By David Hargreaves
"Seconds out - Round Three!"
The Reserve Bank's ready to brandish its macro-prudential toolkit again with the aim of jetting water on our raging inferno of a housing market.
Deputy Governor Grant Spencer, who is also the central bank's Head of Financial Stability is speaking at 5.30pm tomorrow at a "private event", in an unspecified location, (isn't it time these very public-focussed announcements were done more publicly?) on the subject of "macro-prudential policy and housing market risk".
It would be surprising to this observer if Spencer explicitly announces new measures. More likely, if the previous RBNZ strategy is followed, Spencer will give some pretty clear broad-brush indications of what's coming. Then the bank will allow some time for 'market' reaction and response and then Governor Graeme Wheeler in probably not many weeks time will follow up with the specific detail of what is proposed.
That was the template the RBNZ worked to when it introduced Round 1 of the macro-prudential measures with 2013's implementation of a 'speed limit' for banks on high (above 80%) loan to value lending. It was slightly different last year when Round 2 - specific targeting of Auckland investors - was introduced, but the circumstances were slightly different given that the RBNZ was then pushing for the Government to make some tax moves against investors, which it eventually, reluctantly did.
Anyway, we should have a reasonable indication a little after 5.30pm tomorrow of what the RBNZ's cooking up for Round 3.
It's to be imagined that Prime Minister John Key, for all that he was being reasonably coy on the subject yesterday, knows exactly what the RBNZ does intend to do.
Based on Key's responses, plus previous indications from the RBNZ, we can be confident that property investors will be targeted. Beyond that there's room for conjecture.
The measures announced last year, and which took effect in November, placed a requirement on Auckland investors to raise at least 30% deposits for buying a property. Additionally, the 'speed limit' on banks' high LVR lending was loosened outside of Auckland.
I don't think it is unfair to describe this second round of measures as having been a complete failure. The Auckland market, after a Christmas pause, has roared ahead, with investors doing much of the roaring, accounting for 47% of the mortgage borrowing in Auckland in May. A 30% deposit? Are you having a laugh, Mr Governor? No problem at all, the investors have said.
Given that the RBNZ has been badly caught out by the failure of the November measures and has been scrambling to assemble new weaponry, it's a fair assumption that as a short-run compromise measure it will apply the same tool. But a heavier one. A bigger mallet. I reckon the central bank will up the ante and say that Auckland investors now have to find 50% deposits.
What about outside of Auckland though?
The RBNZ's November measures may well have contributed to the catching fire of housing markets in other regional centres as some Auckland investors looked for fresh territory. The heat outside of Auckland is now sufficient that the RBNZ will surely move against investors more widely now. But there are a couple of interesting wrinkles.
It is to be imagined that the RBNZ would like to keep some differentiation between Auckland and the rest, given how much more stretched the income to house value ratios are in our biggest city than in the rest of the country. The RBNZ probably won't mind some 'catch up' in income to property value ratios elsewhere. It will, however, have been taken aback by just how quickly that's started to happen.
So, introduction of a 30% deposit limit for investors outside of Auckland seems likely. But, and here's where it gets interesting, will the RBNZ just apply Auckland/non Auckland criteria - or will it decide that some regions are hotter than others therefore they get deposit limits and other places don't. Personally I hope not, because that could get real messy and start producing all sorts of interesting distortions in the market - something which the implementation of the original Auckland measures has arguably already done. What we don't want is people making property investment decisions based on avoidance of regulations. Because that sort of behaviour can then lead to bad decision making.
That's investors. What about non-investors?
Well, remember that the RBNZ relaxed the 'speed limit' on banks' high LVR lending outside of Auckland to 15% of new bank commitments, while leaving the limit at 10% in Auckland. Will this be changed? I now suspect not. Since so much of the market impetus is coming from investors then the RBNZ might decide that targeting them is enough.
