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David Hargreaves says anything that Finance Minister Grant Robertson is planning to introduce in order to ease housing market demand pressures needs to help - not hinder - measures already being put in place, particularly by the RBNZ

David Hargreaves says anything that Finance Minister Grant Robertson is planning to introduce in order to ease housing market demand pressures needs to help - not hinder - measures already being put in place, particularly by the RBNZ

"Many hands make light work," goes the expression.

So, theoretically, anything that Finance Minister Grant Robertson can do to help on the 'demand side' of the housing market will be welcome.

But there's also another expression: "Too many cooks spoil the broth."

Yes, that's right. Good intentions do not necessarily lead to good outcomes if too many people get involved, perhaps pulling in different directions. This is particularly so when political considerations may be a big motivating factor as is inevitably the case with Governments and first home buyers. As I've said many times before, FHBs being locked out of the housing market is a BAD look for any NZ government.

To be clear, I want the Government to get involved in the housing market. Oh, yes. But its big role has to be setting the platform for adequate future supply. And we all want to see action on this front and to know that things are heading in the right direction. This Government has a lot to live down with the massive failure that was KiwiBuild.

On the demand side, again the best thing the Government could do is look for a balanced market where everybody gets a fair go. Again, measures that are aimed as being long term and sustainable across cycles would be best. Knee-jerk reactions are not likely to help.

The key thing about the yet-to-be-spelt-out measures Finance Minister Robertson is planning to announce before the end of month  is that they should complement - and not work against - things either already in train or being proposed to alleviate housing market demand pressures  particularly 'macro-prudential' measures implemented by the Reserve Bank. 

All we know at the moment from what Robertson said this week is that he wants to target "those who are speculating", while helping as much as possible the first home buyers. This was the key passage from the speech:

"...We all know that building more houses, particularly affordable houses, is critical. But we also can do more to manage demand, particularly from those who are speculating.

"New Zealanders are seeing family members being crowded out of the opportunity to purchase a home of their own by speculators and investors. We want to tilt the balance more towards first home buyers, while also incentivising more investment in the construction of homes.

"As I said late last year, we have received advice from both Treasury and the Reserve Bank on our existing measures to manage demand and discourage speculation, and how they can be enhanced or changed. Proposals will shortly go before Cabinet."

In so far as we can gather, Robertson appears inclined to want to in some way extend the bright line test (which this Government extended to cover five years in its last term). Personally, I wonder if, from the wording in that speech, there's some idea of trying to incentivise investors to build new houses rather than buying existing ones (perhaps by offering an exclusion from the bright line test for new builds?). That's pure speculation on my part, but I don't think it would be the worst idea. Not at all.

It all needs to fit together

It wasn't in the speech but, additionally, Robertson suggested to media later that if there were to be debt-to-income ratios introduced for lending that these be applied to investors, but not first home buyers.

Okay, let's go back to the point about what Robertson comes up with needing to fit in with other either existing or in-train measures to assist with demand pressures in the housing market:

We know that a 40% deposit requirement for investors is now a done deal and we know that the Reserve Bank is again pushing for a debt to income ratio measure to be added into its macro-prudential toolkit.

But we also appear to know that the seemingly once hand-in-glove relationship between Robertson and RBNZ Adrian Orr has become strained, something that first became readily apparent when Robertson wrote to Orr in November seeking that the remit for RBNZ's Monetary Policy Committee be amended to include specific consideration of house prices and to “avoid unnecessary instability” in them.

Orr has pushed back against this and on Wednesday of this week he appeared to be pushing back again against the Finance Minister when saying that it would be difficult to apply debt-to-income (DTI) restrictions to some residential property buyers - like investors - but not others - as Robertson had suggested the day before.

We do need the Government and the RBNZ to be on the same page. You know what they say about unintended consequences. These are most likely to occur when one measure runs counter to another.

Worrying signs

I might sound like I'm being negative about the Government getting involved in housing demand. I'm not at all. But nobody needs it going off half cocked and from what I can see so far I think there are some worrying signs in what Robertson may be contemplating. 

What for example about the bright line test becoming a key part of government involvement in the housing market?

My recollection of the origins of the bright line test, implemented by the previous National-led government  is that it came at a time when said government was coming under the pump about rocketing house prices and, yes, FHBs being locked out of the market. It appeared to be put together in a hurry. Very much so that the government of the day could be 'seen to be doing something'. And it was the Capital Gains Tax that Dare Not Speak Its Name.

Well, now that this Labour Government has seemingly for the foreseeable future ruled out a 'real' capital gains tax, it appears happy enough to lean on this cobbled together one inherited from National. Does anybody have a view as to whether the bright line test actually works well? And does it do its job? The job of course, presumably to not be a capital gains tax but to, simply, er, tax capital gains.

What I'm saying is that the previous National government introduced what looked like an ad hoc, knee jerk measure and now this seems to be becoming part of mainstream Labour policy for the housing market. It doesn't look like a sound basis for formulation of policy and law to me. Drum up a piece of legislation as a quick reaction to adverse public opinion (FHBs locked out of houses) and then gradually add bits on to it - without necessarily checking whether what developed in the first place was sound.

I will be sceptical then of how successful any Government measures might be that lean heavily on changes to the bright line test (bearing in mind that Labour's already extended the period it covers out to five years).

New builds only for investors?

I will be fairly interested, however, if the Government has got some cunning plan to incentivise investors to buy not existing houses, but new builds. Obviously such a policy would have the virtue of adding to the housing stock and would mean that the investors and the FHBs are not scratching each other's eyes out over existing homes.

Anyway, we shall see.

The other point of some nervousness I have around the Government's intentions is the emphasis on getting FHBs into homes come what may.

