Friday, December 17, 2021

Gerry Eckhoff: An email to the Dear Leader

Dear Ms Ardern

I make no apology for writing to you as I find your constant criticism of those who have some investment in land and housing as dull, monotonous, and ill informed. You are wrong in both theory and practise. 

The expression you use to denigrate those with a desire to provide for themselves is ‘speculators’ which is used to deliberately undermine and vilify those who choose to re build and or upgrade houses seen as past their use by date. To speculate is defined as forming a theory or conjecture about a subject without firm evidence. 

With respect Ms Ardern, you are either not old enough or fail to understand NZ ‘s recent history well enough to realize the investment decisions individuals take is usually based on their experience and a real-world comprehension of what constitutes acceptable risk. Those of us old enough to remember the stock market boom of the eighties and its subsequent bust a few years later, are now somewhat cautious of your advice to invest in “productive” stocks and shares. There is even more reason to be wary of your opinion as share certificates are likely to still linger in a desks bottom draw. Investments such as in Equiti corp, Kupe Group, Omni Corp, Brierley, Blue Chip - all constituted a far higher levels of “speculation” Prime Minister than land and buildings/bricks and mortar. If memory serves, some of the commercial highfliers of those days spent time as a guest of Her Majesty in some leafy prison so having an aversion to your recommendation Prime Minister may be both understandable and quite rational to most.

 It is also apparent that your understanding of capital markets needs some work Prime Minister. The purchase of stocks and share is, simply put - a transfer of capital from one person or entity to another of scarce resources. So too is the sale of property whether a house or a car or some other item of definable value. Such value can rise and fall as reflected in a share price or a house. Curiously, you appear to want to tax land and property transactions but not the sale of shares where capital gain occurs, as does capital losses. Will investors be able to claim tax back their losses while paying tax on their profit Ms Ardern under your preferred type of economic management?

Perhaps if you are genuine in your concerns over the cost of housing - you may care to consider the cost of a section to build on, which even here in Alexandra is round 400k. Add on the house build – well, you do the math Ms Ardern. I do hope you will also explain why your government does not allow a landowner to build on their own land as of right.

The government you lead has utterly failed to awaken to the failures of Local Government in the housing area. They (local government) seem to delight in shorting the market of land, which is entirely suitable for housing development, thereby keeping the price of a section even more unaffordable, and on your watch. It would be helpful if you could also explain why the building of new homes is desirable, but the purchase and restoration of an older home is not - from your public policy standpoint. Double glazing, insulation, heating are standard improvements to many older homes and can add another lifetime to the home, yet you discourage such developments. Why is that?

You could if you wished, assist Local Government with a government guarantee over the cost of infrastructure needed for new developments instead of the appropriation of their existing water pipeline assets. (See the three Waters). New infrastructural developments are properly funded by long-term borrowing to spread the cost amongst those who will actually benefit from them.

In Dunedin (by way of example) rental accommodation is essential for students and those on short term employment so why do you insist on demeaning those who provide for the rental market? Purchase is simply not an option for so many who may choose to rent as they may retain a home elsewhere. Your rule change for property refurbishment, now not allowed to write off interest charges, has simply driven out a lot of investment in older property desperately needing capital investment. The government is New Zealand’s worst landlord by a huge margin (as well as being a poor employer of nurses and teachers as their salaries indicate) so any private help in improving New Zealand’s housing stock should be encouraged – not condemned.

I would encourage you Prime Minister to read to learn about well-functioning markets and the importance they play in wealth / equity distribution. In the West, 50 million people have come out of abject poverty in the last 10 years alone.

As Mark Twain correctly observed - Those who do not read to learn, have no advantage over those who cannot read.

Gerry Eckhoff is a former councillor on the Otago Regional Council and MP.

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