The RBNZ suggests exempting certain groups from debt-to-income restrictions would be difficult, as the Finance Minister expresses concerns over the impact these restrictions would have on first-home buyers

The RBNZ suggests exempting certain groups from debt-to-income restrictions would be difficult, as the Finance Minister expresses concerns over the impact these restrictions would have on first-home buyers
RBNZ Governor Adrian Orr

Reserve Bank (RBNZ) Governor Adrian Orr says it would be difficult to apply debt-to-income (DTI) restrictions to some residential property buyers - like investors - but not others.

Presenting the RBNZ’s annual review to Parliament’s Finance and Expenditure Committee on Wednesday, Orr reiterated his request for the Finance Minister to add DTIs to the toolkit the RBNZ has to regulate banks.

These would enable the RBNZ to restrict bank lending to borrowers seeking a lot of debt relative to their income.

Asked by a journalist after the meeting whether DTIs could be targeted to investors, Orr said: “It is incredibly difficult to segment any market and any individual with macro-prudential tools.

“The phrase “macro” means it’s the same tool for all. So, pretending we could fine tune for a particular set or groups comes with great challenge and implications.”

Asked to explain why, Orr said: “Identifying the investor, the bright-line test, the complexities of a debt-to-income tool has a whole lot of work needed in the background to understand who is facing it, how is it being deployed.

“It is again, not too dissimilar to loan-to-value ratios (LVR), but comes with challenge.”

The RBNZ on Tuesday announced it would apply tougher LVR restrictions on investors, requiring 95% of bank lending to this group to have 40% deposits, while only requiring 80% of bank lending to owner-occupiers to have 20% deposits.

Robertson: ‘I am somewhat sceptical’

Finance Minister Grant Robertson on Tuesday expressed some hesitancy over giving the RBNZ DTIs.

“I’ve said in the past that I am somewhat sceptical of that and the effect it will have on first-home buyers,” Robertson said.

“But obviously, we live in a dynamic world and so I’m still receiving advice. We haven’t made a decision.”

Asked whether he would consider giving the RBNZ DTIs on the condition they are only applied to investors, Robertson said that was one of the issues he was getting advice on.

Robertson is due to announce what he described as “bold” measures to curb housing demand - particularly from speculators - at the end of February.

Reading between the lines, his comments over the past couple of months suggest he favours extending the bright-line test beyond five years. This would require investors who buy and sell residential property within a set timeframe to pay income tax on any gains made.

Orr: A ‘political decision’

Commenting on DTIs, Orr said: “We’ve made it clear to the Minister of Finance and previous ministers what debt-to-income tools can do and what they can’t do, and it comes down to a political decision around whether they are willing or not to provide those tools and accept some of the challenges they may bring.”

Orr wouldn’t say whether the RBNZ would apply DTIs in the near-future, should it be given the tool.

“Having the optionality of those tools would be good,” he said.

“Implementing it really comes down to a choice of - is an intervention needed and then which tool is the most efficient, most effective and [can be used] with the most precision.”

Orr in December wrote to Robertson, saying DTIs could complement LVRs.

But he cautioned: “Higher prudential requirements generally imply higher deposit requirements, lower credit ceilings, and higher interest costs for the mortgage borrower. All of these factors disadvantage lower income and lower wealth households.”

Orr also made the point: “Under current law the Bank could not tighten prudential policies for the primary purpose of dampening house prices, if that is not justified on financial stability grounds.”

This said, he maintained it was “ambiguous” whether tightened LVR or DTI restrictions would reduce poverty and inequality.

Orr made the same point on Wednesday: “These tools may impact on housing demand at the margin. They’re not a panacea to the types of housing stories that we’re reading.”

Robertson tight-lipped on remit changes

The discussion over DTIs has resurfaced as Robertson in November turned to the RBNZ as he came under pressure over sky-rocketing house prices.

He suggested the RBNZ’s remit could be tweaked to require it to consider house prices when it set monetary policy.