We do want to do everything we can to ensure that wannabe first home buyers are able to get into a home. But it would be counter productive if official government policies start inadvertently suggesting that young home buyers 'can't fail'. 

To look at the issue of DTIs again, Robertson's suggestion that he would like to see those aimed at investors - but not FHBs is troublesome.

Quite simply, which category of house buyer is most likely to have stretched DTIs? Well, it ain't the investor.

Obviously, I can see where Robertson is coming from on this one. Introduce DTI measures across all category of buyer and this may well block some would-be first home buyers from being able to buy. So, DTIs might act to disadvantage the FHB grouping disproportionately - in much the same way as the original iteration of LVRs did in 2013, when it did not differentiate between investors and others.

There are risks

However, I see a risk that putting DTI measures in place for investors - but not at all for FHBs - could send a message to young buyers that the Government will protect them at all costs. It would almost to me start to look like a Government-sanctioned taxpayer underwrite. Yes, we want the young to be able to buy homes - but not at all costs, not with undue risk taken.

So, look., I hope the Government goes carefully here.

In terms of the immediate direction of the housing market, I do think the reintroduction of 40% deposits for investors will make a real difference. I confess when the RBNZ originally introduced 40% investor deposit limits in 2016 I didn't think that would work then, so hot was the market. But it did. And it can again - particularly since the investors and the banks have had the last several months filling their boots in the absence of the LVR rules, which were removed on May 1, 2020.

The Government therefore needs to be careful any measures it introduces don't help to put downward pressure on a market that might already be about to start easing. Clearly the last thing we would want is for particularly FHBs who HAVE managed to get into a home then watch as house prices start to actually fall. A balancing act is required.

Given the reintroduction of LVRs, I'm not sure the Government really needs to rush now on demand-side measures. I would rather see something well thought out that can be applied for the future, rather than a Government that wants to be seen as doing something in the short term.

What I and I'm sure most people want to see this Government doing is coming up with something substantive on the issue of housing supply. That's where the focus needs to be. We are waiting.

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The best thing that a first home buyer can do to secure a home is to buy a ticket to Australia. New Zealand is mutton dressed as lamb.

House prices never ever being able to fall in the slightest is why this fustercluck exists. As a consequence, when they do eventually fall (and they will) the drop will be much much larger.

I'd rather KEEP My Money than spend it on a Deposit/Home here in NZ.

It's not worth it.

I remember hearing this word for word back in 2016. Imagine how much this advice has cost you now.


Why? There's more to life than NZ's rampant property speculation.

If your end game has always been to have a roof over your head and look after your family then its cost you nothing.

If your life is all about foaming over CG at the neighbours BBQ, its cost you everything.

It's like people think the only way to build capital wealth is by buying residential investment properties.

I mean this message is constantly rammed into us via MSM. But still, in terms of yeilds, risk v reward? Sure have some property in your portfolio but it's far From the only way to make money (more importantly other people) work for you.

Balance and timing is key.

Most accurate comment for a while. Oz house price increases last year single digit, and economy there is poised for takeoff as mining ramps up and infrastructure booms. Ockers are loving the NZ conveyor belt feeding them skilled labour easily integrated, while we have to continually replenish and feed the babyboomer's housing pyramid scheme. And we haven't got any alternatives, National had their chance and kicked this whole thing off, and are just a bridgehead for the CCCP anyway. Aunty Cindy's replacement of the RMA is just a rebrand designed to pick up some cheap runs, while any enhancement of efficiency is going to be offset by greater consideration of wider environmental issues and iwi consultation. Nothing wrong with that per se, but lets not pretend this is the silver bullet. Best thing to make land cheaper in this country the size of Britain with a fraction of the population - force the landbankers to develop en masse and government funded council infrastructure.


Most people must know by now that the problem has to be with investors / speculators. If another 1000 houses are built and are bought by investors then we are no better off, however, these people usually only buy existing houses, they do not add to the housing stock. There should be a limit as to how many houses an individual can own. Also interest on investment houses should not be tax deductible as investing or speculating in houses is not a "real" business.
Nothing will change as there is too much self interest in property investment especially by politicians.


We can all propose solutions, even good solutions, until the cows come home.

It's completely pointless while we have princess tooth tooth and the fat controller unwilling to lift a finger to address the problem.

If the fish rots from the head, then the rotten head needs to be cut off.


"princess tooth tooth and the fat controller".

Nice one Brock


Immigration can't be helping either - if another 1000 households decide to call NZ home then those 1000 houses count for nothing.

Your first assertion is fundamentally incorrect. To see why simply exchange 1,000 for 100,000 or 1,000,000.

Do you really think if that many houses were released to the market that:
A) rents wouldn't fall
B) house values wouldn't fall (less scarce, no shortage, falling rent due to oversupply)

Any chance you could describe what a "real" business is? Is the provision of rental accommodation any less of a service than providing Financial advice or Budgeting services or Equipment Hire? Lot of cases of "sour grapes" when this subject (housing) is discussed imo

Forever locking out the poorer half of the country from home ownership is not a business, it's tyranny.
If I go to a poor region in Africa, buy all the food then sell it back to them at twice the normal price, would you call that business? immoral shit business but definitely a business....and Id curse the government that allowed/encouraged it.

Can someone please elaborate on how DTIs will impact FHBs more than investors?

Take an example: An investor looks at buying an investment property for $1m. Gross rental yield is 3%: $30k p.a. Assuming LVR of 60% the loan would be $600k. DTI: 600 / 30 = 20x

FHB seeks to buy the same house with a combined gross income of $150k. This would equate to a 4x DTI at 60% LVR or a 5.3x DTI at 80% LVR.

