to be leveraged stocks or business investments are so vast. In other countries, capital gains on land and other asset value increases are taxed, while savings in funds that invest in businesses receive tax incentives, either on the way into the fund or in the fund itself. Savings in our investment funds are taxed throughout.
This royally skewed set of incentives is why our housing market is worth NZ$1.6 trillion, which is four times our GDP (NZ$400 billion), 10 times the value of our listed companies (NZX total market value of $160 billion), eight times larger than our total managed funds sector ($200 billion including NZ Super Fund and ACC) and 16 times larger than our only-very-marginally-incentivised household pension funds (Kiwisaverat $100 billion). For comparison, Australia’s housing market is worth the same four times GDP, but is worth four times stocks, three times and funds under management. In the United States, its housing market is worth twice GDP, once the stock market, twice funds under management and 7.5 times its comparable ‘subsidised’ household pensions market, which is known as 401k in America, rather than KiwiSaver.
This dark heart of our political economy shows up regularly in all sorts of ways, in particular the focus of investors, developers, politicians and equity-rich home owners on greenfields development of clearly-titled and mortgageable plots of land. An actual occupied house on the land is a bonus, but not necessary to be exposed to these gains.
…I told you the Real Estate Pimps were buying this election!
Analysis: Property industry tops political donations
An RNZ analysis of political donations since 2021 shows people involved in the property industry are giving the most – and almost all of it is going to National, ACT and NZ First.
Since 2021, people aligned with the property industry have donated more than $2.5 million to political parties.
More than half of the cash from the property industry went to the National Party (53 percent), followed by ACT (32 percent) and New Zealand First (12 percent). Labour received 2 percent.
Real Estate Pimps have donated millions to National and in return National have lifted the Foreign Buyers Ban and will give landlords the right to kick tenants out with no notice.
National and ACT will also role back Tenants rights while reopening Landlord tax loop holes.
There is a class war on renters but we don’t have the political vocabulary to articulate it.
By opening NZ up to foreign speculators while reopening landlord tax loops holes, National and ACT are opening NZ up for sale to their overseas wealthy mates.
Let’s remind ourselves just how vested the Landlord class is..
…there is an unspoken promise between the neoliberal State and the untaxed capital gains private landlord class that the neoliberal State never builds enough State Houses to alleviate housing desperation so that the untaxed capital gains private landlord class can exploit that housing desperation ON TOP OF getting a $1.5Billion annual subsidy in the form of the Accommodation Allowance EVERY SINGLE YEAR!
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Of course the election is being bought. People like Ada try to say this money has no influence. If that’s the case these real estate types are the biggest idiots in existence. Who would give away millions if there was no point in doing so?
Starting your excuses early, Wheel?
Wheel has a valid point Ada, but I see you don’t, as usual.
Imagine if Labour had done something useful with their majority? They wouldn’t be in the 20s now, would they?
+1
The many tiny parties that have formed for this election are a clear indication that National and Labour are trying to make NZers dance to their tune ,that they are not listening to NZers regarding basics such as immigration levels, overseas purchasing of NZ land , the eroding of our access to free health, free education – including university, and the reoccurring threat to the continuation of superannuation.
I would like to see these tiny parties quickly come together and agree to work as one to get some representation in parliament !
A tiny party vote is not a wasted vote. It’s the unheard’s protest vote.
It’s not just the Real Estate Pimps – every homeowner is in on the deal, and it won’t change.
My expectation is that the generation growing up now is going to look at something like communism and think it might be worth a second try. I’m already starting to hear of young people out there aready thinking like this and it’s no surprise.
That’s always been the problem with greedy people at the top of the food chain – they can never get enough and inevitably create a situation where the underclass has got nothing left to lose.
Because communism has worked so well everywhere it’s been tried & without a totalitarian state crushing human rights …oh, wait…
The problem we have this 2023 Election is we do not know who is telling the truth ???
The problem is that too few people want the truth and punish the ‘doomsayers’ at the ballot box, so the political class avoid the blunt conversation we need to have as a nation.
Winston NZF appears to be the only one who tells it as it is which upsets the Establishment.
When a party’s campaign on dividing people than you can be sure they’re not upfront.
Supply. More 56 floor apartment s every where sorry Nimbysim cronies.
Demand. Deport foreign people farmers. One dwelling per person max. Done.
We have a lot of Asian House Farmers here in NZ with multiple properties.
The housing market is cooked. Labour managed to double house prices, I’m sure National can do the same.
What! Did someone say? …the Left is bringing in a wealth tax!
Oh Frabjous! Why not try it – Carroll worked out politics back in c.1855.
or
Saying for the day – ‘Might as well be hung for a sheep as a lamb.”
(Already a proverb in John Ray’s 1678 collection…)
One might as well be hanged for a sheep as for a lamb
EnglishClub https://www.englishclub.com › esl › Quizzes › Badness
In general, it means that if you are going to get the same punishment, you may as well commit the greater offence.
Go for it Hipkins, be a hip-hop artist in the Kiwi way and make a name for yourself as a mover and shaker, not a shaking retreater and schoolboy prefect following the Old Boys’ and moneyed class’ expectations and strictures. Be brave – do the right thing, chance it while you have the opportunity in your hands, go forth and multiply Labour’s votes!
Are you saying the unions want nothing for their imput.They got Little in as the leader and nearly wrecked the party now they have got the minimum wage up with no I crease in productivity and wreacked the economy
Well they seemed to have stimulated your productivity Trevor – as an externality.
Did you mention the banks?
Without the banks the property pimps cannot function. Ultimately the banks can leverage massive profits based on the pumped up equity of land values backing mortgages.
And these banks are Aussie banks with heavy US banks shareholdings. Hence the sound of money being sucked out of the country like cyclone Bola.
The only way to break this rip, shit and bust, land speculation is to nationalise the commercial banks and impose a land tax on unimproved land values.
That would see land values fall to a point where land use based on borrowing form a land bank would be a reasonable return on improved capital gains. The economy would then improve its productivity based on labour productivity and the distribution of value on a more equitable basis.
But all of this could only be done by a Workers’ Government that runs the economy in a balance with nature, and with equity and justice for its citizens.
I don’t want to end up like Rome
“Mille viae ducunt homines per saecula Romam”
It’s funny to see the Right throw their ads at us. But we’re only the 5% educated.
Love the true ignorant who do what they feel.
The Right harvesting the ignorant for their purposes disturb me. I think they could go on to the other ignorant.