The RBNZ hit back, saying this was a bad idea, but its remit could be changed to require it to consider house prices through the way it regulates banks.

Robertson on Tuesday said he was still working through the issue of potential remit changes.  

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136 Comments

33
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So we have no problems applying differing LVR's to investors, but doing the same for DTI is too hard? Please

Indeed...mind you LVRs dont have the same ability to reduce house prices as DTIs and the goal is 'moderate house price inflation'.

So how is the use of LVR's for moderate house price inflation going?

As Orr said “Under current law the Bank could not tighten prudential policies for the primary purpose of dampening house prices, if that is not justified on financial stability grounds.”

LVRs were "justified" due to the greater risk property price drops posed to financial stability due to investors having multiple properties. Given differing LVR's for investors and owner occupiers resolves that risk, DTIs targeted only at investors looks like an attempt to dampen house prices. This is not the RBNZ's job. If Labour is serious about using RBNZ to target investors with a view to decreasing house prices it needs to add that to the bank's objectives.

There is no reason why DTI shouldn't be a tool used to reduce the financial stability risks posed by speculative investors. Here are some more quotes from Orr recognizing the additional risks posed by investors:

“We are now concerned about the risk a sharp correction in the housing market poses for financial stability. There is evidence of a speculative dynamic emerging with many buyers becoming highly leveraged.

“A growing number of highly indebted borrowers, especially investors, are now financially vulnerable to house price corrections and disruptions to their ability to service the debt. Highly leveraged property owners, in particular investors, are more prone to rapid ‘fire sales’ that potentially amplify any downturn.

“These financial stability risks exceed the situation at the time of the Bank’s December LVR consultation, resulting in more restrictive policy settings being decided on."

DTI risk would apply to both investors and owner occupiers. Hence Orr's comment “Higher prudential requirements generally imply higher deposit requirements, lower credit ceilings, and higher interest costs for the mortgage borrower. All of these factors disadvantage lower income and lower wealth households.” Given most advocates of DTIs want to target evil investors this tool may backfire unless the Government changes RBNZs mandate to include punishing investors while not touching FHBs.

Are you just being intentionally obtuse? That quote is saying that lower earning owner occupiers would be disadvantaged over higher income households. It's not saying it would be advantageous to investors over owner occupiers.

The truth is, investors with large portfolios, will likely have much worse DTI than your average FHB. They may have higher individual incomes, but if they own multiple properties as speculative investments (i.e. negatively geared) it will greatly raise total debt levels to income ratio.

But all of this is a moot point. As the RBNZ already recognises the additional risks posed by investors to financial stability - Highly leveraged, owning large number of properties, often negatively geared, and more willing to exit the market. These amplified risks justify a higher LVR than owner occupiers.

When applying a DT restriction there is no reason they can't also apply a different DTI to investors based on those elevated risks.

DTI is calculated on gross income.

The quote acknowledges many FHBs will be young with low incomes so a DTI would adversely affect them.

Limiting the quote to wealthy owner occupiers is wishful reading on your part. Sure some investors may be overextended based on a DTI but if they have 40% equity in their portfolio there would be little risk to financial stability. Furthermore, including rental income will obviously put investors at an advantage along with the likelihood investors have greater income through higher salaries, business income and investments than FHBs.

I have already explained why the new LVR restrictions provide sufficient surety of financial stability. Targeting DTIs at investors only is again wishful thinking by you. You should also read:

https://www.interest.co.nz/opinion/108971/david-hargreaves-says-anything...

Different LVRs for investors and FHBs so why would DTI have to be applied to everyone? It wouldn't.

15
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What's so bad about a downturn Mr Orr. That means cheaper houses for those who need to live in them. And no lifetimes of poverty dealing with monster mortgages.

It just means a lifetime of poverty for those who had to take on monster mortgages to buy homes when prices go backwards if they end up under-water. This is not something that can be ignored.

Be cheaper in the long run to compensate those who purchased within x range of time than to forever having to prop up mortgage and rent payments for overpriced houses and rentals.

