Matthew Gilligan's latest blog post - a must read for property investors

[donna]

Check this out...

The argument goes like this: every dollar that goes into residential property is a dollar that should have gone into a "productive" business. Property investors add nothing. They simply outbid first-home buyers, sit back, collect rent and clip the ticket. It is a neat political slogan. It is also wrong, and dangerous.

What is a productive investment?

What is not a productive investment?

Read Matthew's post here

[McDuck]

What is a productive investment?

What is not a productive investment?

To answer your question honestly.
It's a sliding scale.
With biological needs at one end, like growing food and warm clothes for winter.
And bilogically uselss things at the othe end, like nail glitter.

Also it depend on whos asking.
If it's a government not a person, it usually means "will it reduce our threatening debt?".

But I expect your article will just be what's called denial and delusion.
Where a unproductive activity is masked as a productive one.

In this case it's probably not meaning the survival of the body,
but the survival of the sense of self.
The mental construct inside the human brain.
It keeps the keeps the person feeling happy.
(through delusion)

Well you asked..

[donna]

Matthew sees it differently

Productive investment.....

A rental home shelters a household. It is funded with private capital. It carries private risk. It requires repairs, maintenance, insurance, rates, compliance, debt servicing, administration and management. If a property investor builds a new dwelling, subdivides a section, converts a tired house into a warm and compliant rental, adds a minor dwelling, funds a townhouse development, or provides long-term accommodation to a family that is not in a position to buy, that is productive activity. Housing is not optional. People need somewhere to live.

Unproductive investment - one example

Matthew says landbanking - and he has many more.

Def. property speculation - though hard for that to be a way to quick profit today.

[McDuck]

Matthew sees it differently

Productive investment.....

I get what you mean.
The "leach" impression is partially wrong.
There are some property speculators (because that's what most "investors" are), who DO add value.
But overall, it's a passive way to transfer wealth.
And it enables vast sums to be exported offshore to the Aussie Banks via Debt servicing.

Personally, I do thnik it's the Govts and the Councils and the Banks, shifting the blame off themselvs.
Because ultimatly the "investors" are just the money mules in the rigged system.

PS. I use R.O.I. instead of "Productivity", it's cleaner.

PPS. (Adam Smith has no such kind words for landlords of old).

PPPS. Yes , I'm im not blameless myself. I'll admit that.
I just try to minimise it as much as possible.

[semaj_nil]

Is generating electricity productive?

Electricity itself does nothing. But without electricity, much of the productive economy cannot function. So my answer would be: yes, generating electricity is productive.

Is flipping electricity to another buyer at a higher price productive? No.

Is building homes productive?

Applying the same logic, if productive industries require human beings, and human beings cannot live without homes, then my answer would also be: yes, building homes is productive.

Is flipping a house to another buyer at a higher price productive? No.

So what about selling shares in a productive company to another buyer on the stock market at a higher price? Is that productive?

The housing sector was fine when everyone enjoyed healthy and sustainable asset appreciation. The problem began when prices deviated from that healthy growth path.

Since then, people who do not own a home have increasingly come to despise the housing market.

[McDuck]

Applying the same logic, if productive industries require human beings, and human beings cannot live without homes, then my answer would also be: yes, building homes is productive.

Your logic is falling over because the "investor" person is doing two jobs.

Bloodsucking, and building.

Simple Logic only works if the people have simple single functions.

So in this case your poor little picked on people ( boo hoo ) are 99% disgusting bloodsucker and 1% builder.


Ok, I'm exaggerating for effect.

( Anyway, The Banks and the Govt need the " investors" to be money mules for their debt and cashflow, (also need to use immigrants for the same purpose). So you are just being played. )

[semaj_nil]

Your logic is falling over because the "investor" person is doing two jobs.

Bloodsucking, and building.

Simple Logic only works if the people have simple single functions.

So in this case your poor little picked on people ( boo hoo ) are 99% disgusting bloodsucker and 1% builder.


Ok, I'm exaggerating for effect.