Sure the investor may have other sources of income, but on an incremental basis the investor seems to be much more impacted by a DTI restriction. So DTIs should stop the stories of people aiming to own 25 houses etc.

What am I missing?


You are missing that it's just a smokescreen to disguise the fact that Labour want prices to continue increasing in perpetuity.

The whole evil ruling class suggestion is a little fantastical in my opinion. I think they are more worried about kicking off a slide downwards that coincides with the next election cycle. JA is a professional politition first and foremost.

Power and popularity are the goals.


DTI would bring the housing market to a complete standstill - especially main cities. Another issue would then need to be addressed - the piss poor incomes kiwis get paid. I don't think the Govt wants the spotlight on this issue aswell.


I'm for DTI, but can't see the Govt being keen as It would expose the fact that Kiwis are carrying too much debt compared to income. Other countries have DTI as less exposure for banks.

A key issue is that under the current RB mandate, the Governor can only use DTIs for the monetary purpose of overall price stability. It is not his job to help FHBs relative to investors. If that is to occur, then it is the job of the Government.

This is completely untrue. RBNZ were able to differentiate the LVR ratios between investors and owner occupiers. They did so on the basis of varying levels of systemic risks - There is NO reason they can't apply the same risk based decisioning when implementing a DTI.

DTI and LVR are two sides of the same coin when assessing the "riskiness" of any lending.

Exactly. It was done on the basis of the systemic risk. That is very different from doing it for benefitting one group relative to another. That is the Government's job, not the RB

The RBNZ has recognised the increased risks posed by investors. High DTI's are a systemic risk and recent trends (lowering of interest rates, and relaxation of LVR) will have 100% increased the average DTI of investors.

Take a look at figure 2.10 of the financial stability report. It shows the percentage of investors with DTI > 5 and LVR > 70% has gone from 10% of loans in 2017 to 15% of loans in march 2020, then spiking massively to 25% of loans in Nov 2020. This is a huge change and creates a huge systemic risk. It needs to be addressed and a DTI tool tailored to the risk profile of investors is not only justified, but much needed.

In regards to the dti and financial stability , id suggest the rbnz looks at the debt servicing / income ratio.
This is a function of interest rates, as well as debt and income.
This seems reasonable to me, in regards to the rbnz and stability.
You might find this ratio is lower now than 2017 ?

It is also a function of welfare. The subsidies we pay out to investors.

You aren't missing anything. Parties with vested interests will claim that certain policies are harmful to FHBs. This is a form of concern trolling, they aren't actually concerned about FHBs and in this case it is quite transparent because the policies are clearly less harmful to FHBs.

The investor also has a combined gross income of $150k plus a freehold home plus gross rental yield of $30k p.a

The investor with 1 property does, sure. But those aren't the issue. While numerically the number of "mum & dad" investors is quite high, the vast majority of investment properties are held by larger investors.

If you 150k income, but own 20 negative geared investment properties, that income is very highly diluted.

I think you might be surprised how many 'larger investors' are not actually running their rental portfolios negatively geared. Larger rental portfolios are built up over a long period of time, earlier purchase prices compared to rents received for those properties today easily give investors excess income to service mortgage repayments on property purchased today. A certain amount of debt can be repaid to get the new property to cover itself and then on it goes.

Lots of investors (who aren't aggressively expanding their portfolios) will have low DTI. They aren't the ones causing the surging prices and associated systemic risks.

The ones who are leveraging up to the hilt, and buying every property they could once the LVR's were relaxed are the problem.

There is no systemic risk associated with large scale investors who have relatively conservative levels of debt as they have been in the market for decades - DTI's and LVR's aren't going to impact them, nor should they. Its the investors who have gone on a debt binge and are rapidly expanding their portfolios using dangerous levels of debt that are the problem and the ones a DTI would (and should) impact.

So what you have said is that DTI's wont affect Mum n Dad investors or large scale investors......therefore as per StuckAtHomes original question, "Can someone please elaborate on how DTIs will impact FHBs more than investors? What am I missing?", by ruling out the aforementioned you have answered it yourself...FHB's. Which is the point I was making to StuckAtHome.

That's really interesting - could you post a link to the data please?

Oops accidentally clicked on the report instead of reply option. Point this comment out if queried as I am not able to undo it myself.

Yield relative to debt increases much more quickly than you’d think even whilst yield relative to CV stays static. Also investors chase higher yields to begin with and can achieve these by buying entire blocks or apartments.

You are missing that the investor already owns properties that are hitting capital gains of 15%, so their debt requirement across all properties is much lower than the FHB. Imposing a DTI ratio limits peoples ability to acquire debt and impacts most on those who need high debt.

Exactly. without a DTI rapidly rising prices can make the LVR restrictions far less effective, while simultaneously further disadvantaging FHBs.

Your example is unlikely.

More likely the investor has a higher income than the FHB and will have the rental income on top of that.

Example: An investor looks at buying an investment property for $1m with $400k deposit. Salary $200k (husband and wife), rent $30k p.a. DTI 600/230 = 2.6.

FHB seeks to buy the same house with a combined gross income of $150k. DTI 600/150 = 4.

RBNZ introduces 3x DTI limit. Investor is still buying and your FHB is out of luck.

This is the outcome Orr is warning Robertson may result if DTIs are provided as a tool to RBNZ without a clear mandate that they should only be used on investors to dampen house prices.

Of course DTIs should only be applied to investors. It is another bomb we need to drop on them while ensuring FHBs are not collateral damage.

You just need Labour to change the legislation so as to direct RBNZ/Orr to do this.


