Money has rarely come as easily as it has for New Zealand landlords over the past decade or so. As property prices doubled or more, and interest rates on the initial mortgage shrank to barely 1 per cent, buying an investment property was anything but hard work.
The more invested, the more leverage is acquired, and the easier it became to buy even more. As a result, if you liked the look of a place - and for a landlord in a market with a huge supply shortage, they almost always look good - first-home buyers who showed up hopefully to the viewing were hardly a threat. In truth, bound by strict deposit rules, unable to leverage collateral, and constrained by a reliance on income earned from work, they never stood a chance.
Budget-conscious first-home buyers are up against people for whom $100,000 or $250,000 above asking price is a rounding error. You could see the dynamic play out at open homes: There go the wide-eyed young couples with heart and soul on the line; and then there are buyers like me, bank manager on standby, egging us on. It's not even close to a fair fight.
"You would be crazy not to do this," bankers have told investors like me - and he's right. Entering the New Zealand property market as an investor was both the smartest - and easiest - financial decision I've ever made.
No wonder investors are now the biggest property buyers in New Zealand, with 40 per cent of sales in the final quarter of 2020 made to owners of multiple properties. Last year, 15,000 of the people who bought homes already owned five or more properties. We've worked out that no other category of investment comes close in terms of likely (almost certain) returns, let alone one as generously treated by the tax rules.
We value home-ownership as a societal good, explaining our traditional reluctance to tax capital gains earned from property.
Well-intentioned, perhaps, but we know what paves the road to hell.
To a stone-cold investor, simply weighing up one asset class against another, these preferential tax arrangements are just another reason to double down on residential property, trouncing yet more hapless first-home buyers in the process. The result? A system designed to facilitate mass ownership has been weaponised to the opposite effect.
Despite, like me, lucking on to the easiest money-making scheme of the century, some landlords reacted to last week's housing measures by the Ardern Government with nothing short of righteous fury.
Many of their objections amounted to threats, typified by one landlord cited by Newshub saying they would sell off investment properties when the changes come into force, "and I know a few other landlords will do this".
Reacting to modest new provisions in the Residential Tenancies Act earlier this year, one high-profile real estate agent wrote that "fair, nice people'' want to quit their investments because "the fun and appeal of being a landlord is diminishing".
Of course, not only was this a hollow threat; it turned out the opposite was true. Economist Tony Alexander surveyed mortgage advisers after the new law took effect and found a net 24 per cent of them reported an uptick in investor queries.
Other landlords reacted to the Government's latest plans by putting guns to the heads of tenants, the most housing-insecure among us, threatening to pull the trigger if the Government dares imperil their profits. Two questions for landlords arise from this rhetorical hostage-taking: Firstly, if you're forced to hike rents whenever your bottom line is in any way diminished, why haven't you similarly reduced them over a decade of steeply declining interest costs; and, secondly, what restraint have you been showing on rent increases, anyway?
Supply and demand determine rent levels, and I see no evidence landlords have been looking out for tenants' interests when they go about setting them. You already pay more for an apartment in Auckland than you would in Manhattan, where median rents are the lowest since 2010 in the pandemic's wake. Kiwis are already being forced to spend more than two-thirds of their income on rent, pushing their dream of eventual home-ownership further into the realms of fantasy.
The fundamental problem is, and remains, a shortage of housing for both owner-occupiers and renters. Labour is tackling the supply issue through new infrastructure spending and a change to incentives that encourage investors to build new apartments instead of hoovering up existing stock. But these still amount to policy nudges when what's called for is a monumental shove in the form of - and I know this may seem radical - actually building more houses.
In terms of boldness, the housing package surprised me on the upside. Taken together, the measures added up to something more than the timid incrementalism that's characterised the approach of successive governments to housing.
But it still feels a day late and a dollar short.
Long term, the Government needs to intervene directly on the supply challenge before the crisis abates.
Other initiatives will count too - like amending the Resource Management Act, facilitating higher-density builds, and releasing more land for private and iwi-led developments.
But the scale of the housing shortage is such that the market alone will continue to fail. Without decisive action, the emergence of a two-track society - one of cashed-up owners and investors versus the rest - will congeal into an irreversible fact of New Zealand life.
• Shane Te Pou (Ngai Tuhoe) is a company director at Mega Ltd, a commentator and blogger and a former Labour Party activist.