A vote for property?
Total Property - Issue 6 2017
The insights that will help you plan your commercial property strategy ahead of next month’s general election.
Property and financial markets do not like uncertainty. Investors don't like uncertainty. And, historically, general elections are a source of uncertainty.
The general election on September 23 has already added a degree of uncertainty to a residential property market which, over recent months, has already seen a softening of activity in the face of tighter lending criteria. Recent Bayleys research has shown that residential investors are more likely to put off purchases until after the results of an election are known and the subsequent reaction of the market.
For the commercial property sector, which is more investor driven than the residential sector, and as a result more sensitive to changes in economic policies - both major and minor - an election can be an unwanted distraction.
And although New Zealand has been recognised for its political stability, the surprise resignation of Andrew Little Labour leader at the start of the month and recent electoral turmoil around the world, including the UK’s vote to leave the EU and Donald Trump winning the White House, show that political upsets can happen.
Information is key to safely navigating uncertainty. Total Property asked the country’s major political parties what they plan to do for the sector and the economy in general, and why their policies will make a difference. We also asked leading political and property experts what they considered were the major challenges facing the sector and the winning party.
Prime Minister Bill English, National Party Leader
The economy will remain our absolute focus should we have the opportunity to lead New Zealand into the 2020s. If we build on our current economic success, we can offer everyone better opportunities. But if we let our focus on the economy slip, those opportunities will disappear very quickly.
We are creating 10,000 new jobs a month. The books are in surplus, debt is falling and our exports are growing. And remember how we used to ask ourselves why so many Kiwis were leaving? Now they’re staying. Five years ago a net 40,000 people were leaving for Australia every year. This year, a net 800 came home.
Of course, that means we have to invest and build for growth, and we embrace that.
That’s why our investment in roading and rail, in new schools and classrooms, in defence, justice and health is a record $32.5 billion over the next four years, as outlined in Budget 2017. We are also investing heavily in growing public services, with an additional $7 billion in spending over the next four years.
Phil Twyford, Labour spokesperson for building and construction
This election is an opportunity to tackle New Zealand’s growing infrastructure deficit. There is a growing sense among New Zealanders that these problems have gone on too long and we need change. This election is about which party has the positive plan to take on these issues. The current government refuses to acknowledge there is even a problem. Labour has a fresh plan for investment.
By not adopting the current government’s plan to cut taxes by $400m for the top 10 percent of earners, we will have the money needed to invest in our public services and infrastructure. That will allow us to build more classrooms, fund our health services properly, and invest in transport projects like light rail for Auckland. At the same time, we’ll take a breather on immigration by closing off the backdoor route to residency through low-level education and low-value work.
We’ll also reform the planning rules that choke off the supply of new land driving up urban land prices. By abolishing the urban growth boundary and instead using more intensive spatial planning in the growth corridors, we will allow our cities to make room for growth. We will also free up financing for new infrastructure by tapping into bond finance serviced by a targeted rate on the properties in a new development.
Metiria Turei, Green Party co-leader
We would like this election to be about the serious issues that New Zealand faces - not just in the next 10 years - but the next 100. Serious issues like housing, climate change and poverty.
I think New Zealanders are understandably frustrated with the neglect and underfunding in critical public services in the last eight years.
Too many in need of treatment have to spend months in waiting lists that are too long because the health sector hasn’t been funded adequately with persistent problems in underfunding.
We’re spending too long in gridlock as the government wastes money on Roads of National Significance - some with meagre returns instead of properly funding critical public transport.
Ashley Church, chief executive of the Property Institute of New Zealand
Labour’s policies around taxation present a potential risk to the economy, although these are unlikely to be significant enough to act as a disincentive to investment and tend to be focused on residential rather than commercial investment. In general terms, the differences in party policy are on the fringes rather than at a fundamental level.
A simultaneous downturn in any two or three of our strongly performing sectors - tourism, dairy, technology and education - would present a challenge to our economy, but this isn’t likely and we can cope with reduced economic activity in any one of these sectors. The broad-based nature of our current economic performance bodes well for ongoing strong performance.
Oversupply is always a risk to our commercial sector, but again, doesn’t appear likely in the medium term. Auckland, Christchurch and Wellington are all currently going through significant renewal of their commercial stock and this will eventually lead to redundancy and repurposing of commercial property at the bottom end – but the risks are manageable.
Connal Townsend, Property Council chief executive
Despite recent research showing that the property sector is the largest contributor to the New Zealand economy by some margin - at 13 percent of GDP - it does not tend to be a big election issue. That may be because there are not many votes in the words 'commercial property'.
But voters do care about the many challenges facing our industry, such as congested infrastructure.
On these key issues the major political parties all have good workable ideas. That means the Property Council and the sector as a whole will be able to work with the Government post- September 23rd regardless of the result. That is good for the commercial property sector and, given its importance to the economy, good for New Zealand.
Read more market insights from Total Property
Subscribe to receive the latest commercial news and insights from Bayleys Total Property