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Ryan Greenaway-McGrevy says reintroducing LVR restrictions on property investors is urgently needed and the maximum LVR on investment properties should be 60% or perhaps even 50%

Ryan Greenaway-McGrevy says reintroducing LVR restrictions on property investors is urgently needed and the maximum LVR on investment properties should be 60% or perhaps even 50%

By Ryan Greenaway-McGrevy*

Reinstating more restrictive loan-to-value ratios (LVRs) on investors is critical to reigning in speculative demand for housing and ensuring financial stability.

Irrational exuberance has returned to the housing market. In the middle of a global recession, buyers are behaving as if our record-low mortgage rates are permanent. And despite net rental yields still being well below the cost of capital in main centres such as like Auckland, investors are still piling in, indicating that they are once again betting on future capital gains rather than increases in income.

Both the Reserve Bank (RBNZ) and Treasury are now forecasting double-digit house price inflation that, if realized, will further undermine our financial resilience and impede economic growth.

Grant Robertson has seen enough and is now proposing house price stability be included in the Reserve Bank’s mandate.

LVRs represent the most effective tool-at-hand for the RBNZ to quickly rein in rampant house price appreciation while meeting its employment and inflation targets.

These restrictions on leverage have proven to be highly effective in stemming demand for housing, as published peer-reviewed research by the bank itself has demonstrated.

It is easy enough to understand why LVRs are so effective. Consider how many investors would remain in the housing market if banks were unwilling or unable to lend to investors at all. Only investors that had sufficient cash to purchase the full price of a house would be showing up at auctions or putting in offers. LVR restrictions remove the most highly leveraged – and therefore the most risky – borrowers from the market.

It is clear now that the Reserve Bank was too hasty in removing the LVR restrictions in response to Covid. The removal of these restrictions undoubtedly contributed to upward pressure on house prices over the past few months.

Given the uncertainty surrounding the initial onset of a once-in-a-century global pandemic, it is perhaps understandable that the RBNZ has put a foot or two wrong. But it was nonetheless puzzling that the Bank’s reaction to this downside risk was to relax restrictions on risky lending by removing the LVRs. Prudent financial management in response to increased downside risk would have been to encourage households to slowly pay down debt, not borrow more.

Recent moves by the RBNZ to bring forward the decision on reinstating LVRs to March next year are a welcome sign, but there is still plenty of time in the interim for prices to continue to spiral upwards.

Robertson’s proposal provides reasonable grounds for the Bank to reinstate the restrictions even sooner – and at a lower maximum threshold for investors than the previous 70%.

House prices are already significantly higher compared to when the LVRs were lifted. This warrants an even lower maximum LVR on investment properties – at a level of 60% or perhaps even 50%.

Reinstating a substantially higher maximum LVR for owner-occupiers by comparison, such as at the previous level of 80%, would increase the proportion of less-risky owner-occupiers in the market while still maintaining prudent lending standards. It would also give first-time home buyers a significant edge over investors bidding on houses.

*Ryan Greenaway-McGrevy is the Director of the Centre for Applied research in Economics and an Associate at Koi Tu: The Centre for Informed Futures at the University of Auckland.

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It's the use of "equity" in a home to leverage more and more properties that is the problem. If investors (buying existing stock) were required to sell the property to realise the equity that could then be used as a deposit this would greatly reduced demand.



Spot on. LVR less effective if borrowers are allowed to dip into unrealised equity gain. Very unproductive except to dig the pit deeper for the borrower to wallow in increased indebtedness. Paper gain. Nothing but a Ponzii.

yep or you could make them have at least 10% in cash as a deposit and then 10% from equity in an existing property.

