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RBNZ says house price growth to slow after ‘current recovery phase’
November 11th, 2009The Reserve Bank has warned in its 6 monthly Financial Stability Report that it expects the current strength in the housing market to ease off as interest rates rise, given house prices are still elevated compared to incomes.
“While banks have tightened their lending standards for residential borrowers during the financial crisis, there have been signs of an easing in recent months, with some banks prepared to offer housing loans at relatively high loan to value ratios,” the bank said in the report.
“The housing market is currently strengthening, but we believe house price growth will slow after the current recovery phase. We would encourage the banks to avoid any return to riskier mortgage lending practices,” it said.
Tags: Reserve Bank of New Zealand
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November 11th, 2009 at 9:41 am
This is one market you can’t talk down AB you have to act.
November 11th, 2009 at 9:44 am
ermmm……did the banks really slow down that much? Think the warning is a bit late I’m afraid – our future path is now set.
November 11th, 2009 at 10:09 am
“We would encourage the banks to avoid any return to riskier mortgage lending practices,”
What’s that sound?
Hands wringing perhaps.
Still, there’s always the trusty OCR.
November 11th, 2009 at 10:17 am
Just had a read of the RBNZ blather…conclusion: The RBNZ is powerless to stop the ponzi property play carrying on. Becoming blatantly obvious the RBNZ has been cut out of the power loop. The banks are running the place and the Beehive is buzzing to the banking BS. When we have a pm who believes inflation and property price rises can ’save’ the owners of rotting homes….what hope is there for this nuthouse economy?
November 11th, 2009 at 10:21 am
“When we have a pm who believes inflation and property price rises can ’save’ the owners of rotting homes….what hope is there for this nuthouse economy?”
Can you please explain where this comes from ?
I am the owner of a leaky home and am disgusted at the latest suggestion from Govt, so am very interested when I see someone pick up on an attitude like that from JK.
November 11th, 2009 at 10:23 am
Place your MPs and senior beaurocrats….go to http://muppet.wikia.com/wiki/Category:Sesame_Street_Characters
select all..copy and paste to your paint box…then insert John and Bill, Alan and so on.
November 11th, 2009 at 10:27 am
@Keith, from here, http://www.interest.co.nz/ratesblog/index.php/2009/11/09/90-seconds-at-9am-house-prices-rising-us-jobless-up-tobin-tax-rejected/#comment-46029
November 11th, 2009 at 10:32 am
Keith ( I leave it to the link) but tell us about you leaky boat mate. Help can come from anywhere!
November 11th, 2009 at 10:33 am
“We would encourage the banks to…..”
Thanks for the laugh!
November 11th, 2009 at 10:38 am
Big Bird for Bollard !
November 11th, 2009 at 10:43 am
I agree, My guess is house prices will peak higher than the late 2007 previous peak before plateauing over autumn/winter 2010 with small ups and downs.
November 11th, 2009 at 11:01 am
My guess is that AB wishes to bring forward the second economic decline of a W recession.
November 11th, 2009 at 11:06 am
I really don’t mind the house price up or down but I hate Ausies or people living in Australia(including expats) buying houses in NZ. In my area, central west of Auckland, people from Australia(many are NZer living there) are pushing up the house price and many houses are owened by them. More of them will comming if our houses become cheaper.
November 11th, 2009 at 11:10 am
That video clip is enlightening.
My take on it is that Govt will gaurantee loans to fix leaky homes and expect gradual increase in house prices in years to come to recover the loan value.
As someone has mentioned, clear indication from JK that the expectation is for long term growth in house prices, however as many astute commentors on this site have mentioned, price increases are pure folley as they are due to inflation, not genuine asset value increase.
Doesn’t do anything to actually help owners fund the servicing costs of these loans, which is one of the major reasons banks are not currently lending to have the leaky buildings repaired !
That then results in unscupulous Body Corp Administrations sueing and Bankrupting their owners for funds that the owners cannot source.
The only winners here are the legal proffession, leaky investigators and the Body Corp secretaries charging for their time in prolonging this whole mess.
November 11th, 2009 at 11:40 am
Joe Blog
its called an “International market”
You can buy a property in Aus, or they can buy one here, the world is a pretty free market.
If they are buying here then it indicates that they see our places as value for money and expect the value to hold or increase, regardless of what public statements the reserve bank may be making.