I think this article summarises kiwis (home owners/investors) attitude towards the housing crisis. They say they want something done to control house prices, but really, they don't as it will effect them and their wealth. Governments know this, therefore when it comes to resolving the housing crisis they opt to talk the talk but don't walk the walk.


I am a homeowner but not an investor (I don't own any rental/investment properties) and the 'value' of my home is meaningless to me as I have no plans to sell it and I am mortgage free. I believe that when I do sell it, it's value will be relative to the market at that time -but get this, I will be massively better off if the market has crashed significantly from it's current levels! This is because any mortgage, deposit and payments will be so much smaller/less than currently. It seems that so many people just do not understand these fundamentals.

Exactly. There is a pervasive myth that rising house prices benefit all home owners, when this really isn't true. If you purchased your first home, and need to move to a bigger house in 5 years, rising house prices will mean you have to take on MORE debt, than you would have had to if prices had stayed static.

People who own a single home and are planning to downsize or sell up and rent can benefit from rising prices, but for the majority of people that own one home it really doesn't benefit them much at all.

In terms of your last paragraph, yes that's true but only up to a point, as the smaller, lower priced apartments move up in price as the rest of the market does. Although, they don't move in parallel due to the math, eg. A 20% market-wide increase sees a one mill property rise to 1.2 million and a 600k retirement unit rise to 720k ie. The downsizer is still better off.

How come whenever government plans to introduce policy to control speculative demand many experts and media come out with warning.

For once government is understanding that beside supply, one has to act on demand also specially speculative. As economy = demand and supply.

Till now all government were hiding behind supply as had no real intent to control the ponzi.

Lobbying has started to put pressure on government and RBNZ for LVR :

If Jacinda Arden government really wants to but break on this housing bubble, she can but will she and does she actually wants to ???????

JA has missed and is missing the opportunity that she had with such a huge mandate that she enjoys but to act needs a leader not to be influenced by so called experts, media and strong lobby influincing through administrative officers supporting / assisting government as is evident as now even Labour Leaders are on the same page that RISING HOUSE PRICE CRISIS IS A GOOD CRISIS.

Media...when the government says that wants to control speculation....


It’s all so ridiculous.

House prices rise 10% over a short period – sign of a good healthy market.

House prices fall 10% over a short period – absolute disaster, to be avoided at all cost.

If those with the levers have jointly decided that prices are never to fall then they should be careful not to sow the seeds creating price rises such as we have repeatedly witnessed.

Every rise creates a new plateau that ultimately becomes more and more difficult to sustain.


What really worries the Govt. is they have no way of judging the outcome of any 'tweaking' they do. If they can control how much the market moves up or down, then their policies over the last 12 months, resulting in the 20% increase we have had to date must have been planned. Which of course it wasn't.

That is why they are very reluctant to try and stabilize things, because if they had a drop of the same amount it went up, then they would be out of business.

In short, they are guessing at best, and are deliberately keeping away from making the hard decisions they know they need to make, at worst.

You can bet, whatever they come up with, is more aligned to the next election cycle than what needs to be done to really solve the housing crisis.

Michael Reddell wasn't that worried about a housing depression because of the relatively small numbers of trade being made - i.e. how many people actually would be in negative equity or low equity (after all he is a macro guy).
I agree. but the longer the government waits to do anything, the more people who could be screwed over by the action. They've missed the bus because too many people will be exposed soon (not so worried about the "investors" as investment should be a risk-reward equation)

Exactly right, the longer they wait the bigger the mess. They should have set wheels in motion months ago, even declared an emergency


"Clearly the last thing we would want is for particularly FHBs who HAVE managed to get into a home then watch as house prices start to actually fall. A balancing act is required."

Do not agree with this statement at all, with this logic house prices could NEVER fall in order to protect a very small portion of the population (as there will always be a small amount of FHB who just recently bought a house). A modest fall of 5-10% should not put FHB under water and would go some way to making house prices less our of reach.

When wage growth is circa 2% house prices need to fall or stay absolutely flat (no modest increase) for 10 years to make a difference. The govt has the tools to do this but does not have the will. It is unclear what the population wants. I suggest a reduction in income taxes with the inclusion of a land tax could be sold to the public and I would have thought getting more tax revenue from capital rather than wages would be something 'Labour' could support.

James108 you are correct that a modest fall after massive rise will only effect speculators and not FHB as they have bough a house to make it home and are in for long term so short term fall if will affect will be mainly to investor that too speculative investor BUT government as have no intend hide behind and find reasons not to act against the ponzi.

Do not know wether current Finance Minister has intend or not but for the first time have talked about controlling speculative demand along with supply as normally all politicans and experts as have vested interest only talk about supply issue ignoring the demand specially speculative demand - not because they are dumb as any one with decent brain will know that when trying to build supply, it is extremely important to control and put a break on speculative demand as also it is this section of buyers who pay unheard prices and main culprit for rising house price.

Follow Australia's lead - a Stamp Duty on property purchases. With a Kiwi twist - an exception for FHB, or owner occupiers buying to upgrade existing family home (have to sell the house they shed within 6 months or Stamp Duty applies to new purchase). Imagine investors/speculators having to pay 10% upfront that they will never see again.. A huge disincentive

The UK have a flavour of this - there are different bands of stamp duty (including 0% up to 125k, which is actually still enough to buy houses in some areas of the UK), and if you are buying a second home you pay an extra 3% stamp duty. There's an exemption if you are upgrading but the sale is delayed - you can claim it back if you sell the original home within 36 months.


This article highlights the dangers of reactive policies.
The bright-line test reduced speculative demand some years back.
Speculators have largely gone elsewhere - for example bitcoin
The key driver of property investment behaviour has now shifted to using property as a safe haven from low interest rates and a fear of fiat currency debasement.
The Government is now using the term 'speculator' as a political term that distracts attention from the real issue .