Given how the RBNZ has worked these things before, I reckon it will want the new measures in place for October. The original LVR measures were implemented in October 2013, while last year's measures were first targeted for October but had to be delayed to November. The delay didn't do the RBNZ much good. It meant that by the time the new measures were in place the silly season was nearly upon us and the RBNZ was left waiting for March and April property figures to get a good handle on whether the measures were succeeding or - as we now know - failing.
So, that's Round 3
Have no doubts, however, that this round of measures is very much an interim one. Round 4, which is yet to come, will be the real interesting one and hopefully we'll get something of a sneak peak into that one tomorrow too.
Right now the RBNZ is clearly seeing introduction of debt-to-income ratios as a more complete answer to the housing market puzzle. Trouble is, such ratios are not in the macro-prudential toolkit - which appears to have been a bit of an oversight.
I would expect that Spencer's speech tomorrow will give some sort of an update on where the RBNZ is with these and I don't think I'm over-egging it if I say the market might be following this news more closely than the new investor LVR measures.
My view is that I'm not sure the investor limits will work for anything other than a short period of time, for a pause. But debt to income ratios would have a more lasting impact.
Based on the noises the RBNZ has made so far, I think the bank might well want to at least get an announcement on their introduction early in the New Year.
Anything else?
The amount of time it has taken the RBNZ to launch a new initiative does make you wonder if there's been some consideration given to throwing something else at the market too.
In that regard I was most interested in, and gobsmacked by, the new series of figures the RBNZ's now releasing, which show that over 40% of new mortgage lending is being done on interest-only terms. For investors the ratio's even higher, at around 55%.
Surely at least cutting back, sharply, on the amount of interest-only loans would dampen the enthusiasm of some investors and would be worth considering as a new measure to deploy.
If the RBNZ's not at least considering that, then it should.
86 Comments
Just out of curiosity does the value of a share portfolio get taxed on the increase in value of the portfolio from year to year or only when the portfolio is liquidated?
In the event of the former would holding property in a company whose shares appreciate in value annually because of the capital appreciation of it's assets allow the capital gains to constitute income?
Capital gains on NZ shares (and most Australian shares) are taxed like houses. If your intention is to derive an income by buying and selling, the gain on selling is taxed as income. There's no taxation on unrealised gains. If you're selling due to a 'change in circumstances' or whatever rather than as a trader, there shouldn't be any tax to pay on the capital gain.
Overseas share holdings over $50k (purchase price I think?) are taxed as if they have received 5% returns, regardless of your actual profit/loss.
Not an expert so this could be a simplification, please correct me if I'm wrong.
Given that my comment was duplicated I figure I'll amend this one with another question that springs to mind based on this article.
If you hold property in a company that borrows money (perhaps from yourself) and pays that money to you as a dividend would that constitute income for the purpose of Loan to Income ratios?
There are no proposed "loan to income" rules that I am aware of but in my opinion the above structure should allow the dividend to be included as income. It is obviously a very bad tax planning arrangement as the shareholder would pay income tax on the dividend with no available imputation credits provided by the company. Basically turning a capital amount into revenue (really bad tax planning wise - but good for the Government's income).
You'd lose the difference between your marginal tax rate and the corporate rate. What the company borrows and pays you as income this year it would repay as debt (not subject to tax) next year. Effectively you'd be moving income between years paying your or perhaps your trust's marginal tax rate as opposed to the corporate rate. With sufficient negative gearing in your personal portfolio or sufficient trust beneficiaries on lower tax rates than the corporate rate you could effectively mitigate even the cost of the difference between corporate and personal tax rates
Think of it this way instead of paying more interest to the private banks you'd likely end up paying quite a bit less as tax to the socialist government instead. Additionally you wouldn't risk running foul of the IRD, they like more tax.
Admittedly if you don't already have trusts and companies some setup cost will be involved (still way less than any premium the bank may attach)
You cannot get a deduction for repayment of capital borrowed. You can get a deduction for interest paid on the funds borrowed however; but if you are paying interest to the bank that doesn't help. If you borrowed from an associated entity (e.g. the company borrowed from you and you charged interest) then any deduction the company claims for interest will be offset by interest income the associated lender would be required to return.
