Oh boy, am I glad I didn't "jump in". Best to run a mile when the banks offer low rates. Reminds me of those swine fishing with them nasty catch or kill all nets.

.......... or, you could argue that more domestic bank deposits become available for lending, injected by households.

But where would those deposits come from? Wages and salaries? (but no, they are static, not growing strongly, & too slow to make an impact) Taken from equities etc? (but no, Kiwis have sweet FA in equities, & what they have has declined)

By far the biggest source of funds that NZers have available (75%) is in their houses ("About three-quarters of New Zealanders' household savings are invested in property - including owner-occupied houses and rental properties" - Mary Holm, http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1058...

So therefore of course they could withdraw money from HOUSING to put into HOUSING ..........

Oh hang on........something wrong here.

Looking at it another way. The OECD says NZers are net dis-savers. So the only way that they could start saving is by reducing spending. & the biggest form of spending they have is of course into housing. So exactly the same argument would go - they would have to spend less on HOUSING so they could put the money in the bank so it could be lent out to HOUSING. They would be withdrawing housing equity to increase housing equity

D'oh!!

MattinAuck: Oh yes, I surely agree. I have never been one of the Infometrics / BNZ / Pres of Prop types who visualise a coming Golden Age of Housing Property. There are various reasons - poor economic growth, rising unemploymnet, over-indebtedness, dairy farming tanking, etc - that indicate that. But some of the property promoters make arguments the other way - that there is a shortage of land, inrush of immigrants etc, so it could become an argument of whose forces are the stronger.

My point is that I believe it is systemicallly impossible for house prices to surge - Bollard has installed an automatic correction device. If this is the case, it is the 1st sensible economic initiative I've seen in NZ for over 20 years, unless some have slipped under my radar.

Cheers

I don't know about the breakfast. I see the banks having a thirty to fifty year meal.

Fat chance of rates coming down David and don't expect the nat govt to change it's mind about bailing out the building sector with the 'welcome to debt loans' that are dressed as a helping hand to peasants who would otherwise be refused credit. Just another stupid decision to add to dozens of others that come out of NZ govts.
The 2 and 10 year USSA toilet paper auctions brought a sharp rise in rates for both, Friday their time. Expect this to show up here next week. "cumulative 2010-2019 deficit of $US9 trillion" yes that's the new number from Obama David and it all has to be borrowed! Go figure what that'll do to mortgage rates here. He raised it from a lowly $US7 trillion.

No Steven, the rates will rise whether the depression gets worse or not. It's a consequence of the borrowing by all the thieiving govts and the corporate mob. Obama upped the US fiscal debt for 2010 to 2019 to 9 trillion! Throw in the pommy debts and the others to discover debt financing is greater than credit supply. Rates will rise.

Martin Hawes has his finger on the throat of the economic corpse that is the NZ economy. No pulse to be found. This in The Herald today "Almost without realising we have turned into a nation of speculators" Oh some of us realised it Martin. We even posted stuff about it. Bollard warned about it. Labour were busy buying votes with the temp jobs. Then along came John on his trusty stead and his sidekick Bill riding the Ass and for a moment it looked as though they would sort the crap out and make our day. We enjoyed that moment in time.

Matt in Auck,
Hawes is describing ponzi like speculation.

From
http://www.debtdeflation.com/blogs/wp-content/uploads/papers/9780230_203...

Most important from the point of view of explaining the modern phenomenon of what is surely the greatest speculative bubble of all time, borrowing purely for the sake of speculation has to be added to the production-oriented borrowing that is the focus of this model. Ponzi-financing, which plays such a key role in Minsky's 'financial instability hypothesis', has been the driving force behind the unprecedented accumulation of debt (relative to income) that is the hallmark of our times.

This borrowing is driven by expectations of asset-price appreciation, and the bubble itself drives that price appreciation. The scale of the debt is obvious from Figure 9.10; the scale of the asset-price-appreciation bubble can best be seen by applying one key aspect of Minsky's hypothesis, namely, that there are two price levels in capitalism - one for commodities, the other for capital assets - and deflating asset prices by the consumer price index (Figure 9.11). The results are truly dramatic. In start contrast to Greenspan's well-known remark that an asset bubble cannot identified until after it has burst, the bubbles in both the share and housing markets were obvious by mid-1994 and mid-1996 respectively. By mid-1995 and 200, the had reached levels that had never previously been experienced. By the time they burst, they were 3.7 and 2.1 times their long-term averages. What is opaque from a neoclassical/Austrian perspective is obvious from a Minskian standpoint.

Good point Matt on the 7% yeild.

I think a lot of investors who brought up large during the boom have benefited from relatively high rent increases (altho still small compared to house price growth), so buying at 5% yeild soon becomes 7% plus based on historical cost.

This is another benefit that is now lost due to flatening off of prices and rent, and not only are there few properties around that have good yeilds but the likelyhood of the yields increasing in the near future based on historical cost are slim to none

That would make you legally bound to report the crime Lance L and criminally liable if you don't!

marky mark - i think luxury items dont necessarily follow the same rules re income eg art, vintage cars etc. You have to factor in that some wealthy people love toys even though they could rent them for a lot cheaper for the small time they use them. you also need to factor in ego value - no limit there it seems. This does not mean that they cant drop spectacularly however, and they are subject to heavy speculation.

Matt in Auck,

Whats most disturbing about this is not the policy, its who its coming from. Unions are supposedly about getting whats best for your average Jo, NOT using taxpayers money to line the pockets of property related interests. This is how insidious the bubble is - either everyone has been conned, or the rort goes deeper than we think. Maybe a bit of both. I believe my parents honestly think it is best for me to buy a house, they have just been conned thats all. I get suspicious with govts, and now it seems unions as well.

Housing affordability for key service providers such as Teachers IS a big issue.
And it will become bigger now too, as more and more of the older teachers retire.
I heard the other day that the average age of teachers is 59 years of age. Back when teachers of this age were first home buyers housing was much more affordable, also many primary school teachers are female and if their husband has a reasonably well paid job then a teaching salary is fairly good as a second income.
But taxpayer handouts is a crazy idea.
Is there a God out there? Surely its not a miracle to expect those morons leading us that a change to planning regulation would be a big step in the right direcoitn to addres these issues????
And once again surely we need to think about immigration! Lots more immigrants means potentially lots more children to teach, equals lots more taxpayer funded teachers who can't afford housing!!!!!

Ego... Status... Self-gratification... it's the same thing in the end.
Who really carries the burden?