I agree with you that given the increase in house prices over the past decade, a LVR on its own will have little impact for most potential investors leveraging off equity in their home or existing properties. The only investors affected by a LVR (without leveraging restrictions) will be those investors who are very highly leveraged and sailing pretty close to the wind.
However, while the possibility of a leveraging restriction as you suggest may provide a sense of "feel good", in reality it is not as simple as that.
Its worth looking at the impact of LVRs.
In 2016 when LVRs were in place - but with the market still peaking - RBNZ data shows that most months the number of mortgages to investors were over 5,000 per month and for four months of that year it was over 6,000.
Late last year, and pre-Covid this year, when LVRs were in place - and an increasing perception of upside to the market - the number of mortgages per month was only around 3,300.
In April at the height of the Covid concerns and the future of house prices, the number of investor mortgages was only 1,400.
Since the removal of LVRs in May - and the perception of a strengthening market - the number of investor mortgages has been around 3,900 to 4,000.
So currently without LVRs investor activity is well short of the 5-6500 in 2016 and up only slightly up on pre-Covid when LVRs were in place.
So yes; the past experience of the impact of LVRs may be over-estimated and are seemingly less significant or secondary to other factors such house prices and yields.
So yes, there is seemingly an apparent need to strengthen LVR's bite.
However, while your view that investors shouldn't be able to leverage on existing a property(ies) may appease you and provide the sense of justice and "feel good", in reality that may not be possible or likely toothless.
When a potential investor is leveraging off an existing property, in effect what the bank is doing is extending credit on an existing loan or asset to provide "cash" or a credit facility.
Leveraging is a common practice for Mum and Dad to provide support for son/daughter to buy a home, to fund a business, for home alterations, surgery, buy a campervan/boat, or (although not currently) overseas travel, buy a holiday home . . . or as a deposit on a rental property.
So how does one regulate that a bank can't extend credit on a mortgage or as to how is to be used?
I have had a good relationship with my bank and have had a substantial open credit facility (at minimal cost) - more than enough to put a deposit on an investment property.
Even if "leveraging on investment properties" was somehow stipulated, there are so many ways around that. What about one's existing credit facilities? What is so different between providing cash to a son/daughter to buy a home and a rental property on one's behalf? Use the credit facility against another asset - such as one's boat - and use the proceeds from that as a deposit on an investment property? . . . and that is just a knee-jerk reaction thinking.
Yes, current increases in the property market are unsustainable and create both economic stability issues and affordability issues.
Yes, we urgently need LVRs despite seemingly being secondary to other factors such as the state of the market, house prices, interest rates, and yields.
And, unfortunately, as much as they may have a "feel good" factor and address our sense of envy, investor leveraging is unlikely to be possible or practical.
What is needed is for RBNZ to not only focus on inflation and employment for economic stability reasons, but also take more responsibility to ensuring stability in the property market.
Unfortunately RBNZ don't seem willing to take that on board and are bullish on housing as a means to achieving its existing goals.
What we do need is a LVR targeting investors especially, FLP to be directed at business purposes only (quite possible as RBNZ is providing banks with the facility so they can do this), less QE, and no further cuts to the OCR.
The government also needs to accelerate housing supply to address the current shortage (there are still a number of motels here in Hawkes Bay full of "homeless")
It is in everyone's interest that the property market needs to stabilise; current rates of increase are unsustainable and are increasing both affordability issues and risk of a severe correction.
A LVR with restriction being placed on leveraging for investment a property is just a simple feel good reaction to the issue.



There is what should happen and there is what will actually happen.

Don't hold your breath waiting for the degenerates running the reserve bank to do the right thing.

No problem with LVRs for investors but this isn't really addressing the fundamental issues driving house prices.
The current prices are largely are result of two main drivers - low interest rates and house supplies.
Yes, put LVRs in place and it will slow the pace of prices but will not address the issue of supply - it will not create a single new house.

Based on the last few years of consents supply is less of an issue (although obviously still important). It's the demand side that governments have refused to acknowledge (because implementing demand-side measures is not politically palatable) and thus this crisis will never be addressed until regulations are imposed to slash demand.

"Based on the last few years of consents supply is less of an issue"
Of course not ... you will know when there is enough supply when prices for ordinary homes and units are not rising at meteoric speed. Question if all residential construction was halted for a period do you think prices would be rising at an even faster rate... yes! Ramp up construction and they will slow down

Do you really believe that we can build fast enough to match the billions of dollars that have entered the property market? Absolutely no chance! You turn down the credit tap (which can be done infinitely faster than building a house) you stop and reverse house price inflation.

If that were the answer it would have been done, sure LVR has some effect but negatively impacts the one (fhb) more than the other (PI). BTW you ignored my question and just retort with hype.

Of course if house construction was stopped prices would rise faster but your argument that building more houses in the face of massive credit creation is the fastest and most effective method of curbing house price inflation is just not realistic. Slowing credit creation is the answer but the powers that be (banks and government) don’t want it to occur because they all have financial interests in continuing with the status quo.


Interesting article yesterday on how poor building standards and housing are in NZ. Enter Mike Greer with his solution to import houses from Japan that were built to a much higher standard only to be told, you must downgrade the building material used as they exceed our lower standards in NZ. You really couldn’t make it up! Have we really got to the stage where we have to build cheap crap at astronomical prices which will need repairing at equally astronomical prices within a few years.

Build now, worry later scheme.

@ VeryInterested .....I have been screaming this for years, that the build quality of new homes (even some renovations) is just sh*t ! ...I went through the "leaky homes" crises, which is still going on, but more under the radar now - especially with rate payers $$$'s walking out the door, as no other party would never own up to the crap materials, poor design, "no eaves" boxes that were built (and unfortunately I can see more being built right now) ....yep, I have seen the wood rot internally on window framing etc, right before your eyes.

Then at the prices we pay here in NZ for building materials, to say we have "downgrade"!!! the building material from Japan .....makes me puke !

I have the answer to all this ......any second or subsequent property must have at least a 50% deposit exceptions ! I know the lawyers/accts would have a field day, trolling through all those family trusts, companies register etc to find out, as to each individuals property interest holdings, but tough luck, as these are the ones that have access to this "cheap munny" - let them sort that out and the FHB would have cheaper market to buy their FIRST home.

