Ask Your Taxi Driver
Thinking about the housing boom in Auckland and Queenstown makes you think about other events over the last X number of years. Stockmarket, goats, deer, kiwifruit, stockmarket, timeshares, property, startups, complex legal structures (just in case), dairy farming, stockmarket, property, trust structures (just in case), Queen Street farmers ... [if you can name some more then you are at least as old as me].
There is a well known phrase: if you want to know about what (not) to invest in ask your taxi driver. The more popular an investment becomes, the higher the likelihood that the bubble is about to burst on that investment. If your taxi driver is investing his or her hard earned money in something (or worse borrowing), then the chances are that so is everyone else on the planet (or at least your neck of the woods). And that means trouble is brewing somewhere.
I'm not talking about for example buying your first home, or upgrading your home - because you have to live somewhere and as long as you can pay the mortgage (and any possible increases in the mortgage over the next 10 years) then all should be well. You know - mortgage v rent is not too big a difference in normal times. It's when people are buying and land banking property, buying and flipping property or shares, buying and doing nothing waiting for significant capital gains, or investing in something because it is the 'next big thing' that things can get dicey. We should be investing in things that serve our community as well as ourselves. The great mistake of this generation is the 'Ponzi schemes' that life throws at us where we want the profit but forget that someone somewhere will lose.
My risk profile, I'll admit is tending on the conservative side. I don't buy consumer items unless I can pay for them. I don't book an overseas holiday and slap it on my mortgage. I don't upgrade my car until it doesn't get me from A to B without a nervous cough. And my life insurance cover is so high that I (jokingly) refer to myself as worth more dead than alive. That's me. Maybe that's you too. But for a huge number of people that is not their reality. A large proportion of our community wants to keep up with the neighbours, wants to be 'rich' (insert your own definition of that), wants to get off the bottom rung of life, or hates the idea of someone else making a stash of cash - the 'I don't want to miss out' syndrome.
People are desperate to make money either in "investing" or "enabling" investment in something that just doesn't stack up. And that is where we come back to the current housing boom, or crisis - depending on your view point. Yes the Government has brought in, and now increased the Loan to Valuation Ratio (LVR) but there are other things that the Government could do to turn this issue into an opportunity for real economic growth.
Did you know that usual profile of a person or couple building their first home in New Zealand is in their late 40's and 50's. The normal pattern is that they have owned between 1 and 4 houses before, their children are either teenagers or have moved out of home, or they are starting afresh with a new partner. They have equity behind them and they often have settled jobs and personal lives. The sale of their old home goes to a starter family who cannot afford new, but can put in the labour to do up their slice of the Kiwi dream. The current Government policy is changing the way society naturally works. Surely encouraging first home buyers (by their very definition at the lower end of the financial market) to buy a new house serves either to put them in penury or into a potentially 'cheap and nasty' house or apartment. And the 'locked out' of the affordable housing market becomes a reality. When did a $1 million dollar starter home become socially and politically acceptable?
If every businesses moved just a little bit South of where they are now we could increase our economic performance significantly. New Zealand used to be a place that enjoyed an international reputation for a work life balance that people from overseas could only dream about. Stuck in traffic, leaving early for work and coming home late is not enviable by anyone. I believe that working two or three jobs just so that you can feed your family and pay the rent is not acceptable in New Zealand. Dunedin is wonderful in Summer and Winter (yes it is true). Ashburton has great fishing and outdoor pursuits. New Plymouth has incredible surfing and skiing. Nelson has a fantastic beach that goes on for miles and a wonderful community atmosphere. Gisborne has an incredible climate and is the first to see the sun each day. None of these places is a million miles from anywhere and each one has a willing and stable workforce. Yet for some reason national and international businesses seem to think that they must be central (i.e. Auckland, and to a lesser extent Wellington). The rationale appears to be that (a) they cannot attract high calibre senior staff to the regions, (b) they must be physically close to key clients or customers, (c) they must be close to government departments or politicians, or (d) you can't get good staff or sufficient staff anywhere else.
Many professionals work remotely, they don't need to drive 1 or 2 hours a day (each way!) to do their job. Newly elected Mayor of Auckland, Phil Goff, said it can take him 2 hours to travel from one end of Auckland to the other. That's a lot of wasted energy, time and money, even for a politician! Meetings can be as effective, if not more so, when carried out via skype or video link. A call centre can be based in Rangiora or Gisborne - if you want it to. A factory can be as close to shipping routes in the hub port of Timaru as much as the port of Auckland - and you get a stable workforce. Regional offices by their very name should be in the regions, not downtown Auckland, Wellington and Christchurch.
There is a growing trend for professionals in particular to bail out of the big cities, the high paying jobs and the commute distances and opt for a more family friendly lifestyle. New Zealand's economy needs to attract and retain skilled people at all levels. Time we started a different conversation with our local and national politicians and those who aspire to such roles. And time we throw out the assumptions that we hold so dear to our business hearts, and consider alternatives to the way we want New Zealand to be in our future.
Posted: Tuesday 11 October 2016