Could the Reserve Bank (RBNZ) be preparing to introduce some sort of tool aimed specifically at cooling the Auckland housing market and leaving the rest of the country alone?
Perhaps, based on comments from RBNZ deputy governor and head of operations Geoff Bascand.
Bascand has been quoted by the Otago Daily Times hinting at such a move.
With Auckland house prices going up from what was already a "very, very high level," the RBNZ was considering whether action was appropriate, Bascand was reported saying after a Queenstown Chamber of Commerce function.
Asked if action would target particular regions, he said the RBNZ was working through that.
''We're reconsidering that - it's a time of close scrutiny.''
An RBNZ spokesman told interest.co.nz Bascand was reported accurately, but the RBNZ had nothing further to add today.
On Wednesday morning the RBNZ is due to release its bi-annual Financial Stability Report with a press conference with governor Graeme Wheeler to follow.
When it introduced restrictions on banks' high loan-to-value ratio (LVR) residential mortgage lending in 2013 the RBNZ suggested that, in principle, LVR restrictions could be targeted at particular geographic regions such as Auckland.
"However, the use of targeted restrictions is not contemplated at this point. Geographic targeting would be administratively complex, and would require difficult decisions to be made defining ‘problem’ areas," the RBNZ said in 2013.
"Furthermore, feedback to the Reserve Bank’s March 2013 macro-prudential consultation was that exemptions of large categories of borrowers, such as first home buyers, or more targeted restrictions, such as lending to ‘Auckland’, would be more complex and costly for banks to implement, and difficult for the Reserve Bank to monitor and enforce."
News expected on loans to residential property investors
With the release of its Financial Stability Report the RBNZ is expected to provide an update on its plans to carve out bank loans to residential property investors as a new asset class for banks. The RBNZ has consulted with banks on three ways mortgage loans to residential property investors could be defined as it works to establish the new asset class. It says the move is partly to facilitate the introduction of a macro-prudential property investor policy should that become necessary.
Currently investor mortgages are treated the same as owner-occupier mortgages for regulatory capital purposes. The establishment of a new asset class for them means banks will have to hold more capital against such loans, potentially making loans more expensive for property investors.
eputy governor Geoff Bascand told the Otago Daily Times yesterday Auckland's house price rises - up almost 17% in the year to March, fuelled by migration and investors - have started to distinguish the region from the rest of the country.
''They are going up from what's already a very, very high level,'' he said after a Queenstown Chamber of Commerce function yesterday.
''So we are carefully considering whether action is appropriate,'' Mr Bascand said.
Asked if action would target particular regions, he said the bank was working through that.
He added: ''Previously we've indicated we think that's quite difficult - but perhaps there may be new ways of it getting a little bit more possible.
''We're reconsidering that - it's a time of close scrutiny.''
- See more at: http://www.odt.co.nz/news/business/341607/action-housing-market-possibl…e Otago Daily Times yesterday Auckland's house price rises - up almost 17% in the year to March, fuelled by migration and investors - have started to distinguish the region from the rest of the country.
''They are going up from what's already a very, very high level,'' he said after a Queenstown Chamber of Commerce function yesterday.
''So we are carefully considering whether action is appropriate,'' Mr Bascand said.
Asked if action would target particular regions, he said the bank was working through that.
He added: ''Previously we've indicated we think that's quite difficult - but perhaps there may be new ways of it getting a little bit more possible.
''We're reconsidering that - it's a time of close scrutiny.''
- See more at: http://www.odt.co.nz/news/business/341607/action-housing-market-possibl…e Otago Daily Times yesterday Auckland's house price rises - up almost 17% in the year to March, fuelled by migration and investors - have started to distinguish the region from the rest of the country.
''They are going up from what's already a very, very high level,'' he said after a Queenstown Chamber of Commerce function yesterday.
''So we are carefully considering whether action is appropriate,'' Mr Bascand said.
Asked if action would target particular regions, he said the bank was working through that.
He added: ''Previously we've indicated we think that's quite difficult - but perhaps there may be new ways of it getting a little bit more possible.
''We're reconsidering that - it's a time of close scrutiny.''
- See more at: http://www.odt.co.nz/news/business/341607/action-housing-market-possibl…e Otago Daily Times yesterday Auckland's house price rises - up almost 17% in the year to March, fuelled by migration and investors - have started to distinguish the region from the rest of the country.
