Finance Minister warns Auckland rents and rising house prices a concern for Government; says RBNZ has tools to address interest-only loans to landlords

Finance Minister warns Auckland rents and rising house prices a concern for Government; says RBNZ has tools to address interest-only loans to landlords

By Bernard Hickey

Finance Minister Bill English has warned he is concerned about the fiscal and wider economic risks from an acceleration in rents and house prices in Auckland.

He also said the Reserve Bank had the tools to address any build-up in interest-only loans by rental property investors.

He was commenting as economists have said the Reserve Bank is preparing tougher capital controls aimed at rental property investors that could include a crack-down on interest-only loans.

"The bank has got a responsibility for financial stability and if they think there's excessive risk building up relating to any sort of loan then they're in a position where they can take action on it," English told reporters in Parliament.

"If there's a real build up in risk there, then that should be properly priced through interest rates and if the bank thinks it's under priced then it has the capacity to take action," he said.

"In a rapidly rising housing market in Auckland there must be debt accumulating in some places where it presents greater risk."

English said he was also concerned by recent signs of an acceleration in rents in Auckland, given the Government spends around NZ$2 billion a year on income related rents and accommodation supplements, which means more than half of all rental properties are subsidised by the Government. Any increase in rents risks increasing those Government costs.

Trade Me reported last month that rents on its listings for Auckland rose 6.7% in January from a year ago. MBIE figures on from tenancy bonds found weekly median rents in Manukau and Waitakere rose by 8.43% and 7.90% over the year to February 28.

"Yes. the Government is very exposed to the property market, both through rising rents and also through any buildup in price that might end badly with a drop in the price because we're the largest landlord in the country," English said when asked if he was concerned about rising Auckland rents.

"So yes we're paying a good deal of attention to it," he said.

The Government has flagged fresh measures in recent weeks to try to boost housing supply in Auckland, including Housing and Construction Minister Nick Smith suggesting fresh regulatory intervention in Auckland and English announcing plans to ramp up the joint Government/Auckland Council Tamaki Re-Development Company project to intensify state and affordable housing in Glen Innes.

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Surely this will only compound the issue. If we are being squeezed by the banks (What a sweet justification they get to increase rates adding to the rediculous profits they make year on year) I'm sure we will see rising rents to cover the same.

Shakepeare I quote : - Crocodile tears ......from Mr English ........... if you add 55,000 new migrants every year , without building enough houses , what are house rents going to do ?
This is not rocket science , even a 5 -year- old could get it

And you can't both restrict (or increase costs for) property investors and expect rents to fall.
Only solution is to build build build.  But all seems to hard for them.  Almost 10 years ago now I emailed the minister in charge of the RMA after reading one of the first publications of 'Demographia' that clearly illustrated the restricted zoning of residential land was the major cause of price bubbles.  5 years or so ago this got generally accepted.  So wheres these big areas of rezoned auckland land?

Help me out here will you please
 
Where is all this Auckland land located that you would have re-zoned
 
I really would like to know

Perhaps you're right. Auckland's possibly full. If you don't want to pay the premium to live there, don't go. 

The very best of luck with that idea
Not eaxctly rural land available for rezoning
 
That's the Waitakere Ranges you have marked out there - a wilderness reserve
Mostly Parks, Waitakere Reserve, and vast Watakere Water catchment area
 
Might get a bit down at Whatipu - long way out

You're right you could only fit maybe 10 or 20 average auck sized suburbs there... prob not worth worrying about... best we leave the boundaries as is ay

What?  You're saying it's a good idea to develop a National Park... 

That is the worst idea, housing landzoning outline I've ever seen!!! Simon, you're definitely an out of towner.

Karori and many other welly suburbs go up very steep ranges, when the land price exceeds a certain level it then becomes economic to to this.  Not saying rezone national parks, but can fit another auckland city between national parks there and existing boundaries

Steep and earthquake prone, Wellies is not a good example. 

Being non-earthquake prone, auckland should definately be developing up hills and ranges then? At 300k plus (more if views) per 400 sqm plot, someone will make a lot of money from a few days sitting on a digger

What's the closest National Park to your house?  How would you feel about tearing it down to build more suburbia...

You're right, lets force everyone out to Silverdale and Karaka while there are vast tracts of land in Okura, Coatesville, Dairy Flat, Paremoremo, Riverhead, Whenuapai and Riverhead in the north and Whitby, Brookby and Alfriston to the south. Easily enough space to double the size of Auckland.

I assume you mean Whitford, Brookby and Alfriston in the south.  There's big hills between SE Auckland and Whitford and only a couple of roads going out that way plus no options to easily widen those roads.  You have to go through Whitford to get to those other suburbs. The only part of the far SE I would recommend developing is Beachlands and Mareatai as there is a ferry service to town from Pine Harbour Marina.  North and west would be easier to develop but how are they going to commute...  have you been on the Northern motorway recently? 
 
It's not about finding green land on a map, it's about infrastructure. 

That is the worst idea, housing landzoning outline I've ever seen!!! Simon, you're definitely an out of towner.

Have fun in the rat race, with all the rats.

Zoom in on Auckland on this map and see if you can pick the urban growth boundary:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1136...
 
There's heaps of space - its just getting gobbled up by lifestyle blocks. Do all of these people want 10 acres? No but they want more than 500 sq m and those are basically the two choices in Auckland. 
 