Two rite... investors provide accommodation so without them the govts base will be adversely affected.

19
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investors provide accommodation so without them the govts base will be adversely affected

Nonsense. That's like saying 'I provide iPhones because I own Apple shares.' First, the business provides the phone, not the shareholder. Secondly, if I sell my shares, someone else buys them. No different to houses.

We've discussed this previously and the naysayers ALWAYS respond "it could never happen". Congratulations JC youve successfullly managed to run that argument

14
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Investors tie up the market so that people are forced to rent and line their damned pockets for them. Sooner gone thebetter

If all the investors disappeared the houses would still be there right?

As Air B&Bs so how many people are housed in an Air B&B?

Air B N Bs should be illegal for the same reason heroin is. They harm our society a great deal.

Quite a few, over time.

Also, commercial rates will provide more income for infrastructure.

33
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The whole system is a joke. It's blatantly obvious that the ones pulling the levers don't want a house price correction. Their excuses will just keep coming.

12
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Yes they will make excuses against DTIs because they will work immediately.

13
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Blatantly. Obvious. Also becoming apparent - when JA said that child poverty is the reason she got into politics... Well, I see what she meant now

15
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Yes - when she said transformational, I didn't think she meant turning Labour into National

10
up

Finance Minister Grant Robertson on Tuesday expressed some hesitancy over giving the RBNZ DTIs.
“I’ve said in the past that I am somewhat sceptical of that and the effect it will have on first-home buyers,” Robertson said.

No more than a $million price tag for the majority.

Yeah, biggest difference is DTIs don't help to enrich current asset holders at the expense of the young.

21
up

Extending the Brightline is not 'bold'.

nor even effective -- no evidence that teh move from 2 to 5 years has raised any additional revenue -- and certainly has not stopped house prices galloping ahead faster then ever

It may have contributed to house price rises as less houses were offered for sale.

It most definitely has contributed to rising house prices. When you remove 5 years of housing stock from the market, prices for the few remaining go up. We've got another 3 years of this before the houses purchased in 2018 are eligible to be sold again.

Treasury estimated an extra $50m a year rolling in from February 2020 so it will only show an annual amount in this years income tax returns (i.e. 2021). See page 6:

https://www.treasury.govt.nz/sites/default/files/2018-03/ria-ird-blt-feb...

It only can raise revenue if policed...not much happening there

True. Bit odd, given the rapid talk re share trading taxes when GME was going on.

28
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“But obviously, we live in a dynamic world and so I’m still receiving advice. We haven’t made a decision.”

No hurry - just Rome burning la la

13
up

LOL - I was thinking the same thing. Why rush these things as there is no urgency. (Sarc).

Let’s each get a handkerchief, tie four knots each corner, put them on our heads, each then take a good length of ribbon, attach it to a pole (that is vertical,) and all together cycle around and around it. That will amount to the same outcome and at the same time we win plaudits from the populace, for distraction beyond CV19, proving that bicycles are vital, reduction of obesity and fellowship of head cocking, pouting and kindness. There it is QED! Bravo! Cabinet braves the waves, yet again.

Translation = clueless

17
up

“But obviously, we live in a dynamic world and so I’m still receiving advice. We haven’t made a decision.

Try getting away with that excuse in the private sector. You'd be out on your ass relatively soon I suspect.

He reminds me of, in the old Blondie comic strips, Dagwood Bumstead’s boss, Mr Dithers.

11
up

LINZ has a record of all dwellings in NZ right? Add another column to the spreadsheet "IRD Number".

Tax paid per financial year against said IRD number = 33% of income.
Debt held against property (I assume LINZ has access to this???) = debt.

Debt divided by income = debt to income.

So use income/tax data that is 12 months old or more? New businesses unable to buy property for at least 12 months?
Should calculations be done on the company itself, or the beneficial owners?
Income stacking and debt minimisation in one FY then splurge in the next FY?

How else does one measure income? I couldn't give 3 months payslips in advance when taking on a mortgage? 12 months of income/tax data might suck for speculators. PAYE earners with weekly/monthly income won't have this issue as IRD updates on a monthly basis.

