How our obsession with property ownership is quietly sabotaging national productivity
Walk into any New Zealand café, and you'll inevitably overhear the same conversation: someone explaining why they're buying a rundown villa to convert into their office space.
"Rent is dead money," they'll declare with the confidence of someone sharing profound wisdom. "At least this way, I'm building equity."
This seemingly sensible logic has become gospel across New Zealand, driving everyone from accountants to interior designers into property development. But what if this widely accepted wisdom is actually a productivity-killing fallacy that's holding back our entire economy?
The Case of “Dr Smith”
Consider Adam Smith, a talented medical practitioner with a thriving practice. Following conventional NZ wisdom, he's eyeing up a commercial property purchase for his clinic. He'll spend months hunting for the right space, negotiating purchase terms, arranging finance, and managing the conversion. Once he owns it, he'll juggle maintenance issues, deal with council compliance, and handle the myriad responsibilities that come with property ownership.
But here's the question nobody's asking: What's the opportunity cost of all that time and mental energy?
Every hour Dr Smith spends researching commercial property markets is an hour not spent developing his medical expertise, caring for patients, or growing his practice.
Every dollar tied up in property equity is capital that could be invested in better medical equipment, staff development, or expanding his services.
Renting Isn't Dead Money – It's Smart Capital Allocation
The "rent is dead money" narrative fundamentally misunderstands what rent represents. When you pay rent, you're not throwing money away – you're purchasing a service. You're buying flexibility, liquidity, and freedom from property management responsibilities.
Is paying for electricity "dead money" because you don't own the power company? Is buying groceries wasteful because you don't own the supermarket? Of course not. You're exchanging money for value received.
Rental payments buy you the ability to focus entirely on your core business, while someone else handles the property headaches.
Renting provides strategic advantages too - need to relocate for a better opportunity? A renter can move with relatively short notice. Want to scale up or down based on business needs? Rental agreements offer flexibility that property ownership simply doesn't.
Buildings must also be compliant with ever-changing regulations – earthquake strengthening, ventilation upgrades, accessibility improvements, parking requirements. These costs can be substantial and unpredictable.
When property owners can't afford essential upgrades, they face the devastating combination of a worthless building and a forced business relocation.
Imagine being owner occupier in Tauranga. You purchased your Cameron Road building and invested heavily in renovations, only to watch the CBD decline as development shifted toward the waterfront, Mount Maunganui and Papamoa. That property investment became an anchor dragging down your business, rather than an asset supporting it.
A renter in the same situation could have relocated to follow their customers – a property owner was trapped by their investment.
The temptation for cash-strapped property owners to cut corners on compliance creates additional business risk. When faced with expensive regulatory upgrades they can't afford, some owners gamble by avoiding full compliance – a strategy that only works until it doesn't. It’s a liability exposure that renters simply don't face.
The Productivity Penalty of Forced Property Ownership
When we pressure every professional to become an amateur property developer, we're fragmenting human capital across too many activities – creating a drag on national productivity.
High-performing economies thrive on specialisation. Think of Silicon Valley – the deep expertise, rapid iteration and ability to pivot quickly wouldn’t be possible if all the tech entrepreneurs were also moonlighting as their own landlords.
When you own your premises, capital that could drive business growth gets locked into illiquid property assets. Mental bandwidth gets consumed by property-related decisions rather than professional development. Labour mobility decreases as people become reluctant to relocate for better opportunities when they own commercial property.
Perhaps most overlooked is how property ownership complicates succession planning. When a professional practice is intertwined with property ownership, transferring the business becomes exponentially more complex. Potential successors must have the expertise to run the practice, and the capital (and inclination) to take on property ownership. This creates barriers to smooth business transitions and can limit the pool of qualified successors, threatening business continuity.
When the Building Dictates Business Strategy
The ownership mindset also creates psychological constraints that limit business thinking. Professionals become tied to their property both financially and mentally, making expansion decisions based on existing space rather than business potential. Growth becomes incremental rather than transformational as the building sets artificial boundaries on ambition.
This physical anchoring of ownership creates a more insidious problem in how professionals think about their business growth. "How big can we grow?" becomes "How big can we grow in this space?" The building starts dictating business strategy rather than strategy driving space requirements.
Often, businesses reach maximum capacity not because the market is saturated - but because their premises can't accommodate growth. The property becomes a literal ceiling on ambition rather than a steady foundation for success.
By contrast - renters can ask, "What does our business need to succeed?" and then find space to match. If they need to double their team, they can lease larger premises. If they want to test a new market, they can establish a satellite office without the capital commitment of property purchase.
The space serves the business, not the other way around.
Smart Renting in Turbulent Times
When you rent commercial space, you maintain liquidity, preserve flexibility, and can direct your full attention toward what you do best. In turbulent economic times, this becomes particularly valuable as businesses need to adapt quickly to changing conditions.
Not all rental arrangements are created equal. Smart renters do their due diligence on property owners, avoiding undercapitalised developers who cut corners on construction and maintenance while charging maximum rents.
The ideal scenario involves leasing from reputable developers with solid financial backing, preferably in newer buildings that attract momentum and are less likely to face immediate compliance issues.
For some businesses, in some circumstances, ownership makes perfect sense. But the blanket assumption that rent is “dead money” ignores the very real benefits of rental arrangements - and the opportunity costs of property ownership.
Breaking the Cultural Stranglehold
Changing deeply ingrained cultural attitudes isn't easy, and the stigma around renting certainly runs deep in New Zealand's psyche. Many professionals feel genuine social pressure to own their premises, regardless of whether it makes economic sense for their situation.
But the evidence is clear - forcing professionals to become amateur property developers creates drag on productivity and limits business potential. When we encourage everyone to tie up capital and energy in property ownership, we're essentially asking them to become less effective at their actual profession.
The most successful professionals understand that ownership isn't always optimal. They recognise that paying rent is simply the cost of borrowing someone else's capital – and often, that's the smartest financial decision they can make.
A Smarter Path Forward
Our national productivity challenges are well-documented, but we rarely examine how our property obsession contributes to the problem.
We need to abandon the "rent is dead money" dogma and embrace a more nuanced view: Sometimes, the smartest financial decision is to pay someone else to handle property ownership while you focus on what you do best.
In an increasingly competitive global economy, New Zealand can't afford to have its most talented professionals distracted by property development and management when they should be focused on innovation, client service, and business growth.
After all, the goal isn't to own everything – it's to optimise everything. And sometimes, that means writing a rent cheque and getting back to work.
Nick Stewart (Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha) is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions. Article no. 411.
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