I posted this in the NBR comments but it's behind a paywall so others might be interested in the Barfoot auction that I went to this morning - see below:
7 of 13 houses were passed in - a few with no bids at all. Including 2 bare-land sections not one bid.
3 sold for below homes.co.nz valuation (eval)
3 were negotiated for hard and sold below vendors reserve.
Very different to when I was in the auction house two months ago - where nothing was passed in.
Debt to income ratios. If the government is ready and so is RBNZ, why should their be delay as am sure things can be speed up.
One sentence that PM said was correct that is is just do what has to be done and no talk. Am not sure if he actually meant that for if serious, he himself would have been taking some action instead of RBNZ, alone.
Intend to do and stop speculation is missing in government as we do not see any all out effort/measure.
RBNZ may try to do something but as long as national party does not act, nothing much will be achieved. It is like walking one step forward and then two steps backwards.
National Party has to really do something which shows result to gain the lost trust as is now known as party of denial, lie and inaction, who know just to blame other and work for everyone except New Zealanders, who voted for them.
Survey below shows the trust that Kiwi has of their government - National Party.
https://www.tvnz.co.nz/one-news/new-zealand/nz-facing-crisis-distrust-f…
I notice John Key will not act against speculators and investors for fear of loosing their support. He could prevent these people claiming tax breaks against their interest amongst other things.
Instead he has gone for the cowardly way of slowing the housing market by telling the Reserve Bank to do something.
In this way his support from the wealthy investor sector will not be lost.
We are calling for the RBNZ to come out and put "artificial" controls to limit investors from getting too involved in the housing market because they are buying too many houses. First we took out depreciation claims in the hope investors will back off buying too many houses as wrongfully thinking on the depreciation "advantages" available to investors. What happened to prices? We all know. Then came in 20% deposit followed by 30%. What happened to prices? Again we all know. Now we suggesting raise deposits to 50% and god knows what else. This peculiar and weird intervention may have good intentions but who is going to increase the number of houses required to relieve the housing shortage. The developers can get a break as well as there will not be much building required as there will not be enough buyers as investors will be locked out. At least the investors game, whatever they playing at, increases the total no. of housing unit. Kill this, kill the unitary plan-- what will we achieve- quite the opposite of the desire to remove the shortage of housing and reduction of house price inflation. just because we currently have a raceaway housing price inflation, does not mean we get on and start acting silly. It seems all the sensible solutions that was suggested in the past have ended in the garbage bin--the likes of the Auckland unitary plan to name one. You go to a city like San Francisco and you go as far as 10 km from the city center and you see 3 to 8 story residential structures touching each other, yet it does not look like its "shanty town". Remember, investors do not "eat" the houses, they rent them out and if they have too many in total, the rent comes down--who is complaining? Wake up and allow intensification and relax on the investors (dont get too personal about them) before its too late.
this is where you over simplify and get yourself in trouble...I rent out multi-million dollar homes with 4 to 5 bedrooms each to people in their 20's & 30's....my properties are from 1900's and are not for FHB...yet you say I am the problem, what I am allowing are people who don't want to buy (remember you don't have to it to you don't want to) or people that are saving up to buy so that can live fairly cheap in inner city Auckland, you come after me and my tenants will be the 1st to pay up as I put up my rents 10-20%...don't like it, move to papakura
I agree keywest, a good friend rents a beachfront property while he invests his own money into commercial real estate. His logic of renting, was that the $1,000 a week rent, was cheaper than having his own capital tied up in a Beachfront property when his commercial properties earn a much higher % return.
I just rented a central Auckland property to a young couple from abroad staying in Auckland for a two year work project. They can easily afford the rent with both on high incomes and get a place that perfectly suits them as has a double garage and allows a dog. How could they do this without people like me?
Just a rental market comment here Zac - Half heartedly I am looking for another place to rent in central Auckland. What I have noticed is that a lot of the stock being offered for rent is on an initial one year term, then I go and have a look and they are very obviously new landlords who have done a quick tart up (checked them on QV too)- I just wont go anywhere near a place like that, the chances of ending up homeless due a circumstance change are way to high. 5 of the 6 I have looked at have been in this category over the last fortnight.