New businesses unable to buy residential property for at least 12 months? Why would a new business need to buy a property in the first 12 months?

Sure, they could income stack/debt minimize 1 year, splurge year 2, but what do they do year 3? Surely this income stack/debt minimizing method happens in the same manner already? IRD may see either shifting of assets between IRD numbers, or recurring DTI breaches. Forced sales??

LINZ and IRD don't (and shouldn't) have an info sharing agreement - that's why (as I understand it) the "Brightline Test" is generally being avoided. Having all depts of Govt sharing personal info is a step too far..imo. Peoples accountants and conveyancing lawyers have a duty to advise but not police Govt policy. The tax implications of the Brightline test are for the IRD to police, in conjunction with tax practioners - not LINZ's.

Well said Hook but please don’t give the Greens anymore ideas re the implementation/mechanics of vaunted doomsday wealth tax.

LINZ and IRD are sharing info. IRD's system sends automatic letters where LINZ records indicate a house was bought and sold within 5 years and it is not recorded as the taxpayers home when sold.

See https://home.kpmg/nz/en/home/insights/2020/11/inland-revenue-enforcing-t...

Only tax evaders and their supporters would object to this.

Nah they might see their Name pop up on the spread sheet. Heaven forbid invasion of privacy

11
up

"the Bank could not tighten prudential policies for the primary purpose of dampening house prices, if that is not justified on financial stability grounds.”

How much more instability can be built into any system than allowing those already part of it to extend their risk factor just by revaluing the same asset class they are part of?
Allowing more speculative buying by those who already have holdings, just by revaluing their past purchases, does nothing to de-risk the market. Only adding outside funding does that i.e.: If you want to buy another renter you have to come up with the cash as a deposit not just the revalued figures on a spreadsheet. If that means that an existing property has to be sold to realise the collateral, and it doesn't upend the lenders' portfolio LVR, all well and good.

Extending further purchases based on revaluation of existing holdings is all very well IF the market continues to rise. Once the market reaches terminal velocity and can't go any higher (for whatever reason - there is always one) then trouble - call it Instability - takes over.

They haven't been very good at stability over the last few months, that's for sure.

30
up

The list of "can't do thats" is growing fast...
I imagine Orr, Grant and Ardern sitting down in a meeting at 8.00am. All three of them high on coffee, sweat pearling on foreheads as they nervously turn page after page in their notebooks. A cacophony of words like DTI, LVT, CGT, FBB etc. going on for hours. Then finally, exhausted, ties undone they sit back in their chairs, a job well done.
"Phew, now that's what I call great work. Well done everyone, we did it! There is nothing left to rule out!"

19
up

And all the while landlord subsidies and the costs of emergency accommodation grow and grow.

The FHB market is minute in comparison to the rental market.

#rentcontrolnow.

Agreed Comrade

New Zealand's biggest welfare scheme for the older and wealthier rolls on, off the backs of the young and working folk.

Great imagery CJ.

21
up

“Bold” measures to curb housing demand ?
Well, we shall see.

Extending the brightline would be just the first, very timid step. Much more urgent and comprehensive action would have to be taken, starting with the removal of landlord subsidies, implementing an overall tax regime not favorable to property speculators etc.
We would also need to act on the banking system, for example by forcing banks to require a minimum cash payment of at least 60% or even better 80% for property speculators (not equity from other properties).
Moreover, the current ridiculously and recklessly loose monetary policy should be progressively reversed.
The market should be skewed in favour of first home buyers, not in favour of speculators as it is now.
Investment should be directed towards productive activity and the real economy, not on parasitic housing speculation - we could also force change a change to banks' risk weightings that would move the banks towards more productive investment, rather than feeding this current housing Ponzi.

The market will NEVER be skewed in favour of FHBs dream on.