“The key driver of property investment behaviour has now shifted to using property as a safe haven from low interest rates and a fear of fiat currency debasement.”

Yes – and on that basis I wonder if we’ll ever create sufficient supply – for some buyers these properties will no longer be acting as “homes” – but simply a store of wealth.

A rise in the number of ghost houses will likely be another unfortunate result of continued policy failures.

Yes, it is easy to make the required policy changes, but they don't like the outcome.

The very reason we have the property being used as a store of wealth, is we have policies that not only have encouraged it to become a high-value commodity but almost our only commodity.

Irrespective of bitcoin, low-interest rates, high immigration, etc. other jurisdictions have stable over time, affordable house prices.

Speculators have to be highlighted as bitcoin does not affect average people but unable to buy a home does. Besides financial more damage is done to social fabric of the society.


But shouldn't the point be that using our housing market for the purpose of purely speculative investment IS the problem. Someone investing in housing to provide a long term quality rental service is needed in the market. Gambling on the housing market for speculative purposes is a HUGE component of the problems we have now. Land banking, buying shitty properties on large parcels of land (renting them out in terrible condition), all just to rack up capital gains is a part of the problem

We need to make housing about providing homes to people, not a mechanism for people getting rich of speculation.

That was what KiwiBuild hoped to do. They found it was easier said than done.

Kiwibuild wasn't about reducing market speculation, it was about boosting supply, while letting speculators continue unchanged.

Reducing speculative activity in housing would involve removing it's favoured taxation status. Introducing penalties for land-banking, empty/under utilised homes, where people are speculating on prices rising, and are not actually providing housing to NZ'ers.

Yes, it was about boosting supply and it did not work.
The bright-line has already placed a big dampener on short term speculation.
Investors are now primarily long termers there for the long haul.
If new measures are to be effective, they need to reflect that reality.

Yeah, nah.
Yeah - before she was elected Jacinda Ardern's Kiwiduild policy included things to boost supply like remove the RUB/open up land and build houses for $500,000.
Nah - when she became Prime Minister, she dropped the supply increasing parts of Kiwibuild completely and instead it became a way for the government to chuck $2billion into our speculative housing bubble supporting risk taking investors with a price floor. Then when Covid19 hit the government stepped up further with a massive QE program to chuck even more money into the sector.

Medium term speculation is a thing. It would be good to make it less appealing.

Some of us told them from day one Kiwibuild could not do this, it was so obvious from their model. Simply you cannot put the land and materials in at the same high status quo price and expect prices to be cheaper, unless of course, you subsidize it somehow, which is not the definition of affordable housing.

And as far as the numbers go, one developer alone in the States builds 55,000 houses per annum. I know of one company overseas that has spare capacity for 3,000 prefab houses a year, and they can be delivered here cheaper than locally sourced. It was just incompetence on the Govt's part that they could not get the numbers built.

The only way our present system allows houses to build cheaper is to accidentally oversupply enough so developers, spec builders go bust, and they carry the loss with the discounted prices. But there are auto mechanisms like the banks needing 100% of the plan presales to slow this down, So all that happens is the end purchaser has to settle in the future on a property where the market has changed, and they are forced to sit on it.

The point being, our present system is always designed for supply to be less than demand, sometimes by a lot, sometimes by a little, but always less.

The problem is the premise of building homes for upper-middle class FHB's isn't really a good way to boost supply. It can't be done at scale, and it needs to cater to the whims of the upper-middle class FHB.

Building public housing at scale would have been far more efficient, but wouldn't appeal to the voters labour was trying to swing from national. Build sufficient housing to reduce/remove the accommodation supplement, reduce the demand for housing (through reduced immigration), rebalance taxation of housing, would have ultimately helped those first home buyers indirectly.

It's a myth that you can't do bespoke at scale and for a good price. Yes, it is more expensive, but only slightly so. Just as car volume has moved beyond a model T ford and you can have any colour you like as long as it is black, so has housing prefab. technology, but the mind set remains in the Henry Ford thinking in NZ.

Where all the expensive in NZ lies has nothing to do with scale but with land policy causing monopolistic rentier advantage, coupled with council delays and costs, which further lead onto erratic volume causing demand spikes for labour and materials.

In fact, this erratic system is counter to scale as Prefab factories need consistent volume over time. We have already had a pre-fab factory go bust with having Govt contracts but the Govt. bureaucracy causing stop-start delays.

Housing in NZ is overly expensive in any part of the spectrum.

My point is that the number of people who even afford Kiwibuild houses, and were first home buyers, was actually a very limited pool of people. In my experience, due to their high incomes, they also tended to have strong preferences in terms of location, size and other things.

If kiwibuild had delivered houses aimed and middle-lower income families, then it would have been far more workable. But it was never designed to do this.

Yes and that was what the Govt. couldn't work out, ie they were telling themselves they were building for the lower end, but charging middle plus pricing.

And yes there is a funny thing about preferences, apparently, people are expected to pay high preference prices but accept low preference amenities.


Renting should be a choice people can make due to their particular circumstances, not a life sentence. Is this the future we want? 'One landlord is set to own all of Christchurch by the year 2053'

We need more pathways for people to be able to get into their own homes, and without ever growing mountains of debt heaped upon their shoulders. We desperately need to stop becoming a nation of Landlords and ever increasing numbers of renters. This is hugely detrimental to the health of our society. We should not simply be tinkering with the rights of renters, forcing landlords to be decent at a glacial pace and encouraging more quality rentals to be provided - but actively making home ownership possible for anyone who wants to own their own home and willing to take on the responsibility. There should be pathways for those unable to work, with disabilities or health conditions etc, to be able to own secure and affordable accommodation that gives them as much control over their own life as possible. But the fact that we cannot even make this possible for everyone that is working full-time, is absolutely wrong and shameful. Why should anyone willing to work, to contribute and be responsible, be locked out of home ownership, with all the benefits and security it affords, in this country?

