I have just been to a lovely presentation for the NZIER forecasts. However, an issue was raised which brings me to some slight irritation. During the Q&A session it was suggested that New Zealand “productivity is struggling” because we invested too much in housing and not in productive assets.
Such a load of tripe. Here are the two reasons I would say why:
- Housing is “productive”. It produces this thing called “somewhere to live”. When someone consumes the house they are getting this service. This is just as much of a service as getting a hair cut – the only difference is that it doesn’t require a labour input to keep it going!
- We have been told we have a SHORTAGE of housing. How can we have invested too much in housing if we have too few houses – this is a contradiction. And before anyone says “we borrowed to buy houses off each other” lets try to remember that if we buy something off someone else in the country it doesn’t change national debt – it is just a transfer.
There are issues with the housing market. The tax status is a bit favourable and building costs have been held up by consent issues and industry bottlenecks. But this doesn’t mean we have over-invested in housing – so lets stop propagating this urban myth aye.