Drive north on SH1 at 6am and you will see a stream of commuters coming from Puhoi and above. Drive south and you'll see people commuting from as far as Hamilton. Why? Because these people want affordable housing with the amenties of a town. Remove the zoning restrictions and you'll have new small towns develop on the outskirts of the cite - actually decreasing these people's commutes. 
 
Have you visited Silicon Valley? Apply and Google are on huge campuses they bought when this land was affordable. Our zoning restrictions mean we can't have something like Silicon Valley develop on our city fringe (even if we did have the other prereqs for it). 
 
Only 10% of people work in the city centre - most people who live in the far south will work south of the city and people most who live north with work north. 

I am typing this v.........e.............r........y slowly as clearly Bill English is a wee bit slow on the uptake. 
Time to curb migration and more's to the point ban foreign non-resident ownership of property

Exactly dontgetmegoing.
 
Then the RBNZ could drop the OCR after the housing market corrected and our dollar would follow.
 
However, Bill is not slow - he's just got vested interests .... while his and Keys banking buddies are making a killing out of suckers with big house mortgages in Auckland.
 
If the RBNZ were truly independant they would act - but nope, again more vested interests. All the RBNZ does is assist the banks make more money and pretend they are helpless.

Orcs prices are going to come back to reality, I'd rather a lot of foreigners hoping to get rich quick lost money, then kiwis.

Tons of land around Auckland. Rezone and let developers do the rest

Olly Newland, in January this year :
 
"Rents Sure To Rise":

In the same article the "expert on everything”  Shamubeel Eaqub, NZIER principal economist,

said:  "I don't think rents will rise a lot this year.  

http://www.ollynewland.co.nz/rents-sure-to-rise-herald/6889/

Who is going to to be right in the end?

Wow. Who would have thought. Rents rising in Auckland. Never would have seen it coming, with the shortage of housing supply, high immigration, increasing house prices... 
 
Read Value Added's comment in the other thread re 50 people competing to rent a house in Avondale. Landlords have plenty of scope to pass on costs to tenants if they are slapped with additional costs via any RBNZ policy. It would be very detrimental to low income tenants and the governments balance sheet to increase landlords costs. 
Build more houses and let the market do what it does!!!  

Should this not be headlined........"The price of houses and rents have not gone up by enough"........" Bill English demanding Inflation"???
 
 
 
 
 
 
 
 

It's apt that Billy English should be concerned about rising rents. This morning Trade Me reports that rents are rising in Auckland and around New Zealand. Nationally, rents rose 6.5% in the last twelve months according to their figures.
Where's 'Happy Renter' for a comment now?
Olly Newland (aka 'Big Daddy') is of course correct with his predictions.
Ohhhh... life's still good in landlord land lads!

...happy renter would be well advised to stay put. Your Landlord may be sitting pretty based on buying pre the stupidly high phase, but what a rubbish time for anyone else to buy in Auck.  Watch the race for the exit.... I reckon a wise few ones are already tip-toeing out the side doors trying to be unnoticed - YL no doubt amongst them.

Not at all rastus! In fact I am shocked you would suggest I am "tip-toeing out the side doors", whether trying to be unnoticed or not.
I am doing nothing of the sort.
With my long-time horizon, I think Auckland is a very attractive place to be purchasing residential houses RIGHT NOW.
The provinces are even more attractive just at the moment too.
Don't be fooled by the perceived 'high prices' chatter we hear just now. In 10-15 years time these prices will look cheap.
New Zealand (and especially Auckland) is that kind of place.
I don't even know where those 'exit doors' are rastus!

Happy Renter - yes I am. Rent has been stable for the last 2 years..friends the same, just not seeing any increases. Income has increased however, but watching the world markets, I sense some Black Swans are just around the corner...(Dairy prices a sign). What return are you making on your portfolio Mr Landlord??
Might be time to offload some assets and cash up? 
"The decline in the national median advertised rent appears to have mainly been driven by falls in Auckland and Wellington, with advertised rents in Christchurch remaining flat overall."
Hows those rental increases going ML?
 

Good on you frazz. But ssshhh... don't wake YOUR landlord up. When he does he will be due a healthy increase.
"Hows (sic) those rental increases going" you ask? Well the tax man is happy. My accountant just told me this morning "get ready for increased provisional tax payments."
Oh well.
PS I am cashed up.
(Not everyone in property has loads of debt buddy. I am a long time buy-and-keep-them type investor. The properties are all strongly cash-flow positive and have been for years. In fact, to minimise my tax payments the accountant recommends I borrow MORE money and invest. Heck... I just can't win can I).
 

NZ Government spends 2 billion per year in susbsidies to landlords, how many houses would that build?  Every year, make no mistake, this is a gift to landlords.

Most of the MP's are in on the taxpayer funded rort, so why will it ever change.?
Over leveraging is getting to be a problem for us all.
Especially when I did not bargain for any anomaly.
A flag waving distraction at our expense too, is just about the limit.
As are all the other Northland manouvers.
Maybe we should all get behind...Winstone....
And put him in the Beehive, a Capital Idea, as long as he advocates for a Capital Gains Tax.
That might really put the wind up... Wellington.
That might stir the pot a Little.
And a Dust _up ...is just what the National Party needs...up there.

"more than half of all rental properties are subsidised by the Government" is astounding. And probably what this supplement does is simply push up rents - since people tend to pay whatever they can afford. Which makes for better rental yields, which pushes up house prices. The only way out of this I can see would be to remove all supplements and greatly expand the public housing stock - but that's unattractive for a huge variety of reasons. Are there other ways to wind it back? Pushing up house prices is not where I personally want my tax dollars going.