Thank you

Nice to welcome another strong voice to our chorus! More and more people are realising this. I just hope Government Ministers and/or their advisors read and pick up on this sentiment on this site.

There are times in your life when renting makes perfect sense, and in fact, overseas studies show it helps with productivity, just as buying at the wrong time can reduce productivity.

It is not uncommon for example in Germany for people to rent until their 50's and then buy once they know they are in their forever home, and they do so for the 'feeling' many people get from owning, ie they don't do it because of any capital potential and thus that is why they could choose to rent or buy, with either being of the same quality and same occupancy and financial stability.

Their system is set up for this, our system is set up for a monopoly non-competitive advantage for a few.

Right - a big problem at the moment is that the smartest thing you can do is buy a house as soon as possible, even if doing so limits your career opportunities, because there are very few careers that pay enough to compensate for the loss you take from not owning. That means any career which requires study or moving around a bit is a bad bet - you are better off taking a job straight up and buying as soon as possible.

I didn't see the 'sarc.' postfix at the end?

But if you were being serious:

while it won't be readily discussed at the bbq, there are plenty around wishing that they had better timed some of their purchases.

And re the limiting your career opportunities, is it a wonder we are falling down the international rankings in so many areas, and prices are rising.

I'm not being sarcastic- I'm dead serious. And it's a big problem. The opportunity cost for someone who buys this February rather than last is 120k. Taking into account interest, that's around 160k. Taking into account taxes, you'd need a salary of at least 200k just to not be going backwards. So at this rate, the opportunity cost of each year of study is at least 200k, not even taking into account fees and living costs.

Even if you think more people go to university than should (a reasonable position, in my view) we still need qualified nurses, teachers, etc. But the facts of the housing market mean that you are better off doing almost anything else than a degree, because the opportunity costs housing wise are so high. Which is a disaster.

If you do the Math you can see it can't work like that, as people do need degrees to do many jobs. If everyone didn't play their part the whole system would collapse.

And the example you use is a bit extreme and won't last. It's the system that causes house price rises to be so extreme that needs to change, not, not getting an education because of an opportunity cost. And it will.

Exactly - that's my whole point! A system that makes it essentially more rational to take any job as soon as you can rather than take the time to train for an essential role you might well be better suited for is a disaster.

But on average people with a university degree earn far more money.
If you go straight in to a job from school you are likely to be earning crap money for years and will struggle to save a deposit.

"The key driver of property investment behaviour has now shifted to using property as a safe haven from low interest rates and a fear of fiat currency debasement."
Do you have a source for this?
I don't think a recently bought rental would produce a significant income after costs and if the government does actually manage to debase the currency I don't think an investment class based on high LVR margin lending will survive the interest rate increases. I guess investors could believe otherwise.
I would call anyone buying assuming prices will go up another 20 or so percent this year a speculator.


My source is my own digging around in the industry as to who the buyers are and their reasons for buying. The days of buying, doing a cheap makeover and then flipping are largely over. Conversely, people setting up for a future retirement are desperately seeking a safe haven, and some are very reluctantly becoming property investors. This is what happens when real interest rates (inflation adjusted) turn negative. Currently, the choice is between property, shares and bitcoin.

Are these buyers looking for perceived cash-flow or almost guaranteed capital gains? I would consider these buyers that have been forced to speculate for positive returns (as intended by central banks).
Are these buyers going to sell again having their capital gains when interest rates rise to the point they can live off them again? The market looks to be in frenzy that I think can only be explained by buyers assumptions that house prices are going to continue to rocket up well above inflation and what's needed for positive rates. REINZ's days to sell is down from last year this time when the property market was in full swing as well.

Safe-haven buyers are not driven either by maximising rental returns or by hope of outrageous capital gain. Their prime objective is simply to protect their capital against fiat currency debasement, and hopefully to obtain a modest real return on that capital. In many cases they are reluctant landlords.

You are right Keth. I'm typing this while sitting outside a property for an open home. At my age, the last thing I want is a rental, but I can't afford to leave my $ in the bank.

Where do you anticipate your income coming from after you buy? Are you looking for capital gains or does this place have a likely positive net yield?

Are you worried about currency depreciation? or are trying to get the return from your investment that were expecting from your term deposit?

I'm trying to get a return on my investment. The house was a bust - couldn't believe the poor state it was in. Oh well, there's another one on Sunday :)

There might be a significant number of investors out there who believe they are investing primarily for a safe-haven but I can't see any behaviour that would support this. Day's to sell, B&T clearance rates and price gains don't support a rational investor looking to buy something that will hold value. They must be relying on short term capital gains bailing them out of hidden problems and overpaying.
Am I missing something? A leveraged housing investment (say >50% LVR) would seem to be a terrible hedge against currency depreciation (rates will go to double digits which your savings would be making but now your paying and no one can afford to borrow large multiples of income to buy). It's not a prefect comparison but here's Argentina experience (-20% real prices since 2015 with interest rates of 40%):

People are still flipping houses. The Brightline Test didnt change that. Flippers and developers were always subject to income tax. The Brightline Test only cast a wider net to capture people who thought they were going to be long term holders but then changed their mind or were forced by circumstances to sell. Personally I cant wait until the new LVRs and whatever come in, as a cash buyer looking to flip houses I'm hoping the new rules remove long term landlords from the market so I have less competition.