Bit of a coincidence that prices did not accelerate markedly until after LVR was removed, despite interest rate cuts that were mostly done prior to LVR removal.
According to Niness article yesterday, supply is starting to improve last 2 years.
Immigration also plainly not the driver this year, despite media blather not reflecting INZ stats.
Agents have a lot to do with this, as they are not pricing in what potential buyers might pay as a factor in CMA, which is not how CMA inputs normally work.
Normal CMA rests primarily on what was paid recently for similar property. But agent is now using discretion to include what he sees market likely to throw up at auction in particular, which is substantially above CV. Banks merely respond to what price (mortgage) needed is when buyer asks.
So, crux is Agents pricing higher and banks lending it. Key to reducing prices is for both factors to change
Most likely scenario is one we had in Auckland for 3 years 2016-19, where prices rise less than wages or GDP
Hence falling in relative terms, rather than absolute terms.

You should define your acronyms. I assume CMA = Comparative Market Analysis?

Agents setting prices? Rubbish. It's all demand, FOMO and much lower servicing costs (thanks RBNZ) driving this.

Along with the mass immigration over the last 10 years, councils obstructing building and so on.

Printer 8: When you mention "Supply" you should also mention "Demand". Neglecting the latter ignores the important thing in the equation.

printer8..agreed. The problem is that for banks, lending to an investor with high equity in existing property poses far lower risk than lending to a first home buyer. We need an urgent ten year rent freeze (to encourage renting over buying) and tax on unoccupied homes together with a huge reduction in migrants (to reduce housing demand). These three things would create other (smaller) issues but would pretty much solve the housing problem.


Wait for the Strawman Argument from the Property Lobby:

It will go something like this; Investors UNABLE to raise a 40% deposit for high end housing are NOW targeting lower end homes for investment/rental-yield - putting more pressure on first home buyers .. driving house prices up.

Obviously this is ridiculous:
A: High end property purchasers aren't necessarily interested in mum-n-pop rental-yields
B: Investors are already competing for low end properties!

Sorry to give the property lobby convoluted ideas to use as propaganda.

Bindi should be paying you a retainer.

That would be amazing tbh.

What are these investors going to do with their recently acquired investment properties?
Rent them out?
They need to be careful how much rent they seek
In the last week there has been several Rent Tribunal cases of tenants destroying the property and being charged with large bills for remediation - to which you can say "best of luck with getting paid"

@two otherguys

Hello, I rent. I tell you what, if I brought a house my whole attitude towards this 'housing crisis' would probably change.

Reflect on that, in terms of if you were a renter. But yes, some people are rogues .. there is risk in owning rental properties. You can't get blood out of a stone. I think even Moses only managed to get water out?

I was a landlord for a number of years with several properties.
Difficulties with tenants eventually soured me
Sold them and built two up-market town-houses
Rented one out to the Japanese High-Commission envoy
Rent was paid by the Japanese High Commission - not by the tenant
Japanese family. Husband and wife, son and daughter
The damage was extensive. Holes in walls and doors
Cost of repairs exceeded the bond
That was the end for me
Never again

That's a sad story. Hope you came out of it financially OK somehow in the end.

We've had mostly good tenants but always look after them and the houses even if they go feral later after the initial display of how responsible they'll be. Big risk now for landlords though with new legislation.

I think the govt needs to come up with incentives for landlords without firing the market more somehow. Maybe new builds or something and actually acknowledge how tough providing quality housing is. Until anyone's tried it I don't think people are qualified to know how stressful and soul destroying it can be to see your hard effort and time wrecked.

That experience was 20 years ago - when tenants didn't have to be so respectful of the property or their reference reputation


"how stressful and soul destroying it can be to see your hard effort and time wrecked" - I think renters who have been hoping to buy know that all to well. All the money I saved over the last year and a half just vanished in one month's worth of house price rises.

tenants right, such subhuman creatures.

Last 8 months lifestyle block sales in Auckland up 75% compared to same period in 2019
Residential only up 44%.
I do not think "investors" are buying land blocks to rent them out.
This is avoidance of pop density pus safe haven syndrome


Why would Orr bother doing anything if it is only a "first class problem"? I wonder if he would still think it is a first class problem if he was living in his car or in a garage of a relative? This buffoon wins the Most Tone Deaf Award 2020. His reward is a "first class ticket" to anywhere but here. Let's see how he gets on without his "old school tie buddies" egging him on. He is from a different era. Time to resign and do us all a favour and just go away.

Introducing LVR's for "investors" at 50% (at the very least) would be a good starting point.
But we also need to significantly adjust the tax system, to slightly increase interest rates, and to incentivize banks into lending to real productive activities, not just to parasitic housing speculation.

