If you are speculating on the New Zealand property market, you are a parasite, not an entrepreneur. (Same goes if you’re speculating on anything for that matter.)
You are the people who give real entrepreneurs and capitalism a bad name, under the guise of “simply taking advantage of market conditions”.
Now I’m certainly no anti-capitalist or “money is evil” type martyr. In fact I am a champion for the notion of making money, and I encourage everyone to do their utmost to fulfill their potential to get rich. But do it by adding real value. Do it by making the world a better place for others, not just you. Do it by being conscious about how the choices you make in the process of making money, contribute to, or erode societal, environmental and collective well being.
Leveraging your position to make money without adding value, does not make the world a better place. Making $20k-$30k a week, or flipping properties up to three times in a day that you have made little to no improvements on…? At what cost to your fellow New Zealanders? At what cost to your children and grandchildren, your teachers, nurses, police and fire service workers? Your bus drivers, waiters, shop assistants and all the other ordinary New Zealanders you rely on to serve you the bottles of Dom your speculation is paying for? I’m sorry but that’s hardly something to be proud of is it?
Study the history of economics and speculative bubbles, and the typical excuse made by speculators is something along the lines of, “But I’m just doing what any reasonable investor would do in my position. I have a family and a responsibility to take care of our financial well being. It just shows the free market is working as it should… I’m paying taxes on my profits…” and my favourite, “If I don’t do it, someone else will.”
Bullshit.
No one is forcing you to throw fuel on the fire. You do not have to partake in exacerbating the housing problem. You do not have to make money by making it harder for first time home buyers on an average wage, to own a home. You (presumably) have the power of free will to choose what you will do with your money.
“Yeah right,” is the usual response. “What else is going to give me such a great return with such low risk? The share market? New Zealand doesn’t have enough high growth global companies to make it worthwhile.” Hmm, I wonder if there’s a relationship between our addiction to property investment, the current property bubble, and our underdeveloped share market?
Now let me clarify, I’m not having a go at landlords here. Just the ones who are leveraging the capital gains they are enjoying off the backs of the speculators to amass outrageous portfolios at a time when we do not have enough houses to go around.
Their usual story is, “Us landlords are providing a valuable service. We provide homes for those who can’t afford to buy their own.”
Look, landlords… absolutely… Your rental income is a just reward for letting others do what homes are meant for ie live in them. No doubt your yields have been sorely eroded by the rampant house price inflation (and will need to be rectified by increasing rents). And goodness knows the new investor LVR’s and capital gains taxes must be hurting you.
But you do not have to own 20 or 50 or 100 houses. Are you seriously saying you have no other option? Do you seriously deny that your assembling of mass property portfolios is making it harder for average Kiwi’s to get into a home? The enormous self perpetuating capital gains you’re driving are just a bonus right? How do you sleep at night? More comfortably than the growing number of families shacking up in garages, cars and campgrounds no doubt.
But coming back to my original point (the one about speculators being PARASITES, not entrepreneurs), before I get anyone wanting to argue semantics, let me back up my assertions with some sort of logical rationale.
Firstly, an entrepreneur is generally defined as someone who risks capital, in the pursuit of making a profit.
Speculators on the other hand generally only emerge when the price of an asset is assured to rise, that is, when they are satisfied that there is no risk. They rely on knowing that there will always be someone prepared to buy at a higher price, and they like to reassure each other and anyone else watching that, “This market is only going up, prices will never drop. Get in now because you just can’t lose in this market!” Why? Because they know they’re not adding any value to substantiate their profits.
Secondly, without getting all soppy, real entrepreneurs know that making a profit, without also making the world a better place, is no longer good enough. Again, real entrepreneurs add value, not distort it and suck the life out of it.
One day the music will stop. When it does I hope it’s the speculators and the financiers and agents that enable them, left holding the “baby”. The unfortunate thing is that it will also be young first home buying couples who have poured in their life savings, secured by the equity in their aging parents house, who will bear the brunt of the fallout.
So New Zealand property speculators… well done. Fill your boots, it’s a free market after all. Well done on exercising your right to profit without creating value. Just don’t let those profits fool you into thinking you’re the type of “entrepreneur” this country really needs.
Richard Liew is the founder and Editor of NZ Entrepreneur magazine.