It can also be an indication that property is seen as a much safer investment than any NZ business or bank deposit or shares etc
The answer is not in the standard NZ tall poppy syndrome of bringinig everyone down to the lowest common denominator, it lies in getting everyones incomes up to the highest possible so that housing becomes affordable
November 11th, 2009 at 11:55 am
Joe Blog- you are quite correct. It is crazy that foreigners are buying our housing as an investment. It needs to stop- it could be stopped- and I don’t know why it hasn’t been stopped. A roof over ones head is a necessity and shouldn’t be a place for speculators.
If the government wants to stop New Zealanders speculating in housing then they also need to stop foreigners doing the same. It is essential that they do- otherwise when our dollar drops and overseas investors return in droves most of the wages of hard working NZers will be leaving the country. The main living expense for most people is accommodation.
November 11th, 2009 at 12:08 pm
Al….the govt is encouraging foreigners to buy….speculation IS the NZ economy. Just one big bubble Al…not you…Noddyland.
November 11th, 2009 at 12:14 pm
Joe Blog – why wouldn’t they (foreigners) be buying here? They can speculate on our market, and sell for a lovely tax free profit. Marvellous. I was at the Barfoots Wednesday auction a couple of weeks ago, and I would say that a good 90% of the people in there were foreign buyers, who appeared to have unlimited amounts of cash to splash around. The house I was interested in (to buy as our family house) went for more than $100k over cv. Needless to say, I didn’t purchase!
Keith – surely getting everyone’s income up to the highest possible will only be inflationary? The banks will then be prepared to lend more, as people’s ability to pay is better, people have more to spend, the house prices go up… I think some other controls need to be used to bring the market back into line with incomes, rather than incomes in line with house prices.
November 11th, 2009 at 12:16 pm
In countries like India & Indonesia (there’d be many others too I assume) foreigners are not allowed to buy land/houses. There’s a good reason for that – if they could they’d be in there buying up a storm. Where would that leave the citizens?
November 11th, 2009 at 12:16 pm
Veedub – in the same place that we NZ citizens are currently in!!
November 11th, 2009 at 12:21 pm
@ Kiwifruit – your last paragraph is spot on. If incomes go up dramatically, so will house prices. The effect would be similar to what we saw in Australia with the FHOB. A $7k grant leverages out to an extra $35k lent by the banks – so the buyer takes that extra $35k and offers it to the vendor. Imagine 1000’s of FHBs all doing that, and you can just imagine what that did to house prices – yes, they went through the roof.
November 11th, 2009 at 12:23 pm
“it lies in getting everyones incomes up to the highest possible so that housing becomes affordable”.. what planet are you from Keith?….try taking the cheap easy credit out of the bubble and you will see housing prices decline until those on low wages can afford them without becoming serfs to the banks for their entire lives.
November 11th, 2009 at 12:29 pm
We need policy to address the problem, warning alone would not work.
Home buyers would continue to borrow and seek to buy their dream homes while report after report have shown house prices rising. What to do…..?
It is about the majority’s choice versus minority voice. Warning can’t change it.
November 11th, 2009 at 2:16 pm
The trick will be to get rid of the cheap and easy credit without pushing up the NZ dollar, which will only hurt exporters further, and lessen our chance of an export-led recovery.
A capital gains tax on all houses that are not the primary residence of the owner will help to discourage property speculators. Abolishing the ridiculousness that is the LAQC will also make property a less attractive proposition, whilst going some way to address the current tax deficit. Creating some form of incentive to invest money in more productive parts of the economy (such as manufacturing) will help to stimulate the economy and create jobs.
Using the OCR to try and contain the property market patently hasn’t worked – more direct and aggressive means are required!
November 11th, 2009 at 2:30 pm
Kiwifruit
CGT for not the primary residence doesn’t work. You can come to inner west from Herne Bay to Pt. C., so many KIWI expats buying in the ares for their future primary residency. They are paying tax to other country when they are young now and buying in NZ for their retirment or for their future family growth. Sick.
November 11th, 2009 at 4:01 pm
Joe Blog – well, that’s their problem. If they are buying a house, renting it and making money either out of rent or capital gains when they sell it to fund their retirement whilst they are living off shore and not contributing to the NZ economy, then tough. You can’t have it all ways. If they buy it to return to and live in, then they won’t get hit by CGT, as they won’t have sold, or if they do eventually sell after they’ve returned and been living in it, then they won’t pay CGT. Any off shore investors, be they Kiwi or otherwise are helping to create the housing problem by buying properties that they can sell for a tax free profit.