Well i think if investors are brining money, not unrealised equity in their stock, then they should be subjected to the same 20%. I guess they should be a multiple for their unrealized equity: like you would need $2.5 for every $1 of hard cash. So if an investor is leveraging its unrealized gain, their LVR will be 50%. I think this is sensible approach.
On taxation, you want capital gain tax? I have no problem with that. But do not expect any magical outcome. Any impact of CGT will be one off and soon the market will be back to where it was.
On lending to productive activities: I totally disagree with you. Bank lending is good for expansion of established successful businesses. There is so little room in this space in NZ that it will be impossible to lend them money that justifies the lending risks. Why do you think all the money is flooding into property? there is obviously a lot of money in NZ who is seeking return. It flows to any opportunity offered. The fact that it flows to property is a symptom of lack of economic opportunities.

CGT will not be one off. What is needed is consistent policy for taxes property.. Govt makes the tax law and could implement anything if they have the people’s remit. Say flat CGT at 50% for all persons holding more than 1 does that take ya cherry!


What alot of people are not realising is you cannot inject $100 Billion into a country the size of NZ without anything happening. The result is lower interest rates , asset price increase its economics its doesnt matter what the government introduces it will not cure anything. They can bring in higher LVRs , taxes etc but it will not correct it. The reason asset prices increase is because the currency is devaluing and it cost more dollars to purchase the asset. The printing of money with its new name QE is devaluing the currency and it has been devaluing since 1971 which means asset prices increase. Governments just keep on printing adding fuel to the already out of control debt fire. The currency is dying.

Well put. Printing money without changing the economic output of a country will inflate the prices, as sure as sun coming out every morning. In 70s and 80s the inflation was in everyday goods and services. Now, it all goes to asset prices (shares, houses, gold, anything you can think off really).

I agree Mr pink. One has to only look a gold over time as a measure. Gold is stable, unchanged and lasts for eternity.
It is not that it's become more valuable, it's value is unchanged, the price change is just a reference to the way in which govts continue to devalue their dollars, thereby destroying the savings of the people. Mr Orr just playing along with other central banksters to steal from us.

It's a tax on the poor.

This would be a common sense course of action. Also given the uniqueness of 2020 it is not surprising there is the odd miss step. NZ should be nimble enough to adjust course...

I wonder if you would have said the same if National was in power. a miss step :). The language we use to describe the same thing, depending if the thing is done by some we like or detest, is truly amazing.

"Inexcusable, outrageous, damning" becomes "concerning, unfortunate, worth keeping an eye on" as soon as you get your feet under the desk.

It's a bit ironic Robertson going to the RBNZ, when his government is energetically hosing the flames with copious doses of petrol

Is everyone ready for the next boom in the regions?

If buyers can't afford a $800k Auckland rental and can afford a $500k Rotorua rental then guess what happens? The same thing as last time.

Until NZ rolls out CGT and inheritance taxes speculation on price will not change.

More government (CGT, Tax etc.) intervention is not the solution.

Government is the PROBLEM in this whole thing. They inflate prices by restricting supply. It's too damn hard to build in this country.

Everything they do just pushes out a problem in another part of the market. Let's "help" FHB with a welcome home grant - all FHB homes immediately jump in value by $10k. Let's limit the grant to a max of $500k, all starter homes are immediately bid up to that max. Increase LVR, regions get inflated.

The government needs to GTFO.

I would do two things in relation to local government.

1. Reform local government to a single level. There is so much unnecessary waste in applying to district and regional councils for different consents for the same projects.

2. Remove zoning from district plans. It's a radical idea, but has been a key conflict in the Resource Management Act which is supposed to be effects based. Retain restrictions for nationally important matters, e.g. significant landscapes, ecological areas, culturally important areas, natural hazards, versatile soils etc. But blanket density restrictions on, for example, rural areas for no other reason than they're rural needs to go. Similarly for intensification in urban areas. Councils can still plan infrastructure to attract residents to more desirable areas to live, with land priced accordingly. People will always congregate towards cities as they always have anyway. Cities are places of dynamic change; rather than urban areas stuck in time. This would also put a stop to the cabal of developers that have the inside working relationship with councils to release land for development. Nobody else can get a look in anywhere.

There are already jurisdictions, like Texas for example, that operate like this, and they have a very stable and very affordable housing market.

Already happening I'm afraid

You're going to be waiting a long time if you think inheritance taxes will do anything - and a huge chunk of people have no chance of ever paying off a mortgage off now without accessing inherited wealth. And the government has plenty of money and a printer going brrr overtime - it can't competently manage that now, so good luck getting Kiwis on board with the idea of being taxed for dying - which will end up in more Wellington policy wonks and virtually no extra houses on the ground.

You need to increase holding costs and stop people amassing huge portfolios, using the gains in one to outbid owner-occupiers. You do this by taxing land interests and scaling with each subsequent ones (e.g. 0% on family home, 1% if you have a second homes, 2% once you have three, 4% if you own four, etc.). That will diffuse ownership away from the investor class and back towards the people who are currently underwriting their losses while they make sweet sweet capital gains.

Lets get the darklord class to build the houses we 'need' - do not allow investors to purchase anymore existing dwellings. They can only lease what they build.