''They are going up from what's already a very, very high level,'' he said after a Queenstown Chamber of Commerce function yesterday.
''So we are carefully considering whether action is appropriate,'' Mr Bascand said.
Asked if action would target particular regions, he said the bank was working through that.
He added: ''Previously we've indicated we think that's quite difficult - but perhaps there may be new ways of it getting a little bit more possible.
''We're reconsidering that - it's a time of close scrutiny.''
- See more at: http://www.odt.co.nz/news/business/341607/action-housing-market-possibl…40 Comments
Interesting.....They say the job of the Reserve Bank is to take away the punch bowl when the party goers start getting out of hand. The question is: Should the rest of us be sent home because Auckland has just nailed two beer bongs and spewed on the dance floor. The rest of the country has been drinking quite responsibly.
I think one thing we can all agree on is that we need actual stats on foreign buyers. If the government won't restrict foreign buyers ( usually on the premise that there isn't that many of them ) then surly they can introduce a means of gathering the statistics. The do absolutely nothing approach on this issue is starting to wear thin for me. Anyone else?
No, what I'm saying is that if house and land values in the 'regions' were on a runaway trajectory as they are in Auckland, there's no guarantee that investors/buyer/seller behaviour would be any more restraint.
I think if you flooded any market with cash, people will start acting foolishly.
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And my comment wasn't meant to only cover foreign buyers.....
.
It would be nice if some more sustainable investment went to places in NZ other than Auckland.....Please note I said sustainable investment - that doesn't mean I'm advocating selling farms off to the highest bidder, or opening up national parks to get stripped ad mined.....
... the job of mayor Len Brown is to not constrict the supply of sections to build on , nor to deny developers the right to construct more intensive units in the centre of the city ...
The question is : Should Phil Goff come out with some responsible plans for the Queen city now , build up his legitimacy as a mayoral contender , ahead of the next local body elections ?
Why do we carry on with the myths?
-I'm not saying it's not necessary to build in Auckland, but the price increases are not being driven by the shortage. It's purely a speculative market where more and more mum and dad "investors" want to join the party believing that prices always go up. It's just inertia. Rents don't go up as we would expect if there were such a shortage. There are no CGT and interest rates are at a very low level, what do we all expect to happen?
-Foreigners go to Auckland because it's in Auckland where the good jobs are for foreigners. As simple as that. I am a foreigner, I lived in Auckland (but can't stand it), I moved to Invercargill (couldn't stand its lack of opportunities and low salaries) and found finally a nice place in Tauranga (where my salary is less than what I would earn in Auckland but exactly DOUBLE than what I was earning in Invercargill). Want to cool down Auckland housing demand/population growth? Encourage productive investment in the provinces and add some controls in the Auckland universities (the real immigration back door).
..But the truth is that provinces are also overpriced. Tauranga, for example, is seriously unaffordable compared to salaries. Even Napier, Hamilton, Dunedin.. they all have expensive houses and expensive goods that makes Auckland worth living in. Is there any place in NZ where the median household income salary is more than 33% of a house price?
I still don't understand why I pay $8 for a beer in Auckland and why a beer in Invercargill also costs $8. I don't know any country in the world where prices are so equal among different regions despite having so different salaries and commercial properties rents/prices. No wonder why foreigners rather stay in Auckland. Houses are expensive but everything else is the same and with better salaries and opportunities!
- Investment in property is encouraged by the government itself (kiwisaver being able to be used as a deposito to get a mortgage). Clearly the message people get is that it's ok to buy a house. Instead helping ownership government should dedicate these funds to help renting or to build houses only for rent. It's safer for the financial stability in general, it allows further saving, further productive investment and further consumption.
Until then, if houses are expensive stop crying and don't buy. The only RBNZ should do is to ensure that all the risks derived from "over-investment" in property wouldn't affect the financial stability/productive economy when the bubble explodes. Only speculators and the fools that joined the pyramid scheme late and badly should suffer the consequences. Unfortunately we all are exposed indirectly..
http://www.stuff.co.nz/waikato-times/news/9630548/Hamilton-house-prices…
http://www.nzherald.co.nz/bay-of-plenty-times/news/article.cfm?c_id=150…
http://www.nzherald.co.nz/hawkes-bay-today/news/article.cfm?c_id=150346…
http://www.stuff.co.nz/dominion-post/business/residential-property/8207…
http://www.odt.co.nz/news/business/243434/dunedin-high-unaffordable-list
Auckland has a big problem, yes, but the rest of NZ has it as well. At least Auckland is mainly where the quality jobs are.
well said.
