ANZ Banking Group CEO Shayne Elliott says bank's NZ staff have 'been really run off their feet' meeting record demand for home loans

Banks extend 60 % of their lending to one third of already wealthy households to speculate in the residential property market because the RBNZ offers them an RWA capital reduction incentive, to do so.

In March 2017, former Treasury and Federal Reserve (Fed) official, Peter R. Fisher, delivered a speech at the Grant’s Interest Rate Observer Spring Conference entitled Undoing Extraordinary Monetary Policy.

Wealth effect or wealth illusion? The other therapeutic effect of lower-for-longer interest rates is the wealth effect. By driving up the value of future cash flows with lower rates of interest, all manner of assets – stock, bonds, and houses – increase in value and, thereby, can stimulate our marginal propensity to consume. More simply put, the imperative was to make rich people richer so as to encourage their consumption. It is not so hard to imagine negative side effects.

There are the obvious distributional effects between those who have assets and those who do not. Returning house prices in California to their 2005 levels may be good for those who own them, but what of those who don’t?

There are also harder-to-observe distributional consequences that flow from the impact of lower-for-longer interest rates on the value of our liabilities. This is most easily observed in pension funds.

Consider two pension funds, one with a positive funding ratio and one with a negative funding ratio. When we create a wealth effect on the asset side of their balance sheets we also drive up the value of their liabilities. Lower long-term interest rates increase the value of all future cash flows – both positive and negative. Other things being equal, each pension fund will end up approximately where they started, only more so.

The same is true for households but is much more ominous, given the inequality of wealth with which we began the experiment. Consider two households: one with savings and one without savings. Consider also not just their legally-defined liabilities, like mortgages and auto-loans, but also their future consumption expenditures, their liability to feed and clothe themselves in the future.

When the Fed engineered its experiment to promote the wealth effect, the family with savings experienced an increase in the present value of their assets and also an increase in the present value of their liabilities. Because our financial assets are traded in markets and because we receive mutual fund and retirement account statements, we promptly saw the change in the value of our assets. We are much slower to appreciate the change in the present value of our liabilities, particularly the value of our future consumption expenditures.

But just because we don’t trade our future consumption expenditures on the stock exchange does not mean that the conventions of finance do not apply. The family with savings likely ends up where they started, once we consider the necessity of revaluing their liabilities. They may more readily perceive a wealth effect but, ultimately, there is only a wealth illusion.

But what happened to the family without savings? There were no assets to go up in the value, so there is no wealth effect – real or perceived. But the value of their future consumption expenditures did go up in value. The present value of their current and expected standard of living went up but without a corresponding and offsetting increase in assets, because they don’t have any. There was no wealth effect, not even a wealth illusion, just a cruel hoax.
https://www.grantspub.com/files/presentations/FISHERGRANTSREMARKS15MAR1…

Indeed.

Wait Jacinda has concerns too https://www.nzherald.co.nz/lifestyle/jacinda-ardern-wants-to-help-find-…

"At what point do we say enough is enough..."

That point came and went about 14 years ago.
Before that, you could possibly excuse those who thought 'house prices going up makes me wealthy!" as that is all we were told and saw for the previous ~30 years.
But today? We should, and do, know better. Yet nothing is, or will, be done.

Disgraceful on every level; societal; governmental and economically.
It's a disaster in the waiting.

(But, Hey. Should I care? I'm a wealthier than I was this time last year...... Repeat that thinking by 1,000,000 'home' owners in New Zealand, and there's the problem - and it's Political.)

Buying property is the way to get rich in New Zealand, it's a one way bet. People have been forecasting otherwise for years but RBNZ and Government have always made sure property continues to ascend.

See Audaxes comment above, the banks have their risk settings wrong, if we want to stop it.

Ha!
And their idiot of a Chief Economist pontificates about the housing crisis, what a joke she is!!!

Due to political ramifications from property investors nothing tangible will ever be done to stabilize house prices.

Haha
It just defies logic that this won't end ugly.