( Anyway, The Banks and the Govt need the " investors" to be money mules for their debt and cashflow, (also need to use immigrants for the same purpose). So you are just being played. )

You seem fixated on your own viewpoint and only see the examples that support it.

There are plenty of ordinary homeowners (who you'd apparently label "bloodsuckers") who upgrade to a larger family home and rent out their previous one. Not every property investor started out owning their dream home and then decided to buy investment properties. Many simply progressed over time.

My original post wasn't about defending property investing. It was an objective answer to the OP's question: what counts as a productive investment, and what doesn't?

Using capital to corner the electricity market and drive up prices wouldn't be a productive investment either. The same principle applies regardless of the asset class.

[McDuck]

There are plenty of ordinary homeowners who upgrade to a larger family home and rent out their previous one.

Not every property investor started out owning their dream home and then decided to buy investment properties.

We are in total agreement on that James.

They would not be called bloodsuckers.

They would be called accidental bloodsuckers.

Now, some questions for that failing logic of yours...
What proportion of the money in the housing market is accidental blood sucking?
And what proportion of the money in the housing market is deliberate Predatory bloodsucking?

PS. I'm guilty too.
But like I said.
I try and mimimise it as far as possible.
And it has cost me a fortune to play fair by my society

But we are fooled!
Focus on the true puppetmasters.
The govt is just using you to suck the life blood out of renters and the next geneation.
They could just simply use tax to pay down their debt,
(but the they mignt not be so popular).

* Here's an idea.
Get those empty Govt owned apartments in Wellington,
update them, and then remove accommodation allowance for politicians,
and say they can stay in the apratments if they need to.
Now that's a smart use of our tax dollars.

[semaj_nil]

We are in total agreement on that James.

They would not be called bloodsuckers.

They would be called accidental bloodsuckers.

Now, some questions for that failing logic of yours...
What proportion of the money in the housing market is accidental blood sucking?
And what proportion of the money in the housing market is deliberate Predatory bloodsucking?

PS. I'm guilty too.
But like I said.
I try and mimimise it as far as possible.
And it has cost me a fortune to play fair by my society

But we are fooled!
Focus on the true puppetmasters.
The govt is just using you to suck the life blood out of renters and the next geneation.
They could just simply use tax to pay down their debt,
(but the they mignt not be so popular).

* Here's an idea.
Get those empty Govt owned apartments in Wellington,
update them, and then remove accommodation allowance for politicians,
and say they can stay in the apratments if they need to.
Now that's a smart use of our tax dollars.

I am neither an economist nor a domain expert, so I can't say what the right distribution of wealth or money should be. However, if we look at the different stages of life, young people fresh out of school entering the workforce will either stay at home with their parents or flat/rent. (Sure, some lucky, silver-spoon-fed youths might get a free house from their parents, or at least have their deposit paid for). The vast majority, however, will live in a rental while they save for a deposit on their first home, should they want to become homeowners. But who is going to provide these rentals? It has to be either private landlords or the government. In a perfect world, rental supply would grow proportionally with population growth, meaning no shortages and, consequently, stable prices.

What actually happened over the last few years was that a large number of wealthy expats returned home and tried to buy property, which triggered FOMO due to the limited stock on the market.

Of course, availability is only part of the issue. Most people still expect a quarter-acre section and a standalone house in a nice, low-crime neighborhood close to work. Who wouldn't want a property like that? The highest bidder wins, which drives prices up even further. A major contributing factor to this is our poor transport system; people are willing to spend top dollar on central locations just to avoid a two-hour daily commute.

Finally, New Zealand is an immigrant country that aims to attract "above-average" people from around the world. As a consequence, the domestic population is forced to compete against these well-educated, highly skilled, or wealthy immigrants.

I have always tried to tell people, for every $10 profit in rent, the govt takes $2-$3.

[McDuck]

young people will either stay with their parents or rent.
The vast majority, will live in a rent.
But who is going to provide these rentals?
Private landlords or the government.

Many of the people who are retired now took a state advance loan.
They left home at 19, got married, got a job, did nightschool.
Those same loans built many of the homes landlords now rent out.