Speculators have largely gone elsewhere - for example bitcoin

Evidence Keith. Bitcoin's market cap is approx USD600 mio and the value of the NZ housing stock is approx NZD1.2 trillion. BTC is a universal asset class that can accessed globally. It would be damn near impossible for NZ banks to lend people money to speculate on crypto. Completely different animals. I don't have any evidence but I would not be surprised if only a few HMW NZers had exposure to BTC or crypto in general.

Bitcoin's market cap is approx 3x that of NZ's housing stock value...... Really? can you run us through your maths.

Apologies. The value of NZ housing is greater than the market cap of Bitcoin (which may change in the near future) +. But the point still remains: my thesis is that crypto is not a speculative instrument for most NZers. Housing is the instrument of choice. It has the potential to take down the economy and much of the net worth of NZ. Far cry from Bitcoin, which is philosophically different from the monetary debasement used to drive the property bubble.

You are correct. Housing is indeed the main choice. The point I was making is that the alternative options are limited. A key question to ask is: why are investors being driven to property right now, and more so than in the past? I suggest to you that it is the specific monetary conditions and the negative real return on bank deposits. And therein lies the answer as to moderating the behaviour.

I do actually struggle to see the logic behind some of decision making related to housing investment. For ex, without a doubt, the property market has been driven by the 'retail banks' ability to create money. I cannot for the life of me understand why this is being ignored by RBNZ, the govt, the media, academia, and the 'experts.' It cannot be denied and is endorsed by people such as Mervyn King. Housing investment is so reliant on this mechanism and people just accept that it will continue into the future with no consequences to investments such as housing (known unknowns). The idea that ROI on housing investment > cash rate, therefore one should invest in houses is wrong-headed if one cannot quantify the risk factor.

One also has to quantify the risk factor for cash in the bank, and quantify that risk in inflation-adjusted terms. The risk is not that the bank will be unable to honour the commitment to repay but that the money will have become debased in terms of spending power. If we assume inflation of say 2% per annum then in 10 years the bank deposit has declined in inflation-adjusted value by 22%. In comparison, the likelihood that a property will have declined in real terms by that amount might be considered low, plus it will be providing a cash return. This is even before considering the effects of leverage. But I agree with you that the merits of property investment are now more finely balanced than six months ago.

Yes. This is a very important point. But let us 'assume' that money is being debased at say 10% p.a. So we want the property to appreciate at 10% p.a. to break even. Are people assuming that prices will increase at the rate of monetary debasement? Do people really factor that in? What if they're lead to believe that inflation is only around 2%? Now you may argue that 10% sounds a bit excessive. However, if we use gold as a benchmark, the value of AUD (using a proxy) is actually devaluing at that rate.

There is always the sharemarket and the rewards can surpass housing with a great deal less effort and stress. Too many Kiwis suffer from tunnel vision when it comes to investment. .

If you take a look at the Smartshares annual reports, for ex, the NZX50 tracker ETF, you start to get an understanding of just how few people are invested in these funds. Of course, it has become much better since inception, but even then, the reports give you an idea of how many individual investors there are and of how many units they own.

If the Govt hadnt put a wealth tax on overseas shareholdings, perhaps more people would have invested in companies like Apple and Amazon, instead of buying houses. Don't blame people for not investing in shares when they are punished by heavy taxes when they do so.

The FIF tax is miniscule. How do you work it out to be heavy? And you would rather own a shack in NZ, than a stake in scalable power house company such as Amazon or Apple? I don't think it's the tax that's stopping people from investing overseas...

“The bright line test reduced speculative demand some years back”

Did it though? My understanding is that IRD have been very slack in actually enforcing this law and even if they did if a speculator is making $200k capital gains in a year are they really worried about paying income tax on that?


The best thing the govt can do to control demand is to never go back to mass immigration. The 500k net new migrants into the country in the last 10 years is the root of the housing shortage. When an employer goes to the govt dept and says I need to bring a chef in from overseas - the dept needs to say increase your pay rates to attract a chef from the NZ employment market or train your own chef. The refugee programme should also be suspended until we have provided half decent housing to all kiwis. It is absurd that we have kiwis sleeping in cars and garages while giving state houses to refugees.

Please don't equate the very minor number of refugees we take in with the wider problems we have around immigration. We absolutely should continue to welcome refugees, as its the right thing to do. We are talking 1000~ people a year

But I am 100% in agreement that our levels of immigration can NOT be justified unless the government can actually provide a coherent plan as to how we will provide the housing and infrastructure to support them, but just as importantly, how we will pay for it. Right now we import people to drive down wages, to benefit a small number of industries, but hand off 100% of the costs on to society as a whole. Do you actually believe industries clamoring for cheap workers would continue to want to bring in workers if they actually had to shoulder the costs of providing the additional housing and infrastructure required to support those workers? of course not, because it would be MORE expensive than employing locals. But when the costs can be palmed off onto society as a whole, they are happy to bring in people who will work for 4 dollars an hour less


ok Miguel you spend six months sleeping in your car and then tell us how it feels to be leapfrogged into public housing by a non citizen.

I completely agree we have a huge problem that needs to be urgently addressed. But reducing the number of refugees we take in won't make the slightest difference, when we have 70 people immigrating for every refugee we accept. These are people escaping situations like genocides, torture, war and other atrocities.

We should be putting a halt on immigration, investing into public housing, and working to reduce the number of unutilised properties. We shouldn't be turning people away who are in situations far more dire than what most of us can imagine.

