Stop Calling Us 'Speculators'

STOP CALLING US 'SPECULATORS'

Auckland, New Zealand - 7th April 2017 - Labour’s housing spokesman needs to learn the difference between a speculator and an investor if he’s to be taken seriously, says New Zealand’s biggest group of property investors.

The Auckland Property Investors Association comments are in response to Mr Twyford’s rant at speculators being in the property game to make a fast buck while referring to an investor who is actually working for long term gain. Moot point but the rules and objectives for speculator and investors are like night and day.

In yesterday’s NZ Herald Mr Twyford said he admired people like three-property owner Maxim Sherstobitov, a freight forwarder who had saved hard to get on to the ladder and had no intention of selling anytime soon but then went on to tar him with the speculator brush.

"If they can do that and by playing within the rules, good luck to them. But the question we have to ask ourselves is, is this good for New Zealand and our children and grandchildren that the only way to make a dollar is to speculate in real estate?" Mr Twyford is quoted as saying.

"We're never going to get wealthy as a country by selling houses to each other. It doesn't generate jobs or exports or make the country wealthier. It just shifts wealth between one group of people and another and drives inequality between poor and rich and that's what's going on. This speculation-driven housing bubble in Auckland is a social and economic disaster.”

He is correct insofar as the devastating effects speculators have on our housing market and the economy. But he could not be more wrong by mistaking Mr Sherstobitov as a ‘speculator' rather than an ‘investor'.

This mischaracterisation goes to show that even at the decision-making level, there is a fundamental lack of understanding between what a speculator is and what an investor is, says the association.
“We think a clear distinction is much needed, especially in an election year, for sensible decisions to be made about the housing and rental
shortage in New Zealand.”

This is what defines you:
• It is not what you buy but why you buy that determines whether you are investing or speculating.

• To an investor, a property is an income stream that speaks to the fundamentals of investment (being safety of principal and adequate or satisfactory return ). It is a long term, low risk undertaking, the profit of which is only realised over time.

• To a speculator, a property is a commodity that is intended to be resold for a profit (i.e. capital gain). It is a shorter term, higher risk venture which generates impressive profits at the right point of the market such as where Auckland is at now.

• Investors operate on a much lower risk end of the spectrum being more focused on yield than capital gain. In addition to investing for a better financial future (rather than putting undue burden on the state for our retirements), investors also serve a key social role as accommodation providers for those who are either unable or unwilling to purchase a home. The long-term undertaking also means that investors have a vested interest in the relationship they have with their tenants as well as the wellbeing of their tenants. True investors treat residential tenancy as a business rather than a hobby. The effect of which ensures that tenants are better looked after.

•Speculators on the other hand are essentially profiteering from being right place at the right time. Mr Twyford in pointing out that their activities add nothing positive to our economy. Coupled with the high risk nature of property speculation, the association supports appropriate regulations such as LVR restriction and 2 year bright line test to slow speculators down.

In APIA’s latest survey, 88% of members (investors) have not bought a property since October 2016.

“We are not out there frantically buying the properties - the market condition hasn’t fit within investment fundaments in particular satisfactory return - the simple fact is, prices are such that the returns are simply not there,” says APIA President Andrew Bruce.

"As much as we do not want to be in a speculative economy, we also want to be encouraging Kiwis to take an interest in their financial future by investing their savings sensibly. Property investors serve a dual purpose of securing our financial future as well as provide good housing solutions for tenants. In that same vein, investors should not be discouraged, but rather encouraged.

"The habit of interchanging the two labels (speculator and investor) has to change. Confusing the two only serves to demonise investors who serve a key social function (accommodation provision)." This could result in the exiting of investors from the market that will lead to a rental shortage.

"We want to see political representatives, such as Mr Twyford, take a leadership role in educating the public about the investor/speculator divide and make policy decisions accordingly. Mudding the two will only do the economy as well as Kiwi tenants a great disservice."

Mr Bruce says property investors have a genuine interest in the futures of their properties, as opposed to speculators who are only interested until the date of sale.

Across the country, 83% of NZ Property Investors Federation members’ properties are fully insulated to the RTA’s standards, two years ahead of the 2019 deadline.

"Members are also more interested in long term tenancies."

On a personal level, since February this year, Maxim Sherstobitov has attended 15 APIA landlord seminars/workshops which speaks volumes about his commitment to his portfolio as well as his tenants

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