Peters Speech: Property Institute Conference
An address by Rt Hon Winston Peters to the New Zealand Property Institute Conference, Ballroom - Level 6, Duxton Hotel, Wellington, Thursday 07 July 2005, 9:45am
“Your Home Is Your Castle”
Thank you for the invitation to be here today.
This being election year, you have probably had your fill of politicians trying to peddle their wares to attract your vote.
Your invitation focussed on three issues – the government’s role in the property market, regulation and an analysis of where things are going politically and the impact of this on the market.
Let me address the last of these first.
Where are things going politically?
Three clear trends have emerged in the lead to up this election.
The first is that there really is no obvious winner and so the ‘no contest’ of 2002 will not be repeated in 2005.
Labour’s veneer of invincibility is gone and with it any prospect of sleep walking to an election victory.
The second trend is that people are beginning to understand that no post-election governmental arrangement will be decided without New Zealand First.
What the media has failed to grasp is that this is not about New Zealand First propping up one of the two tired old parties, but a strong sizable third large party which will be advocating for the policies it has campaigned on.
The third trend is that this campaign will be the most presidential of all the MMP elections and that this is a huge liability for the two old parties.
Their leaders are so out of touch with mainstream New Zealand, lack any warmth and are more interested in appeasing special interest groups than helping average New Zealanders.
Helen Clark’s Labour-led government has crusaded for gay marriage and legalised prostitution but has done nothing to lift real wages for hard working New Zealanders.
These warped priorities have and will continue to cost Labour in this election.
Sadly, National is no better.
So they are led by a self-confessed political hitchhiker, and everyday it shows.
Here is a man who tells the National party conference almost a fortnight ago that he was a long time Labour voter – in short that his conversion to National is pure opportunism.
But the media is intent on creating a competition this election and Labour’s continued gaffes have flattered to deceive just how unprepared he actually is.
Just last week Brash issued the most bizarre response to the Zimbabwe cricket situation.
Trying to play the populist card, but with absolutely no in depth analysis, Brash proposed that the cricketers not go and we pick up the bill.
Had he done any homework at all, he would have realised this bill could come close to $30 million dollars, all of which would have gone straight into Mugabe’s pockets.
Brash’s comments were as out of touch as the Greens on this matter.
This is not the first time he has made such injudicious comments.
Remember the gone by lunchtime comments and the totally outrageous claim that the government was using a foot and mouth scare to deflect attention from itself.
This is the worst kind of political misjudgement – making ill-informed public utterances.
Now the media crucified Bill English over his Afghanistan–Gaff comments and yet Brash receives no such treatment, this despite his comments being equally naïve.
It also demonstrates that he lacks a quality team around him, because anyone with half a brain would have warned him about making such stupid public statements.
Come to think of it – his entire front bench has only got half a brain.
So it really is a case of tweedle dumb and tweedle dumber when it comes to Labour and National.
Fortunately there is a third alternative which has both the experience and the policies to fill the void of the two old parties.
So what impact will the evolving political nexus have on the market.
Well New Zealand First can give you this assurance – whatever happens post election we will not be destabilising the market.
In fact, if we are being honest – there is not a political party in New Zealand outside of the Greens that would deliberately destabilise the market.
So the Property Institute has nothing to fear from this election.
Now let me consider your first question – what is the government’s role in the property market.
In many ways it dovetails with the second – the nature of regulation.
At its most basic level the role of government is to regulate the industry to ensure it is a level playing field and to remove distortions.
This of course must occur at many different levels.
As the nature of the Property Institute illustrates, with 3000 members across a broad range of professions associated with the wider industry, there are no homogeneous and simple solutions.
Indeed, if anything the demands of the property market from top end large scale investors and developers through to those simply trying to provide a family home ensures that a range of regulations are required.
As the recent leaky buildings fiasco demonstrated, where regulations are poorly enforced or outdated, then the potential for people to get hurt increases.
In the leaky buildings situation it was really a case of bureaucratic incompetence, across both central and local government, and a discernable drop in standards which had effectively gone unchecked.
The consequences have clearly reverberated through this industry.
I want to address this issue at three different levels and highlight New Zealand First’s policy prescriptions on each.