A one year term is fairly standard for agents to get renters to sign up to. I usually just agree to this and when the year comes around I will sign for another year if the tenant really wants to but they usually don't. It's unusual to do more than a year although a relative of mine signed tenants up for four years so the tenant's kids were sure to see Epsom Girls Grammar through to the end. It does work both ways in that the tenant is obliged to see the term out so they lose a bit of freedom there.
The tarting up maybe because they have just bought it. QV stats take a while to show up I think.
You shouldn't end up homeless though as other houses will be available in theory. The rental market is odd though in that it can get very busy, usually just when you need to rent as I found out once with a toddler and heavily pregnant wife in tow. It wasn't nice having to live on food hall food.
"We are calling for the RBNZ to come out and put "artificial" controls to limit investors from getting too involved in the housing market because they are buying too many houses."
Artificial? The whole god damn OCR is artificial, interest rates are artificial, Fiat currency is artificial.
The RBNZ's sole responsibility is to protect the solvency of banks via all these methods. Secondary to them is the economy as a whole, which again leads back to protecting banks.
Investors and Speculators can quite frankly go ......suck it!
Well said ... can't beat the foreigners , so let's bash the local investors and we will deal with rental shortage and higher rent prices later eh? typical kill then count scenario.... I might add, Does anyone really believe that FHB ( or renters) can now afford the houses that are snitched by investors ?? if they could they would !!.. but some people believe that shunting investors out of the market will bring the prices down to a level that is within the reach of FHB .... I don't think that will happen and the market will stall. ! Or allow better prices for the O/seas buyer to have a feast ... lose- lose ...
100% correct Eco Bird. Remove the foreign money from the property market before blaming and punishing NZ'ers. The market does need landlords, let them be NZ'ers so that if they make money it stays in the economy. Removing the foreign investors will allow the market to stabilize at prices that are functional.
I have a feeling the speech tomorrow may be a bit anti-climactic.
An investor LVR limit of 50% will not have much of an impact - considering the average portfolio has increased in value by 10%+ since the last round of LVR restrictions were implemented.
Wildcard for tomorrow might be an indication from the RBNZ to limit the period of time a property can have an interest only loan against it (e.g. 2 years).
Debt-to-income implementation will be amusing as the RBNZ attempts to set a Goldilocks level that doesn't crash the market (good luck with that). Having said that, DTI makes sense and is a macro tool with teeth.
I hear this all the time.
rents can only increase as to peoples ability to pay you can not pay more than you earn
and as we have no wage inflation we are nearing the point people can not afford the rent, what then?
that is when they make the choice to leave either for somewhere else, a garage, squeeze three families in to one house, or last resort the street.
so what you will say plenty more immigration to take there place, problem is job they replace will be the low paid that have gone.
it is now affecting people further up the pay scale and soon companies will start to be effected by trying to replace staff, and this is already happening
Misleading! 80 percent of Singaporeans live in government-subsidided flats. Many of these are quite nice and contemporary in design. A 4-bedroom flat to rent is about $1,500 a month. To buy they cost $200,000 to about $800,000 depending on size. Govt chips in $40,000 if you buy near your parents. It has also put in numerous parks, cycle connectors, new underground train stations near the newer housing blocks. The 20 percent remaing, live in condominiums or in landed property. Naturally these are much more expensive to rent.. There seem to be several posts lately using Singapore as a disingenuous example to contrast 'good' Kiwis have it, in raality there is alot to learn from its good governance and also how it has safeguarded first home buyers.
The problem is that it is not a free market subject to free market forces.
If it was a free market, then investors should not expect Government assistance in the form of massive tax write offs against interest on their mortgages. It is not a level field as first home owners cannot do this
Get rid of the tax incentives on rental properties. If the rental property runs at a loss then the loss should only be able to be offset against future gains on that property. Not the owners personal income derived from other sources.