It’s a nice sound bite for the polis to talk about but the reality is they are a tiny fraction of the population

And growing daily

And the largest share of the pie (owner occupiers), the majority have kids who are more and more likely to be locked out of the housing market

14
up

Govt should just do everything to make it financially unviable to be a property investor. It will not reduce supply as investors rarely build and existing houses would not disappear. Maybe ban investors from buying existing houses but let them build. We could allow them to buy one existing rental for each new house they built to incentivize new builds.
Also unoccupied houses should be taxed heavily (and progressively, similar to the income tax system) . If you have a bach or holiday home, you can afford it. Also let us just outright ban air B n B. Anything that damages society should be legislated against or at the very least taxed to death. We do it for drugs and cigarettes because of the harm they do so why not for unoccupied homes, Air B n Bs and anything else that is causing damage to our society? Time for action on anything and everything that even might help the housing and rent crisis.

I know someone will come along and say "oh but a rental removed from the pool will make a person homeless" because rentals average 3.7 occupants vs owner occupied at 2.8. The thing is, investors don't dictate how people cohabitate. Well, actually they do because there's nothing stopping a home owner from having 10 people in a 2 bedroom house but I'm sure a landlord would put a stop to that in a heart beat.

If they stop the reckless supply of monetary policy who is going to pay for the virtually permanent quarantine system where no user is actually getting charged?. Who’s going to pay for all the wage subsidies and stuff like the media bribe fund?

18
up

Do something Robertson. Anything. Please!

15
up

Now now... let's not be so hasty, shall we? We have to carefully analyse the possible outcomes of changing policies. Can't just jump into it head first and see what happens, can we now? Just imagine what a disaster one could create by changing, say, the LVR rules overnight!

With 22,000 families on the public housing waitlist, I dont really understand why we are trying to discourage people from providing rental housing. Sure house prices are on a tear, but the rental crisis is far more immediate. For most people buying a house is a want not a need, but renting a home when that's all you can afford is a need.

One of the suggestions doing the rounds is a price freeze on houses sold within 5 years of purchase unless major renovations have been undertaken.
This is not a new idea at all.
Under a previous Labour Government long ago, that is exactly what they did. I can recall my parents struggling to buy a house under these rules as vendors insisted on more than the purchase price using underhand payments. The most common way to circumvent the rules was to sell the house at the frozen price but demand “carpet money” for the floor coverings, even if there weren’t any.
As I recall the house price back then was ( in dollars) $4000 and the “carpet money “ was another $1000.
This happened again under Muldoon and the rent price freeze in the 1980’s. The property was rented out at the frozen price, but the carport, broom cupboard, or letter box was extra.

All good big daddy, I’d like to buy your house at its 2016 valuations please. Put your money where your mouth is, or not.

You cannot protect people from themselves

11
up

And really the price of houses doesn't matter, so long as rental prices are regulated. Affordable rents mean that potential FHBs have a better prospect of saving a deposit.

Im assuming that comment is based on the assumption that if rents are regulated down house prices will follow?

Good assumption. Lower rent yields = lower prices

"And really the price of houses doesn't matter,".....I'd suggest house prices very much do matter as their dominance indicates and rents are but part of that importance

22
up

Really? You don't understand why investors have and continue to fill their boots on investment property??? The cheap loans, the high leverage available, the low thresholds for security from retail banks, the favourable tax treatment (read: no tax), the list goes on.

These very 'investors' are purchasing properties that could otherwise be bought by first home buyers (the current renters) which therefore frees up another home for renters. If there is less demand for property, the purchase price declines and therefeore some downward pressure on rents occurs.

Sure we could do with more supply but ignoring the perverse outcomes on the demand side, caused by rabid investor activity is ridiculous and one of the reasons we got into this mess.

Exactly I heard kiwibank economist stating this morning that demand measures are just tinkering at the edges and I was thinking spoken like a true banker.

I too listened to that interview on the drive to work and found myself pulling the fingers at the radio.

Such a build up to this February announcement... ironically this is causing more FOMO and adding thousands to house prices in the mean time.