The first is to address the notion that the New Zealand property market operates in a global market.
We must face the fact that New Zealand has not done globalisation well. This is primarily due to the ideological dispositions of those in power for the past two decades.
For too long we have opened up our markets to be among the freest in the developed world, but we have often ignored the need to protect our national interest and that includes the living standards of New Zealanders in their own homes.
The New Zealand model would be fine if every other nation was as open and free as ours and we were on a level playing field.
Well we are not – and it is coming home to hurt us now.
You see just last month our Current Account Deficit went through the $10 billion mark. That is the largest amount ever and it is also the highest amount as a percentage of GDP.
Those of you familiar with markets know the danger such debt levels represent.
And the largest contributor to this situation is money leaving the country to foreign investors.
Now let me tell you about an article I read in a British newspaper.
The headline is “New Zealand’s Superior Property at Your Fingertips”.
It was advertising an investor’s forum in which British investors were encouraged to buy into New Zealand property.
The promise is a low cost piece of paradise.
They highlight the fact that in New Zealand we have: no capital gains tax (yet), no estate tax, no stamp duty, no death duty and that one UK property was equal in value to three New Zealand properties.
You see we are not playing on a level playing field.
Similar advertising can be found in newspapers across Europe and North America.
We have opened ourselves up for exploitation.
And we can’t blame these foreign investors for doing it – we have made it too easy for them.
New Zealand First aims to redress this imbalance.
Just last year the government again loosened the requirements for foreign investors.
We seem to be the only developed nation which holds up a neon sign to the world saying “come and exploit us – we are suckers for punishment”.
We must align our practices in allowing foreign investment with other developed nations.
Too much of our valuable land and property is in foreign hands.
This is why New Zealand First vigorously opposed the recent Overseas Investment Bill and will work to put real safeguards for our markets in place.
The impact of this almost unfettered foreign access to our markets is self-evident.
Prices rise, interest rates rise, the dollar rises and when the bubble bursts – as it seems it will soon – everybody suffers.
The second level of concern is the domestic New Zealand property market. Like all markets this goes through cycles and the property market like the New Zealand economy has enjoyed a good ride over the past few years.
But it is subject to increasing volatility.
As the May 2005 building consents information showed, the market has been fluctuating by more than 20% on a month by month basis. That’s significant volatility.
While a surge of consents had occurred leading up to March 2005, recent bureaucratic requirements through the newly established Department of Building and Housing and the new Building Act 2004, have begun to bite.
There is also an over reliance on immigration fuelled consumption in the property market.
This artificial effect on the market again only serves to force up prices and interest rates in the short term, but leads to long term difficulties when the bubble bursts.
You see unlike the seminal Gordon Gekko statement that ‘greed is good’, when it comes to property markets – greed always comes at a cost.
We are now more indebted, both at a personal and national level, than ever before.
This will inevitably impact on the property market – we cannot keep borrowing forever – eventually the credit will run out.
We must also acknowledge that borrowing to spend impacts on prices and this in turn impacts on interest rates.
The seven interest rate rises in the recent past will reverberate in the property market.
Now we must also address one final level of this industry – the provision of adequate housing for the citizen base.
The government does have a role to play when the market fails. That’s how we once became a property owning democracy. It was once a proud boast of the National party.
But the dream of an affordable family home is increasingly out of reach of many now.
We must accept that while the rapid rise in the median house price over the past five years has benefited some – including many in this audience – it has maligned others.
This combined with a deteriorating savings base is impacting on home ownership rates.
We in New Zealand First believe homes are the basis of family life and incentives should be in place to facilitate families into their own homes.
These incentives must be a mix of enticements to save and greater provision of affordable housing.
You know in the US they have a term for those who are discarded by the property market and are forced into makeshift homes.
They are called trailer trash.
Well let us hope that the only people in New Zealand Forced into this type of existence are Lions tourists for whom it is a temporary experience.
But I would make this point in conclusion – everything we have discussed today is interlinked.
From the impact of globalisation on property prices, through to leaky buildings, nothing in the property market occurs in isolation. Governments and regulators must be cognisant of this reality if they are to do their job effectively.
This is the year to encourage them to do so.