This would level the field of play and rental ownership would have to operate as a business - ie make money through its operations should be the goal, which are taxable, which then benefit the country as a whole.
This is the sole reason (even outside of the current insanity) people invest in real estate.
Yeah tomoorows RBNZ may be anti -climatic unless they announce the date for debt to income restriction.
Need real measures but again along with RBNZ, national govt too should have announced but will not as they just want to show that they are doing something but reality as PM said interested in housing bubble to continue.
This shows the trust people have of establishment under national party - hope they do something meanjngfull as 50% in Auckland and 30% in rest of NZ will not help much without debt to income.
Coming to a mansion near you? Vancouver has a problem with rotting, empty mansions whose owners have "disappeared". One was in fact found, in 100 pieces.
http://www.google.com/url?q=http%3A%2F%2Fwww.zerohedge.com%2Fnews%2F201…
Most of the interest only is to maximise the TAX loss on the rental investment which is 100% debt encumbered but with security over the persons residential house by personal security. Taking away int only and property becomes cashflow negitive at AKL yields.... worth a crack along with extending investor 30-40-50% rest of NI
Its now impossible for a bright young thing making 75-80k to buy much in AKL anymore..... minimum LTV , etc etc was quite easy back in 2000. (Remember the 104% loans before the GFC... so you could buy a furniture pack....)
National is not doing itself any favours with the 18-30 voters who normally stay away from elections, it might surprise the polsters who survey everyone what happens as th epolsters have not ever asked will you vote and discared the no's..... young voters will vote this election
I would suggest paying close attention to the US election.
1 Unless we have the same LVR figure throughout the country we will just move the problem around the country. But then Key did say that he thought that the rest of NZ wanted the Auckland disease.
2 What is the point of restricting Kiwis and making it easier for foreign investors. Silly me I forgot that this government's objective is to sell NZ out from under us.
3 The government is the only body with adequate powers to deal with the fundamental causes of this problem and it is squarely their responsibility. However as they running to an agenda that is contrary to the interests of New Zealanders it suits them to deflect public pressure by hiding behind the skirt of the Reserve Bank governor who every body knows is very limited in what he can achieve.
1. Key is wooing the home owners vote in regional cities by promoting their house prices upwards.
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2. As the local investors are progressively squeezed out, then foreign corporates and banks can become large landlords like Blackstone in the USA.
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3. Neoliberal politics is now for globalisation, to replace all govt spending with corporate replacements hence zero intervention on behalf of its citizens. The RB is acting for Banks primarily, not for economic wellbeing of citizens and households.
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All working to the Plan.
WHAT ABOUT LOAN TO INCOME RATIOS ON INVESTORS ?
David Hargreaves has a look at the possibilities
David why don't you look at ALL the possibilities that the Reserve Bank has discussed ?
LVRs haven't done the job surely it is time to try a different tool in addition to LVRs .... or doesn't interest.co.nz want to promote Loan To Income ratios ?
Sad when the media itself is part of the problem not the solution.
It's time for Key to do his own dirty work is what it is, instead of expecting some magic dust from the RBNZ to get him back in the good books for the next round of internal polling. I'm pretty sure the dissatisfaction that came through there in the last week was directed at him and the Nat govt, not the RBNZ.
I think House prices is a manifestation of deeper systemic issues.... To do with the nature of our current economic system.... where economic growth is driven by credit growth.. "Debt Capitalism"
NZ is a very small boat in a very big economic ocean... NZ has open economic/financial borders....
the monetary policies of USA...China...Japan and the EU all create big waves....
NZ never had a hard landing from the GFC.... so the Central Bank life support of these big economic powers has had the effect of being like a massive "heroin fix" for NZ.... Low interest rate fed credit growth is coursing thru NZs' veins..... giving us an economic rush.... the feeling of a strong "growing " economy.
We suffer the Global deflationary forces of restrained wage growth ..AND..the Global inflationary forces of asset price growth...