18
up

Thankfully Orr is always there to remind me that planning to leave NZ is the right decision after all.

Copy that

Where are you going Sydney? London? Yeah much more affordable there...

Is that you Adrian?

I'm in Wellington. Wellington compared to London? Try Hobart.

you need to compare Auckland with Brisbane and Perth rather than with Sydney and London

Disagree. London and more so Sydney are better comparisons to Auckland.

Brisbane and Perth are huge downgrades. I would not consider either of them unless you’re a massive bogan and inclined to love chicks with sleeves

Absolutely. The WSP Global Cities Index rates Auckland above Sydney, Melbourne and Brisbane.

2018 WSP Global Cities Index

You dont even need to leave NZ, your money can leave without you. The more difficult they make it to invest in NZ, the more investors will buy property in Australia. Better returns over there as well.

Excellent decision. They're learning fast.

Every attempt at 'fixing' the house price are filled with landmines- you don't see one till you step on one. Like the good 'ole saying, "if it ain't broke, don't fix it!".

The house prices are just doing it's thing, stop meddling with it!

14
up

Totally agree.
Stop meddling with interest rates; Bond Buying; First homeowner Incentives; Taxation breaks and RMA 'changes'

Stop meddling with them all...and let The Market decide what the cost of debt and mortgages should be; how much cash there is sloshing about The System (or not); let every buyer stand on their own two financial, taxed feet and build whatever they want, where they want.

Or do you want them just to meddle in those bits that suit you?

(PS: It is broke. It needs fixing. Every political Party, from all sides of the ideological spectrum elected over the last couple of decade, has told us so.)

A truly free market is the most efficient market.

Absolutely!
And what is the problem with today's asset markets - all of them? Meddling. It's going to end in one unholy mess.
The most disconcerting factor of all? "They' know it too.
So the reason they are doing what they are is that there is no other alternative. Failure is baked in. It's just a matter of who loses and how much.

10
up

CWBW... . We heavily tax and legislate against things that harm society all the time. Is that wrong? Increasing rents and house prices are doing more damage to NZ than meth, heroin, the cancel culture, gun violence and real estate agents combined. And if the price to pay to fix things is to have a market that is a little less free and efficient I think it is a small price to pay.

Sure sounds like a Strawman attempt to me. We are talking about houses.

Has the chill up Egmont got to you? I can send you some gumboots if you're keen.

CWBW...Some gumboots and your best sheep plz. I will fatten it up and send it back it in time for your Easter dinner.

A free market doesn't give tax free investments or subsidies to investors!

Nor protect them from any possibility of a fall in prices.

Well, it is badly broken

10
up

Extending the brightline test is not a solution. With the high escalation in house prices even paying tax on the capital gain would still give a better return than most investments. The true solution will not be achieved until the Government turns off the tap of new immigrants and overseas purchasers and we have built enough houses to satisfy demand. But please lets not have the crazy current policy of allowing ad hoc developments in Auckland that are not served by proper infrastructure. True town planning has been absent and seems more concerned with cycle lanes.
Mortgage rates need to rise and as a possible temporary measure deny tax deductibility on new mortgages for investors to give FHB an equal footing.
I have yet to hear any substantive policy from the Govt, it is all just PR spin and tinkering so as not to offend.

Even if extending bright line will do nothing, do it anyway. There is absolutely nothing to lose. Pascal's wager.

Overseas purchases will not be banned. Some of our trading partners make that part of their terms of trade that their citizens are allowed to buy our houses and land, no questions asked.

16
up

We live in an age of unparalleled data collection and processing. Truly amazing stuff. Saying that it's too difficult to distinguish between homeowners and investors is a lamentable, piss-poor excuse that does not remotely pass the plausibility test for me.

Banks already keep accurate records on whether a home loan is for a primary place of residence or investment property. If they didnt how would they or RBNZ be able to publish their lending stats on these?

Does anyone else get the impression Orr and the politicians are in the pocket of retail banks and lobby groups? Or perhaps the politicans across the spectrum just cant bare to do without the investment property holding class?