Allow them to flood the rental market with houses, reducing rent and when the yields become so terrible they will sell and when they sell the price of owner occupied homes drops. Its a win/win.

As Bernard Hickey has remarked, "This is what happens when you build an economy that is really just a housing market with bits tacked on and your banking system is all about lending to landlords and other home buyers."
LVRs requiring a 30%, 40%, or 50% deposit by property investors won't accomplish much.
What is needed is a Government mandate that banks lend only to intending owner-occupiers for existing houses, and to other property investors only for new builds that increase the national housing stock.
Let the would-be landlords go cap in hand to the non-bank lenders.


That we allow property investors to use equity in other properties to purchase more properties makes the whole housing market a giant ponzi scheme.

I wish I could do that with shares.....I don't need to sell any shares to buy more of them because the price of the ones I previously owned have gone up! No cash need to sell what I own to buy something else. And I can do that with leverage! Its absolutely bonkers.

I've been banging on about the leverage thing for yonks IO. Investors need to find the deposit with real cash money, not equity from another property. They actually have to save the cash, just like a first home buyer has to. I would think then a lot of investors wouldn't be able to do a thing as I know a few who don't actually hold down real jobs as such. It's just so frustrating this whole thing. I know we need to use more tools than just limiting investors but at least we could try and make it some sort of even playing field for first home buyers.


Yip - property investment in NZ is parasitic. They often pay little or no tax. A number I know don't do anything other than receive rent from people working in the productive economy. And as prices rise, they use equity to buy more houses and lock FHB's out of the market, then take their rent from them as those people try to save a deposit. Its morally wrong (in my view).

Not sure how they do it - I wouldn't be able to sleep at night knowing I'm making other peoples lives worse, not better.

IO, you *can* do that with shares.

Unintended consequences.

The problem with tinkering around the edges to try and stem the flood of investors is that the river will still rise. The real issue in regards to affordability must surely be to better support first home buyers with the onerous deposit requirement. There are plenty of entry level properties available on the market right now with record low interest rates, even with a 90% mortgage, in many cases it is cheaper than renting.

Yes adjusting the LVR for investors will reduce the competition for 1st home buyers at the bottom end (entry level prices). However there will be some competition from 'new investors' ie anyone who has not invested in rentals yet but have owned their home for a decade or longer. With plenty of equity already they could become an investor using their existing equity especially and they wont have to compete with as many already leveraged investors.

Decreasing the LVR will also create great opportunities and higher yields for those with good equity to benefit from the lack of competition by other investors, especially if the property is a multi unit rental (ie no first home or upgrading house buyers want to buy those).

The very rich will get very richer...

'The real issue in regards to affordability must surely be to better support first home buyers with the onerous deposit requirement.'

Disagree - that will just push prices higher.

Are you a property investor - if so how many properties do you own?

For those who despise property investors perhaps a short history lesson may soften your views, or maybe not.

In the mid 1990's the government of the day announced that Housing NZ's (HNZ) state housing stock was in such a shocking state of disrepair, due to massively deferred maintenance for a very long time due to budget constraints. This had become exacerbated by the deep recession of the early 1990's.
They publicly stated HNZ could no longer meet it's mandated obligations to provide adequate and safe rental housing to accomodate the growing number of renters.
They actively encouraged "the private sector" to provide rental housing and started selling down their extremely poorly maintained state housing stock to private investors.

At the time I was instrumental in starting the Auckland Property Investors Association and our membership grew due to the governments incentives to invest (like depreciation on residential buildings able to be deducted from the rental income and the ability to offset property losses against other income.)

By investing in rental property we could effectively reduce or eliminate the tax payable from other income ie your day job.

The private sector stepped up as a result and investing became a valid option for mum and dad homeowners to invest for the long term to supplement the pension which we were also told would likely have the qualification age raised from 60 to potentially 70.

So before you blame investors think about that. We did step up and take the risks of investing and meeting the accomodation need yet today we are blamed as the main driver of rising house prices.

Second point to make is that the CPI calculation used to have the LAND component included so the RBNZ could include the value of rising land in the CPI and therefore target inflation to the then 1-3% range.

Funny thing happened though... in the later 1990's property values went down threatening to reveal negative CPI (deflation) . At the time Don Brash RBNZ governor removed the main ingredient from the CPI calculation that was dragging down inflation and that was LAND values. If he hadn't he would have had to resign as his job was on the line if the 1-3% target was breached and it would have been if land values remained in the calculation. We were told this was "only a temporary measure" until land values stopped falling but surprise surprise it was never re-included in the CPI calculation and still isn't.

That is why we appear to have a low inflation environment yet property prices have clearly decoupled from the reported CPI rate since 1999.

One last point todays first home buyers are tomorrows property investors. Why? To provide a better financial future for their children and improve their own chances of retiring from the rat race sooner.

What's your point?

Independent Observer, theres no point asking the same question on various posts.
So as I answered on the same q on another post

The government created the environment for investors to en masse invest, now they blame the same people for the problem they created thirty years ago.