I say good luck to the RBNZ in trying to address runaway house prices..... It feels like bandaid style solutions for what are deeper malignant illnesses....
eg... restrained wage rate growth in the face of excessive credit growth is as much an issue as excessive asset price inflation...??? etc..etc..
Once credit enters the "Global economy" it can, largely, flow anywhere..???
One would need to have a very "controlled " economy to be able to manage how credit (money ) flows thru to all the different sectors....
Without credit growth... NZ would fall into a deep recession.... ( we cant have our cake and eat it )
Our turn for a hard landing is yet to come...
Bill Gross has a nice piece about Credit driven growth
http://image.exct.net/lib/ff021270746501/m/9/42143+-+TL-Bill+Gross+Inve…
I think the problem is we have a shrinking world. What we are seeing is the continued trend of the move from rural areas to the cities - the next phase. If this happens on a global scale we will see super cities arise. Not super in size necessarily but super desirable. Cheap air travel makes it possible too so the hubs in key countries are poised to become super cities. The cities that speak English and have established multi-cultural resources will really start to shine. English speaking means British heritage with the property laws that go along with all that too plus freedom etc. This is super desirable from an investment and cultural point of view.
Looked at in this way it all makes sense.
Get into the super city while it is still affordable I say.
I write this in all seriousness. We want NZ to have one of these super cities. Without it we will fall into decline. We want Auckland property prices to be among the highest in the world.
Of course while I do have several dogs in this race it doesn't change the fact of what is happening currently.
but Zach. People, net, are moving from Auckland to the rest of New Zealand. It's just there is a bigger stream coming from the likes of Mumbai to Auckland. Mumbai to Auckland would seem like a shift to rural to those doing it.
Seems the shift is big city to rural really.
There is an element of that but it is not the whole story. We are not getting the poor of Mumbai but the children of the wealthy families.
The flight of people from Auckland will be the next phase which appears to be starting. People moving to the satellite cities of the super cities. People will realise that a super city is just a short connecting flight away from a satellite city and the penny will drop. The super desirable global cities also have highly desirable satellite cities and hinterlands/coastal areas. Opportunities abound in the Anglophone countries. We could become a nation of hobby farms for the world, especially Europeans.
Where do I begin? First you say that the problem is a shrinking world,that being the unstoppable move from rural areas to cities. Then you say that this is not actually a problem at all, but 'super desirable'.
Then you say that it will be the cities based on speaking English that will shine and presumably excludes cities like Shanghai, which in your less than penetrating analysis, also suffers from not having a British heritage or property laws.
You quite openly want Auckland to have world leading property prices, but are silent on the fact that it does not have incomes to match that aspiration, nor the infrastructure to support being a Super city.
If I were marking this, it would be a Fail.
Aucklands problem is not enough money there to meet the inflated expectations. I agree it will probably grow, and it is a pitiful future . Too many people and not enough money to do justice to one of the worlds great sites.
I do agree with Zach that the British/European democratic tradition is a great asset which makes New Zealand so attractive.
1. Impose a stamp duty on all non-resident buyers (say 40k). Use this to partly fund an infrastructure fund.
2. Limit interest only mortgages to no more than 10% of a banks lending. Exempt construction/development loans and bridging loans and FHB for the first 2 years.
Done.
You have missed an article written by EY on taxation.
http://www.interest.co.nz/business/82366/ey-points-out-double-tax-agree…
Parallels between Vancouver Property market from 1986 - 2014 vs Aucklands now
http://www.visualcapitalist.com/vancouver-real-estate-mania/
Thank you to someone else who posted this link in the comments! it's an interesting read
The strange thing about Vancouver is that when prices go up those Canadians actually build stuff. Weird?
http://www.huffingtonpost.ca/2016/06/21/home-construction-boom-canada_n…
Back in the insane asylum - Auckland has a housing shortage locked in until after 2030, apartment construction rates which would mostly be associated with recession levels in other countries and people living in cars. And the genius solution from our RBNZ - make it even harder to build more homes.
Gee whiz. I don't think that is going to work very well.
