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Policies Affecting Investors

Mason Reed looks at 2020 election campaign promises and their possible effects on property investors.

By: Mason Reed

31 October 2020

By the time you all read this, the 2020 general election will be over and we will all know which party/parties will be tasked with leading the country through the economic recovery phase of the Covid-19 pandemic.

This article picks through some of the party policies, which relate to building and construction, which may possibly affect property investors. Bear in mind, promises and policy statements made on the campaign trail don’t always translate into meaningful action or new legislation as there are other variables at play, such as coalition agreements, practicalities of implementing the policy and electioneering. So, what policies may potentially affect property investors?

Repealing The Rma

All of the major parties are now promising to repeal the RMA, if elected, so it appears that the RMA’s days are numbered.

The purpose of the RMA is to promote the sustainable management of our natural and physical resources. It is unlikely that any new laws will fundamentally change this requirement. It is likely that any new laws will need to take account of all of the existing matters in the RMA, and also will need to consider additional matters (not well covered in the original RMA), such as climate change and more meaningful iwi consultation. That being the case, it is difficult to see how the consenting process (under any new laws), will become any easier, particularly under a Labour/Green government.

It should also be noted that bringing into law new legislation to repeal the RMA would be a complex and timeconsuming exercise. It is unlikely that any new legislation would be introduced until late 2023. I am also sceptical whether any new legislation to repeal the RMA, when it is eventually brought in, would have the desired effect of expediting the consenting process.

Infrastructure

Both Labour and National have announced plans to invest in large infrastructure projects, if elected. The projects generally relate to roading projects. There has been talk recently by Labour, about a pipeline of “shovel ready projects”. However, the Government has been slow in identifying the “shovel ready” projects, and providing the funding. As a result, the building industry still has no certainty as to the nature and level of forward workload and the resourcing required.

Given the lag time between the design and construction phases of major projects, it is unlikely that any new large projects (which aren’t “shovel ready”) will kick-off in the next three years.

It is unclear whether the next government will invest in providing new infrastructure (roading and services), so that new areas of land can be made available for housing. The major constraint to opening up large tracts of new land is typically the supply
of infrastructure and services to that land, and who pays for it. Councils and developers normally squabble over who pays for it. If agreement can’t be reached, the developments don’t go ahead, as the cost to supply the required infrastructure can be significant. If the Government is willing to invest in infrastructure for new areas, then this could help alleviate some of the housing issues, in places such as Auckland. I note, however, that the Greens are against “urban sprawl” and favour densification over opening up more land for housing.

Building Material Costs

Labour has promised to launch an investigation into food and building material costs, if elected. The recent government investigation into the cost of fuel, revealed that two thirds of the cost was government tax and resulted in no meaningful changes to the cost of fuel.

The costs of building materials in New Zealand, however, is worth looking at. The cost of building in Australia is significantly lower than here. There are only two parts of the equation when calculating building costs: labour and materials. The cost of labour in Australia is not cheaper than New Zealand, which leaves building materials as the likely culprit.

If an investigation is undertaken, it is likely that the findings will indicate that we have limited competition in the market, which results in uncompetitive pricing. However, the Government has been xenophobic when it comes to allowing the use of foreign building materials. I doubt this will change in the
foreseeable future, certainly no party has advocated for opening up the market to overseas suppliers.

Some of the policies may serve to only push up the costs of building materials, such as increasing the minimum wage, doubling the sick leave entitlement and providing for an extra public holiday.

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