The government instead should actually provide low cost quality housing (it CAN be done but not by relying primarily on the private sector imo) and at the same time help 1st home buyers with the deposit needed that so many of them struggle to save to get on the property ladder.

For the record in 1987 when i wanted to buy my first home i had zero deposit, so I got two jobs and borrowed the deposit unsecured (credit card and personal loan) then got the rest from a bank on the basis I got 2 flatmates (to also give me cashflow). Everything was disclosed to the bank and they could see my cashflow was strong enough so they approved my mortgage. It certainly was a stretch and sacrifices were made ie eating essentials only, no luxury items to speak of, no holidays away, no restaurants, movies etc,etc but got me started when everyone said you cant get in without the cash deposit. How many 1st home buyers today would get two jobs and live with 2 strangers to get started? Very few i imagine but it's still possible."

I'm still missing your point - is this a gloat about how well you've done and how broken the system is but you've used it to your advantage?

Perhaps you could tell us how the government should be building this low cost quality housing?

They could also provide a better financial future for their children by starting a business in the productive economy which would create jobs, god for bid, then retire early when you sell the business. Irrational thinking I know.

Yes precisely! Thats exactly what i did 9 years after buying my first home and two investment properties, sold the rentals and started my own business, went on to create dozens of jobs and many of those people started their own businesses on the back of that too. Input to economy is still significant GDP contributor to this day 20+ years later.

Without property I would have still been an employee of a corporate. No business started, no creating jobs and many spinoff businesses.

It's a nice story. But your experience when it was possible to buy a house in your 20s without a massive deposit (far beyond what you can get on credit cards), does not apply today. Because house price to income ratio's are so high compared to then, it's impossible for the young to get that first step (without Mum and Dad's help).

So what do we have instead? Lot's of people that are forced to work for corporates, who want to start businesses but have no avenue to credit. They are locked in to paying enormous rents, while still living with flatmates and no hope of ever saving up enough for deposits, while prices are going gangbusters at 10%+ increases a year. High house prices have ensured that your experience cannot be repeated.

Asking the government to support those high house prices by giving FHB's a deposit is simply propping up the system that is already out of whack. And who wears the bills for the governments cash grants to FHBs? The productive sector (as we aren't allowed CGT's in this country), sucking even more money from the productive sectors into property.

Sorry, you're the problem.

No need to apologise, you are entitled to your opinion, I'm just explaining how we got here. You can blame investors all you like but in reality it's the government (HNZ in particular) that has failed to meet it's mandate to the NZ public for decades...

If they hadnt offered us all the incentives to invest back in the 1990's I never would have invested in rentals. Just saying.

I can, because I'm not determined overlook the immeasurable harm that investors have done, banking massive tax-free gains on dilapidated rental stock, driving houses out of reach and acting like they're doing everyone a favour. But sure, it's the government's fault. Never mind your argument about it continuing to enrich others relies on constant capital gains and affordability worsening even more than it is now - but that's someone else's problem, right?

Jesus, you sound bitter. There are a range of investment opportunities available. The investor considers risk/reward and then makes a decision. If the past environment with both taxation and legislation favored buying property, then you'd be a fool not to pursue. My 2 rentals bought in the late 90s allowed me to be freehold@42. I regret moving away from property but shares have done quite nicely over the last 13yrs. Out of Auckland, nice houses can be found for 600k in major cities (I'm looking at some). If an educated and sacrificing couple can't acquire a 20% deposit after 5yrs of committed saving then you need to question their lifestyle choices. Get a 2nd job (I did), delay kids (we did), drive shitty old cars (nearly 200k on the clock) and you get there. Too many whiners who won't do the hard yards. Oh, add no alcohol, SKY TV, cafes or restaurants. The upside is financial security and early retirement. I see a lot of folks in my work environment not owning homes in their 40's.....they all have nice phones, overseas holidays, Friday drinks and expensive clothes. Irony is we earn similar amounts. Go figure, go whine.

I have a house, and I am currently up to 330,000km on a 2000 Corolla. Your anecdata about whining and people spending poorly doesn't stack up with objective things like spending patterns for younger people or deteriorating housing affordability stats. Did you pay 10x your household income for any of those houses? Were they financed with 20% deposits or 5% deposits? Did you have a 30 year mortgage, or a 20 year one? Perhaps your experience from when houses cost (i'm guessing here) 30% of what they do now just isn't that relevant? Maybe everyone goon-rushing property for capital gain has pushed prices to unsustainable levels?

Or maybe not. Maybe it's all in my head and I'm just bitter. Maybe some people have gotten tired of the tedious lectures from people who had it made and have just given up. I don't blame them.

Someone elses problem? actually no, it's not, its the whole countries and the only ones who can change that are the government.
They can solve the issue but they are too busy relying on the 'wealth effect' from property value growth to support the economy so they turn a blind eye or blame the 'other political party' until prices rapidly escalate like now and then they desperately reach for a fire extinguisher, which only temporarily quells the fire, not put it out.