Problem is Government does not want to act. No one is saying that the prices should fall drastically but it is important to stop this craziness and the price to stabilize and correct as per economy as growing prices on a daily basis and that too in multiple is not economy but speculation and is been fueled by overseas money.
If not true that open challenge to government or anyone else to release correct data about non residence buyer (That is Citizen and NZ residence buyer compare to Non residence buyer including students, work visa holder, overseas and any other that is not a resident and citizen of the country as remember that now most overseas money is diverted through students and short term visa holder as then the parents and friends are also able to hide their identity in their home country and is done on trust - mostly by parents).
Why does not the government release the correct data now as earlier data released in march was faulty/ not fully comprehensive (as admitted by the agency itself releasing the data) and why are we waiting for next 6 months for the new data. If government is making policy decision of not acting on non resident/overseas buyer based on that data which is faulty than does it not imply that the government policy is wrong and as is a burning issue in NZ, government can easily ask the agency to present the correct data asap.
BUT government will not do any such thing as it is in their interest to either hide and if not possible to hide, delay the facts/data with people of NZ. Our PM has himself admitted that Rising house price is in the interest of the country (Am sure he forgot to mention the name of the country whose countrymen are benifitting) so how do you expect anything from them.
To top it leader of the opposition endorses PM statement that it is interest of the country that house price remains high.
One does not have to be rocket scientist or so called expert to understand what is happening. Just another day was reading a comment by someone that now it is in the interest of National party to give free hand to speculate in other parts of NZ - and how correct that commentator was as this is exactly what is happening now. To speculators it does not mention where as long as are able to buy and sell and know that will be supported by govt(Govt will not act).
My understanding is that if the house price correct reasonable, mum and dad who are staying in the house will not be that much be affected as much as speculators who are buying and selling for quick buck (even long term investor will not be that much affected). It clearly shows who is protecting whom.
Ireland, which introduced loan to income measures 18 months ago at 3.5 x , when Dublin was a having a second wind with annualised 25 percent increases, has just released Q2 data. Annualised inflation Dublin 1. percent , a level consistent with past two quarters . Interestingly the more expensive parts of Dublin have generally seen 4-6 percent falls over the past year, and the less salubrious areas have seen 4-6 percent rises, and areas outside Dublin the largest increases . So every global study shows that restricting debt to income works in reducing house price gains. Obviously in such a distorted market as Auckland, if these measures were to be introduced, as there will undoubtedly be some fallout (and Dublin shows this) , it should be done alongside strict rent caps initially possibly in line with inflation , interest only loans should be culled or at the very least apply to only a portion of an existing mortgage, and the government et al can be given the task of putting supply in . Quite frankly a housing market should not be for speculation and almost purely dependent on lucky timing.If we want to fly in nurses and teachers or indeed gardeners and refuse collectors to oversee the 'global' city of Auckland in a decade , then that may be the path that is being driven.Alternatively it could all simply blow apart because of continued speculation and ra ra banks and unlike Canada, another with its real estate excesses , there is no Insurance backstop in New Zealand
I work with immigrants. Most immigrants rent and many of these Indian students go home as they can't get the jobs they are promise by their agents. Some are sharing flats with 10-15 other people. Many are treated appallingly by agents in India who sell them worthless degrees. Some get exploited here by 'employers' who will pay them in food or for almost no wages just so the new immigrant can get a reference. These people are not driving the property market. Investors, mainly Kiwi, are driving the market as we all know. Investors keep going on about the surging migration as it gives them comfort that the market will never fail. But they are just egging each other on. Let's hope RBNZ does something that works for once.
Will it not be better that national release the non resident buyer data to stop all the speculation and prove their point.
If nothing to hide should release correct data and shut mouth of people who not only feels but believe that one of the major contributor for this housing bubble is overseas fund. I too am one of them.
Niw it is upto govt to prove and get some crediability.
When the overseas data report is released in September and October and assuming no error this time and the result will be not what government expected (though knew) will just the blame to the agency for wrong data released earlier.
National is doing nothing but just playing with the time and helping their ......................
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