Well Robertson did just make his pre-budget speech or what ever you call it at a BNZ event... kind of a tells a story of what's going on.

13
up

"RBNZ Governor Adrian Orr said that reaching down to tie his shoes every morning would be difficult," while justifying his continuing use of slip-ons.

10
up

And still have not heard one word from the Govt on immigration settings.

Maybe because they believe the earth is round?

No Labour believes the Earth is flat and that's the problem.

13
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The govt should be making the most out of this Covid lull and be in full swing throwing the existing failed settings out while they can.

I live in the forlorn hope that even this bunch will start to understand the links between poverty, housing and infrastructure to the mindless immigration policy that they never endingly cheer-lead forward.

But yes – at this point nothing but a deafening silence on the matter.

Explain the links and prove them- perhaps I'll believe you.

What proof do you need? Half a million net migrants have entered the country in the last 10 years. The root of the housing crisis is a severe shortage of houses. That is why my mate advertised his very basic house in palmy for rent and got over 100 applications in the first 2 days.

By your logic the rising house price is also caused by the Sun rising everyday; since people tend to attend open homes and buy houses during the day.

I don't subscribe to flat earth theories- proof matters.

Our sun rises on eight planets, some argue nine, not sure which one you are on though.

CWBW. After reading that, I think you should steer clear of using the word 'logic' in a sentence ever again.

Rome burns while Nero fiddled

12
up

So Orr wants DTI's but he probably won't use them. And Robertson probably won't give it to him anyway. Brilliant work.

Yes – it’s quite excruciating to watch really.

This lot are into their fourth year and still miserably bumbling around.

GR “But obviously, we live in a dynamic world and so I’m still receiving advice. We haven’t made a decision.” Still taking Advice???? In the meantime ,watch the fire raging in the housing market. Only douse it after it has burnt to the ground !!!!

I wonder why they don't do something concerning interest only mortgages. They could be limited to shorter terms for investors. I guess people may just get bigger mortgages or mortgage the family home and use that to pay the principal.

13
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Yet more pontificating about what they shouldn't do.. what they are worried about .. what might not work.

They only need to do one single thing... Tax equity release as income. Nothing more is needed. NO IMPACT ON FHBs. No need for CGT.. NO need for bright line tax. Simple strike at the heart of the problem.

I quite that.

A great idea.

Bring in a DTI of 4.5, I dare you. It wont happen because the DTI would have to be about 7 for Auckland lol. No, we will stick to paper equity and the pyramid game goes on. DTIs have as much chance as real cash deposits, zero with Orr in power.

I suggest 7 is to low for speculand.

12
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I've said it before but I'll say it again - put all buyers in the same paddock = cash deposits. No leveraging. The housing market horse has well and truly bolted, it'll take a govt prepared to lose an election to get the nag back in the stable and therein lies the problem
LVR and DTI may actually favour investors when equity and rental income+personal income is counted.
NZ can't ban or tax it's way out of this conundrum - something "transformational" is required and must be "transparent" and take the "team of 5 million" with it, with some luck it'll "build back better" and then Labour can say "We've done this"

Pleassssse. Easy to apply to investors...only hard for the speculators to swallow. That the RBNZ raised DTI at all....

Picking pesto bismol could be a popular order shortly.

Ran NZ figures on the statement below and NZ's fair price for a home is 490K based on wages. Seems about right. Good article by the way. http://www.davidmcwilliams.ie/a-solution-to-irish-house-price-silliness/

The median family’s after-tax income in Ireland €3,750 per month. This means such a family should be paying rent of around €1,125 per month. In order to put a value on the asset and a fair price on the house for a landlord, let’s assume (very generously) that a landlord needs a 5 per cent yield to remain in the business.

At a 5 per cent yield, the house should be worth the annual rent (€1,124 multiplied by 12, or €13,488. If €13,488 constitutes 5 per cent of the price, then the total value would be €270,000 as the fair price of a home in Ireland.

