Saturday, August 12, 2017

Frank Newman: Political manias and meltdowns

The election campaign has already brought up its share of extraordinary events: the self-mutilation of the Green Party leadership and the rise of Jacindamania. With those two events the campaign has been transformed as support shifts from NZ First and the Greens to Labour - although based on the latest polling it looks like NZ First will continue to hold the trump card come election night.

In amongst the manias and melt-downs there have been some policy announcements. Prior to the election I will summarise the party policies that particularly affect property investors, but one that is particularly eye-brow raising in a weird way is the announcement by the Opportunities (Gareth Morgan) Party (TOP).

It's not unusual for a minnow party to have policies that are at the extreme of the normal curve, but TOP seems to have more than its fair share of them. The latest is their policy to reform the Residential Tenancy Act.

This is what they are proposing:   
  • "We will [make] it far easier for a tenant to remain in the premises long-term. This will be achieved by restricting the conditions under which a landlord can evict a tenant to those of non-payment of rent or property damage. Sale of a property is not necessarily a legitimate reason for eviction."
  • Introducing warrant of fitness requirements for all rental accommodation. 
  • Putting a hand-brake on a landlord’s ability to increase rental payments, to "give tenants time to adjust" to the increase. They point out this would not prevent landlords from obtaining market rent; their policy would limit the rate of increase.
The effect of this policy would be seismic for property investors. Once a property was rented, it would be locked-in as a rental for as long as the tenant wished to remain. The tenant would have greater rights to say how that property is used than the owner! Imagine wanting to sell a rental property where the only prospective buyers are other landlords! Eliminating everyone but landlords as a potential buyer would have a significant impact on price, and it would prevent anyone from renting a property with the intention of one-day living in the property themselves.

Gareth Morgan's policy would trigger the decline of individual landlords, who are typically industrious individuals wanting to do well for themselves, to be replaced by the rise of social housing organisations with large long-term portfolios.

The problem with Mad Hatter policies like these, is that there are already enough lunatics in the House of Representatives to adopt them, if they think there is a block of votes to be had by doing so.  Unfortunately the pro-regulation parties fail to see that it is, in fact, over-regulation (the Resource Management Act principally) that is the single biggest cause of inflated land values, but rather than deal with that, they prefer to set more regulation.

Still with news items, it is interesting to read that Bob Jones is building a 12-storey office block made from laminated timber. At 52 metres, the building will be the tallest wooden office building in the world, although there are taller ones used for other purposes. Essentially the structural elements (the column and cross beams) would be of laminated timber not concrete and steel.

Sir Bob was on National Radio last week extolling the virtues of wood framing over steel and concrete, pointing out that laminated wooden timber is stronger and more earthquake resistant, and is more fire resistant. 

The wood processing industry is, of course, excited about having such a high profile project promoting their product, and they are encouraging designers and engineers to look at it as a building option. While Sir Bob was unsure of the construction cost savings, he pointed to developers overseas using the product and assumed they would not do so unless it was economic.

Putting that issue aside, laminated timber construction is a massive opportunity for New Zealand, and particularly for timber growing regions like Northland and the East Coast. Sending raw logs overseas does not make a lot of sense, when the logs could be processed here and exported as laminated beams.

New Zealand has the potential to become a premium producer of laminated timber products for use in construction and furniture making. Perhaps leadership in this area is something our politicians could think about and just maybe this is the sort of opportunity that Mr Morgan and his Opportunities Party could seize, instead of punishing property investors.

Frank Newman writes a weekly article for Property Plus.


Unknown said...

I fail to understand Gareth Morgan and his party view on "protection for those renting a property". Some time ago I watched an interview with him on one of the morning news programs and he was talking about property investment. His most shocking statement (considering the shortage of rental accommodation available in Auckland) was that he owned about six properties but none of them were rented as "renters only dirty the carpets". He went on to say that he kept a property until there was a good return and then sold it. What has changed, or does he still view landlords as "plebs with funds"?
Having said that I do agree with him when he calls for a warrant of fitness for every rented property. I have seen some of the derelict building shells in UK that are offered without power or running water let alone any safety features and they are usually rented by up to 10 people per room. This seems to be the way NZ is leaning, mainly because of the attitudes that immigrants of low quality introduce to the country. I am right behind him on that one issue, but acknowledging the apathy of the average Kiwi and the way we pass laws but when someone breaks them we find that nobody is authorised to do anything about it, I doubt that passing such a law would cause even a ripple in the rogue landlord community.

A.G.R. said...

What the world needs now, is a lot more Bob Jones, & a lot less Gareth Morgans.
It would appear however, that the opposite is true, with the P.C. brigade thriving in a world where every-thing is expected for nothing. We used to call it SOCIALISM..

Brian said...

A little bit ff Frank's Blog..but close

Just who in their right mind would want to be a Landlord in New Zealand.? I am just waiting for the results from the use of these Motels for the rental "homeless" as to the state they will be left in!!
No doubt in an election year or indeed any year, damages to this accommodation during the occupancy will result in no adverse publicity especially so from any political party against the "Homeless". Any criticism of such damage would be downplayed by the media; not to mention that it would enter into the fields of racism, and lack of humanitarian compassion for the poor and helpless in our society.
After which the Government will have to fund (with our money) any damage or excessive wear caused in this accommodation in the form of compensation. Just what has been gained by using Motels as a temporary convenience, when we are still accepting vast numbers of immigrants and “refugees” (whose status needs a deal more investigation) into New Zealand, which is further compounding the problem?
Simply little effort has be made in the construction methods similar to the mass standardization of pre cut components in the erection of Lockwood houses; or in updating building methods which are, in comparison old fashioned and still labour intensive.

Add to this Acts like the R.M.A. and ridiculous over regulated safety regulations and local bueaucracy, which compound and harass builders, and add further costs to building.