You NEVER hear them complain about investors when values stall or fall.
Many investors are not acting like they are doing everyone a favour. They are quietly building wealth, often for their kids, I know many investors who have helped their kids into their first home. You can argue if no-one invests everyone can buy but thats not the case.

Inflation means property prices will always rise, labour and building materials don't consistently get cheaper.

Most property investors were renters once too, its just they decided to take charge of their financial future instead of relying on the government.

NO investors dont have to rely only on capital gains.
When I started investing I realised if values never rise thats ok because rents rise over time with inflation so the cashflow rises and i can then use those funds to maintain the property and even 'heaven forbid' pay off the mortgage.

See, this I do agree with you on. Yes, there was a wealth effect at play in 2000 - 2008, but it was also because people kept spending while tax rates were astronomically high on middle income earners (the heedy days of 39% of over $60K). However, "taking charge" of your financial future means me and people like me are going to be working well past our retirements to keep a roof over our heads, instead of starting businesses or doing all that other stuff you guys are doing because of the gains you were able to book. Forgive us for not being super enthused about the prospects of that.

Thank you for your service. I regret to inform you that your services are no longer required. The different set of circumstances and different set of issues we face today mean you're now a part of the problem.

I like your "One last point" re today's 1st home buyers being tomorrows property investors. The ridiculous prices mean that less and less are able to become 1st home buyers which has massive generational inequality consequences. Hopefully we fix the rules so they don't become property investors and you know invest in other things that are actually productive.

Shame it's not that simple.

If the government would actually step up and provide affordable homes combined with financial solutions for first home buyers instead of all this constant politicking and puffery about solutions they dont deliver on, then there would be a natural market adjustment and less investors. Investors would find less tenants to rent their houses, there would be a surplus of rental properties so rents would have to fall and/or investors would sell down their stock and invest elsewhere.

This buck stops fairly and squarely at the governments feet imo.

I fully agree. It is not the investors fault for making the best of their situation within the rules. We cannot begrudge anyone for that. It is the rules (set by govt) that need to be changed. Govt (red or blue): Tax free capital gains is the biggest incentive so obviously tax maybe via stamp duty. Next is leverage, you can leverage equity to go into more property so cap equity in existing housing as a percentage of new lending. E.g. 20% deposit must be cash and the rest can be existing equity. Remove the endless red tape re RMA etc. Enquiry into building supplies industry in NZ. And just get on with building building building.


When is Jacinda going to send an open letter to Faafoi instructing him to take steps to ensure our net migration drops to under 10K PA till at least 2030? First step would be ensuring 90% of students leave once study ends as opposed to 90% staying, working and adding massively to our housing crisis.

On point as usual.

Karl You have hit the nail on the head. It is often overlooked that mass immigration of recent years is the root cause of the housing crisis.

Exactly KK, why don't they see it, who is holding them (the Government) to ransom as to why so many people are allowed to stay here.

What is stopping the RBNZ from requiring banks to charge a higher interest rate on residental investment properties, and a lower rate on owner occupied properties? Surely a higher interest rate on the mortgage for residential properties makes it far less attractive to buy? After all, LVRs are a bit of a sop and fairly easy to get around.

Yes banks used to add a 1% loading as they considered a rental as commercial loan but competition by Citibank in the 1990's (who didnt charge any extra for investors and introduced the revolving credit product to NZ when no main banks had R/C's) saw all the banks eventually drop the loading.

How about Banning all investment property buy & sell for next 10 years to kill property market completely ? Any selling investment property will be taxed 100% net profit.

Yes that could be done, just wonder how renters would fare though when there's few properties available to rent... Of course that could suppress value growth for some time or push values down but cause unintended consequences like rents could spiral up due to lack of competition. and available rental stock UNLESS Housing NZ reignited the very reason it was created in the first place ie make home ownership affordable for first home buyers or give them an affordable rental to occupy!

10 year guaranteed rent price freeze would cool the investors jets. We had a total price freeze in 1982 so why not? My Dad tried to increase my board from $20 to $30 in 1982 and I informed him he would be breaking the law!

Do you know what happened once the price freeze was lifted?

Was like a shaken up champagne bottle having the cork popped...

OK ten year rent freeze followed by 20 years of 3% max increases, or sthg similar.

The PropUpcycle..didn't the cork pop before the price freeze and they implemented the freeze as a reaction to this? I think you may be twisting things (to fit your narrative and/or interests?) a little.

Thanks, yes and no, yes rampant inflation preceded the price freeze as a result of the 'oil crisis' in the 70's when the world was told global oil supplies would run dry within 10-20 years however no, things were already starting to cool down before the price freeze that Muldoon introduced.
The price freeze had massive negative consequences that lasted well into the early 1990's deep recession.