Also, example of 2 young families with one kid:
Family 1: buys a house with a huge mortgage- gets WFF , kiwisaver grant, and accommodation supplement from govt because assets other than house is Zero.
Family 2: rents and tries to save enough money to one day buy a house with more than 20% LVR- gets nothing because they have cash asset so no WFF, no kiwisaver grant, no accommodation supplement, and pays tax on interest earned...
That's the way it's planned to be, govt wants this.
why 500k? why not 550k or 450k?
Maybe it'd be better to apply it on any residential where the purchase price is over 3x the household median income of the area. Then.. yes, I like it.
That way would ensure that only rational prices can be paid through debt at the expenses of the future financial stability. And if the price is higher, it's clearly overpriced hence if you want to buy it you'd have to make sure the funds come from your savings and not from future wealth (debt).
And hows that LVR restriction going to get more houses built dazz?
Behind any LVR restriction there is a person......one who you and the RBNZ and anyone else who supports this concept doesn't give a toss about!! What gives you the Right to interfere in another persons life?? Why is your financial safety more important than theirs? The whole concept of an LVR is ludicrous and ignores basic constitutional rights!!!
It is all the interfering by Politicians, Councils RBNZ bureaucrats etc that has caused the problem so more interfering is not going to cut it!
Why doesn't the government just ban New Zealanders from buying real estate? If any New Zealander is caught buying real estate they should get severely punished by having 400 basis points added to their mortgage rate.
I don't think this would solve the sky rocketing prices in Auckland though.
Oh well just apply them to the whole country, investors in residential housing need their wings clipped, big time they are a huge part of the cause of NZ going from a home owning to a house renting country. It stinks, especially given the way tenancies are set up here. Look out the country is going to be coming after you
not likely most are after capital gain, yield is not important. only seasoned investors are buying in Tauranga and Hamilton as they understand the long game of positive gearing, the object is to let the tenant pay off the mortgage and leave you a nice cashflow when you retire to supplement your lifestyle.
And that is the shame of it and one of the reasons why investing in residential housing must become as welcome as a pork chop in a synagogue, so that we can get back to ordinary people owing their own homes, the way we are going is extraordinarily sad for a country once proud of what it stood for and what it represented. Our lives are being corporatized at a horrendous rate and all the ordinary folk seem to be is fodder for the wealthy few.
I want my decent country back
What about a retrospective seller based stamp duty on Auckland property. Say 4% it would be fair the faster and the more you turn over your properties the more you pay ... bingo gets investor's, speculators whether foreign and local. For the average Joe that sells their house every 14 years it aint all bad.
Retrospective stamp duty would not be fair. However few people know that SD still exists in legislation
but set at "zero" . The last use of it was only very recently when stamp (cheque duty) was abolished.
Stamp duty was on all property purchases,( not sales) both residential and commercial but was phased out on residential decades ago, and on commercial in 1999. It would only take a nano second to reintroduce it again as no legislation would needed. SD also existed on many documents, invoices, wills, etc .The effect of SD would in practical terms mean that purchasers would have to come up with bigger deposits while in theory the value of the property would not be effected as SD would not be regarded as a part of the purchase price. The Australians have SD on all property purchases with first home buyers under a certain price, being exempt. After all that it doesn't work in neither Australia nor anywhere it still exists, and property prices continue to surge upwards despite it's impost.
link:
http://www.legislation.govt.nz/act/public/1999/0061/latest/whole.html
Um, not really. If all you can borrow is $X then that is all you will pay or the deal doesnt go through. I think there is some evidence that houses in the FHB territory are quite price sensitive. In terms of OZ well they have had FHB grants which in effect every time they are brought in pump the housing market higher. Steve Keen is the one to read on that effect. The good thing about SDuty like a CGT is that it dampens the domino effect, again Steve Keen comments apply.
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