The Property Council of New Zealand (PCNZ) has published a new report crowing that property is now New Zealand’s largest non-export industry. From Stuff NZ:
Property is now New Zealand’s largest non-export industry, a $83 billion dollar business.
A report commissioned by the Property Council found that property directly contributed $29.8b to the economy – about 13 per cent of gross domestic product, more than manufacturing, agriculture or health.
And every dollar the property industry generated makes $1.80, in a range of indirect industries or spending by property-related employees…
Property was also the fourth biggest employer, supporting 160,800 jobs –99,000 of which were sub-contractors, tradies and residential builders…
That meant roughly one in 12 people were working directly or indirectly in the property sector, about 8 per cent of all jobs…
Property also dominated our retirement savings. Among the 33 Kiwisaver schemes in New Zealand, worth collectively about $36b, $1.8b was invested in property.
It was New Zealanders’ favourite investment, attracting more than triple the amount of money put into shares or bonds on the New Zealand stock market.
The report shows that the property sector’s growth has been spectacular, generating an extra $11.7 billion between 2007 and 2016, more than double the pace of any other industry…
But not everyone believes that Kiwis should be so heavily invested in property.
ACT Party leader David Seymour said he thought the market was over-heated and “a massive waste of activity for the last 20 years”.
New Zealand had not kept up with its housing needs and then spent the last two decades buying and selling them at inflated prices.
“I’d much rather live in a place like Silicon Valley where the way to get rich is to start up something cool, than Nappy Valley where the way to get rich seems to be to buy one of a restricted number of homes.”
I was not at all surprised by this result. New Zealand does, after all, have the most expensive housing market in the Anglosphere when measured against both GDP and employee earnings:
According to data from the IMF (albeit dated), New Zealand also has a very low proportion of its wealth stored in financial assets:
Rather than being something to celebrate, the New Zealand economy’s over-reliance on property should be feared, since it represents a massive resource mis-allocation into a non-productive asset class, and also requires a never-ending expansion in debt to keep the bubble inflated, not to mention ongoing mass immigration:
We all need somewhere to live and having some of the world’s most expensive housing serves little purpose to the vast majority of owner-occupiers, who typically must sell and buy into the same market. Expensive housing also punishes those who have recently entered, or are yet to enter, the housing market, who are required to either take-out mega-mortgages and have a life of debt slavery, or miss-out altogether.
Would Kiwis really be worse-off if the median capital city house price was $270,000 instead of $540,000, household debt was 80% of disposable incomes instead of 168%, and the banking sector was smaller and less profitable?
The answer is obviously no. Lower debt loads would make New Zealand households better-off, whereas the broader economy would benefit from the productivity-boosting effects of lower land prices, increased business lending (investment), and a more balanced economy.