Landlords do provide accommodation, I know a number of investors who are tired of the new legislation and investor bashing that they are turning their properties into air b ‘n’ b doing this they make as much having tourists in for the weekends as they do charging tenants weekly rent. This is clearly taking property out of the total available for habitation. Once again unintended consequences of this governments actions.

Is there really the demand for air bnb now that overseas tourism is extinct and for at least another year.

Soo You know multiple investors... ALL who own multiple properties... ALL of whom are kicking out tenants (what they all on periodic vs the normal fixed term).

Me thinks you fake.

You are misinterpreting what I am saying when you say ALL. However I do reiterate that I do know a number of people converting to Air B&B. Some have moved tenants out before the new rules came in, aware of potential difficulties ahead and some have bought with a view to investment and decided rather to rent the property out to go down the Air B&B route. I am talking about Rotorua where hotels are full of people in isolation and Motels full of the homeless. This does not leave a lot of options for people to stay when they come here and many are choosing the Air B&B option.

HalfwaytoP... simple, just ban air B n Bs because of the damage they do to society in the same way as we ban heroin. When an invertor exits the market the house does not go with them.

Is that what you would do in your Marxist dystopian state?

I like to think the Govt will protect the vulnerable from the predators. I am a bit soft like that.

Difficult? = actually, just don't want to do it. Firstly? even if difficult, the new rule is enough deterrent, off course the big pro cats will still find a way. Then this where, auditNZ & IRD can help to step in. Current translation? 'Mr. Orr won't do it' - too difficult, let's just skip it. Kcing!

'The RBNZ suggests exempting certain groups from debt-to-income restrictions would be difficult, as the Finance Minister expresses concerns over the impact these restrictions would have on first-home buyers'

Why do they ever discuss or use the word DTI when have no intent...........May be just because they want people to feel that they are concerned and want to act but in reality have no intent SO why even discuss about DTI.

Atleast now the government have said (even if it is just for effect) that while waiting for supply will target demand specially speculative demand.

Serviceability testing already applied doesn't achieve the same thing as DTI?

DTI’s have been in place in Ireland for a while, from what I can see, in Dublin where houses are as expensive as Auckland, all they do is restrict who can buy houses. The richest earners, and those who already have income from a rental portfolio. It has not helped reduce prices.

Only apply DTIs to investors then.

'Orr says it will be difficult to target property investor.....'

Is this guy serious if can use LVR to target, how difficult will it be for DTI. When applying for loannk, bank does ask if it is FHB or for investor..... though some manipulate but still in no way it will be as difficult as Mr Orr is making it out to be.

What is it with this aversion to property investors? Taken to an extreme, if property investors were banned outright the impact on rental supply would be devastating. The only new houses being built would be for owner occupiers selling their current house or new first home owners building their 1st home. It's an impossible situation, ban investors and have no rentals or let investors run free to push up prices. Maybe an equilibrium could be to limit the number of residential houses any one person can beneficially own. How many 3? 5? 7? This would be extremely difficult to monitor and enforce. That leaves the obvious - increase the supply of homes through new home construction - bring in a large american or chinese builder who has the resources and staff to get the contract done. Increasing the supply worked a treat in Christchurch after the earthquakes. The supply increase is happening according to Tony Alexander's research. It will take time though. Bashing investors (I'm not a residential property investor) in the meantime is idealogical political posturing but will quickly shrink the supply and push up rents - it's already happening. Investors selling out to 1st home buyer solves one problem but exacerbates another - rental supply. It's going to result in tears this year. In the 1970's Muldoon tried spec taxes and ring fencing of rentals just like this govt and it didn't work. House prices and rents kept going up and the supply of rentals decreased. Both measures were quickly reversed a few years later. Robertson is about to increase the "brightline" test to 7 years - it wont make any difference and will not result in more tax. people keep rentals for much longer terms. Flippers dont increase overall prices. They are taxed anyway under old legislation plus the current brightline 5 year test. The only solution is to increase the supply. Its the same with bananas and tomatoes. Supply and demand. Doh!