The Auckland Chamber of Commerce chief has gone into bat for the rest of the country over the Reserve Bank's lending limits, saying that the whole of New Zealand shouldn't be penalised for Auckland's problems.
Chief executive Michael Barnett said there were signs that first home buyers outside Auckland were becoming "unwitting sufferers" of the RBNZ's policy.
"The Auckland housing market has been overheated for some time, and this should be the target market for the Reserve Bank’s loan to value ratio (LVR) policy," he said.
Barnett said while he appreciated the intention of the policy was to cool the house price market, he questioned its fairness and whether it would make a real difference.
"First, the big housing problems are in Auckland, not across the rest of New Zealand. This is reinforced in the NZIER’s recent release showing Auckland’s real house prices are up 15% on 2007 while for the rest of NZ they are down by 25%.
"Second, by pricing first home buyers out of the market, there are real risks that developers may focus on higher end products; especially in Auckland where there is a continuing demand for higher priced housing."
Barnett acknowledge that it was early days for the new policy, but said the Auckland Chamber’s initial impression suggested that property developers were being incentivised to continue focusing on the the "top end" of the housing market.
"Therefore long-term the Reserve Bank could end up penalising the need to increase first home buyer housing stock.
"Despite the relative real house drop outside Auckland, first home buyers face a tough challenge to meet the 20% LVR policy.
"With Auckland 35% of the New Zealand economy and the dominant player, it is time that policy designers and decision-makers in Wellington took a more innovative and realistic stance in their approach to addressing issues. Auckland is different to the rest of New Zealand and this should be acknowledged and recognised," Barnett said.
"It is unfair to keep penalising the rest of New Zealand for Auckland problems."
10 Comments
It's so frustrating when people use extreme stats to prove their point. Real prices outside of Auckland are not down 25% across the board. That's the worst of the regions. Some people need to have some patients, calm down a bit, and allow some time to let the data settle down and show some decent trends. In my Nelson neighbourhood real prices are down around 5%.
What gives Michael Barnett the right to question the reserve bank governor?
If the guy has no credibility, he should keep his nose out of it, and go back to his job at "Auckland Chamber of Commerce", and not being a "self elected" spokesman for how others may feel, i dont think thats in his job description.
There is no LVR.
That is the joke.
http://www.scoop.co.nz/stories/PA1312/S00039/politician-of-the-year-more-like-financial-jester.htm
He right the rules should be different for provincial New Zealand
its two different markets
Like London is not really England in a demographic context , Auckland is not really a typical New Zealand demographic city .
The property market dynamic in London is completely different to the rest of England
The rest of NZ is not being punished. A 20% LVR is a very sound policy and ensures minimum risk of being over-leveraged should the realestate market take a turn for the worse.
It use to be the banks that enforced such policies - it use to be commonplace to require a 15% deposit and for total loan repayments (including previous debt) to not exceed 30% of income.
And now because the banks have slackened their own credit risk policies, the RB has had to step in. Good on them I say.
Provincial NZ should not be too affected by the LVR restrictions:
a) a >20% LVR is good practice regardless of where you are in NZ
b) house pricing in the provinces is lower hence the required 20% deposit is lower as well.
The banks are still able to loan (1st home) buyers with less than 20% deposit - as long as these loans make up no more than 10% of their total loan book.
People also need to remember the RB has not implemented LVR restrictions to specifically slow down the housing market, it's implemented them to reduce the economic risk should these low LVR mortgages fail.
".... Auckland Chamber’s initial impression suggested that property developers were being incentivised to continue focusing on the the "top end" of the housing market."
surely if people can't afford the deposit on an expensive house, the developers are incentivised to build cheaper houses?
Developers, builders and specualtors have been doing this for many years...
"Second, by pricing first home buyers out of the market, there are real risks that developers may focus on higher end products; especially in Auckland where there is a continuing demand for higher priced housing."
Nothing has changed...
Yet another person who I just wonder managed to get into a position of influence, yet is clueless...
No wonder we are in a mess..and wont do a thing on Peak Oil etc.
regards
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