TPC.. not sure you can blame a price freeze between 1982 and 84 for a deep recession that lasted in the 90s. Seems pretty clear that the 87 crash together with high inflation was the biggest contributor with the price freeze having very little to do with it.
We need to take measures to prevent landlords from heaping misery on renters by charging them more and more for a place to live. I had properties in Akld for over 25 years and never once increased the rent on a tenant. Most stayed for years, hardly ever asked for anything and almost always paid rent on time. Many (but not all) landlords today are greedy and totally without compassion or empathy for their tenants therefore the urgent need for legislation on long term rent controls.

Yes to all that. Another big difference today is that many landlords have never met their tenants - the tenants only interact with the property manager.

This infographic from statistics NZ demonstrates how the big shifts toward the FIRE economy happened around 1987 onwards;

Agree one way to try (not that will happen) is to have high LVR specially for speculators - so called investors and for FHB should also be 10% to 15% as now more chances of going in negative equity than ever before with 5% deposit.

The thing with 1st home is that many dont really care what happens to the value so much bacause it doenst matter unless you sell or HAVE TO sell. (I didnt care after my 1st home property value initially fell 10% before bouncing back up).
People say the bank will call up your loan but that really only happens when you dont pay the mortgage payments. The banks dont want to call up mortgages and sell properties at a loss when the mortgage payments are still being made, they would be nuts to as they would potentially collapse themselves in the process of unnecessarily incurring losses on otherwise good loans being paid on time every time.
They do chase those who default or have a massive exposure to them, but not typically a 1st home buyer who is paying their way.

To most its more about no longer wasting money on rent for someone elses property. 1st home buyers usually hunker down for the long term view imo.

Investment in housing should be banned right away, at least until affordability levels come back to 3-5 times average incomes, especially in areas of high density population.

Sure thing... here's the rub. Median income is $55k p.a. so at say even at 5 times that means a median house price of $275k

The national median price is currently $725k

Assuming wages keep rising by say 3% p.a. and house prices don't rise at all ie $725k then it would take 32 years for the median income to reach the 5x median multiple.

Of course alternatively the median price could drop to $275k but that's a drop in the median value by 63%.

Investors are not the only ones who sell property and bank the profits.
Many homeowners and investors adequately maintain and renovate their properties pushing up the value, value growth is not all capital growth but you wont see that reflected in the explanation of the cold hard $ figure of the median price. Nor will you observe the impact of the old house that 3 years ago was apparently worth $700k (for a one house section so land value excluding the house was say $500k reflecting that only ONE house can be built on the section) but the section has since been rezoned by the council (ie the Unitary plan) and now 7 townhouses can be built on it so it's worth $1,400,000 which is a land only price of just $200k per site...

YES that is a reduction in the land value per house of 60%...

Homeowners represent a very large % of house buyers so even removing investors completely would not stop the capital growth train.

Of course theres another alternative where the state owns all property and rents it to you in perpetuity for your lifetime... ie no-one owns a house per-se, no private investors, no capital growth, welcome to the socialist state.

Nitpicking, but:

Median household income is over $85K.

b21 mentioned "3-5 times average incomes". Average household income was $102K in 2019.

Exactly, and the idea is not for prices to go down right away, but to wait as long as it is necessary for wages to catch up.

50% LVR for investors for existing homes
20% LVR for owner occupied existing houses
10% LVR for a new build

Let’s sort the supply problem and build enough houses because the government sure can’t do it! (KiwiBuild, LOL)

Get those builders trained. Use some good project management companies and bring building prices down. Free up land and reduce restrictions. Hopefully they have some vision.

Do that and every property spruiker in Australia will be on our doorstep. All those that cant get into the NZ market would simply go buy an apartment on the Gold Coast, financed by an Australian bank who has been greenlit by the Australian government to ignore all responsible lending rules.

And yet another article that doesn't mention our very high immigration levels over the last 10 years. We've added a city the size of Hamiltion (350,000) to the population in that time, but apparently it has no effect whatsoever. Not worth mentioning it seems.

Yes I get that ridiculously low interest rates and LVR removal are probably the main driver. And then there's council regulations (RMA and so on) and restrictions. Anecdotal evidence of people returning with money etc.

But if you say the average number of people per house for immigrants, that's 116,000 new houses needed in that 10 year period to house those coming in. It's not an insubstantial figure. Did we even build that many in that time? I doubt it.

Govt can see & agreed with RBNZ, removing LVR is actually the good things for housing supply which is needed by the Nation, the next step which to completely remove the bright-line test. Those are some of the past archaic moves that prevent the trickle wealth effect. The MMT clearly stipulated the creative way to shift the issue into future times, Time is money, money in the past, present & future. In future, NZ shall reap the benefit as the one to be at the top of debt numbers, I hope we can trade our way to the top, in future having debt will be the envy to those that don't have it. The way it is, remember the early day of Banks promo to get us into silver,gold or platinum credit cards? wow the feeling, now it's slightly change. You'll be welcomed in the future, red carpet, wine and all into Koru lounge, if your loan credit wealth is at the top. Future world, evolve around credit, debt. Albeit phantom, imaginary & un-repayable, so Kiwis - why the waiting?