I can tell you and trust me the blood loss and lack of breathing at nights does not make it any better. But not many survive it and that is want the govt is banking on. So much so that overdose medication is more available then medical support. That many in "emergency accommodation motels" are disabled and cannot even access a bathroom so have to toilet and bathe in buckets. In fact the govt would repeatedly deny the homeless disabled even access to emergency accommodation like our family, so a car, sewage flooded conditions and severe brain injuries resulted from not even having a wheelchair accessible floor to sleep or live on. The lowering standards people can live with and then disappear without a footnote in the news is far too dark and too common. But this is what happens to many disabled and homeless people and the govt advocates for furthering pain, torture and death. The govt in deprioritizing the most vulnerable for more migrants is literally pushing for degrading NZder humanity and lives. In fact the govt is pushing even more hiring bias against disabled people in its own departments because equality of opportunity to work and housing was never the brief and it literally is all media window dressing. You can get used to pain, to blood, to death in those around you but it takes a special kind of person to ignore the suffering they inflict on the most vulnerable in their community. I would group govt officials and MPs in the same category as drug dealers and predators. They are worse though because they can inflict damage on thousands every year, not just those they force to be homeless and dead but also the families and friends whereas a single drug dealer or predator has a much smaller reach.

If, and its a big if the Gov wish to disincentivise property 'investment' then they would do well to encourage an alternative...a (net) carbon free economy is an obvious area of activity.

A start would be only allow banks to use existing currency for lending on old houses and only newly created currency on new builds.

Strictly speaking the banks do not create currency but only money as credit. Only the government can create currency, which is money that carries no debt liability for households also referred to as net financial assets and vertical money as MMT describes it. This is the only type of money that we can add to our savings.


Yes I know... I've read prince's of the yen..

Yes the movie is great... But the book has more detail. Also werner predicts the ECB would attack and wipe out smaller banks..

How can the article claim that its dangerous to put DTI's that differentiate between investors and FHB, as it will create a risk of sending signals that the government will protect FHB's at all cost ... and then go on to say:

"The Government therefore needs to be careful any measures it introduces don't help to put downward pressure on a market that might already be about to start easing. Clearly the last thing we would want is for particularly FHBs who HAVE managed to get into a home then watch as house prices start to actually fall. A balancing act is required."

There is a fundamental issue here that does not get the airing it deserves. The *full* cost of building a decent quality house - including supporting infrastructure, land, materials, labor, etc - makes that home unaffordable to buy OR rent for large swathes of the population (particularly when escalating rates, insurance etc are considered). If we need more homes for ordinary New Zealanders, then Govt is going to have to provide or find the financial investment to close the gap.

Yes, the 'full' cost. Which in NZ on the land side is approx. 50 to 75% made up of non-valued added cost due to landbanking which is caused by Govt. restrictive land policies causing supply shortages, ie land prices being that much dearer than they need to be.

If this money was not syphoned off then there would be more than enough money for infrastructure and for total lower house prices.

Yes my friend you are bang on the money,having been involved in local govt for over a decade now I see the costs in every deal going only one way for a long time.
Although land may be the original cost,try getting contractors nowadays and then they have to try and keep their staff who are being poached by other contractors who are then poaching Council staff from water reticulation right through to building consents and planning.
Great to see the govt spending 700million on water work but this has to be on work which we werent going to do/is not in your long term plan.
So the necessary jobs languish while we all rush to find new less important work to do with the free govt money,meanwhile the contractors swoop in again and take the Council staff for this work under contract and so it goes.
As my dad always said when labours in buy in Wgtn as the pollies multiply and house build always rocks

If you look at what is getting bought and compare it to what the aged listings were (v are now) you can see that aged listings are now down to about 18% of inventory (was 33%). Aged means OTM over 3 months.
So looks v much to me that investors ALREADY buying up stock not built yet, off plan.
Gov and RBNZ has stoked demand when it was not needed.
Interest rate cuts already gave about $100 pcm to average OO to spend after last lockdown.
LVR cuts were not needed. Total cock up

The amount of 'off the plan sales' is a red flag.

Just think how bad the housing crisis would be with another 33000 overseas workers and students.

The crisis would be actually worse than it appears with 33000 renters looking

There has been decades of such talk with only tinkering around the edges.
We all know this is a self created crisis, created by every successive Government from the introduction of the RMA adding cost and time, high levels of immigration without the infrastructure in place, Boomers told years ago that the pension will have to be reduced in the future, Greenie's forcing green belt boundaries, no tax on capital gains, TD's deposits so low people are being forced to place their money into another asset class the list goes on and on !
Every point that has contributed to the situation needs to be addressed and a full plan needs to be put forward by Government.
It certainly is a balancing act as any significant drop in prices will kill off new builds.
I am a home owner and investor and would welcome a intelligent policy to at least stabilize prices and turn this crisis around.
For example if the Government wants to incentivise new builds for FHB's surely they could drop the GST of every new FHB with say a min hold period of 6 years.
Removal of the RMA to something truely practical.
I would like to see a CGT on anything and everything including the family home so everyone plays with the same rules.
Great opportunity for a political party ( ACT ?? ) to put forward a sensible housing/immigration/tax/infrastructure/education/training package policy and get everyone's buy in for the future of our country....
Bold big picture vision is required but it is not going to come from the current crew unfortunately !

Undoubtedly this issue is going to drive massive political changes over the next decade.
Can't see labour hanging around with it's lack of progress if this keeps up.

Concreting over your food basket (green belts) would have to be up there with the dumbest stuff we can do

Like allowing it to be sold off to our largest trading partner and becoming tenants in our own country?

I guess the problem isn't a rising house price more than a income retard and it comes from a low productive society and an inefficient economy.

Just thinking aloud here (always an action fraught with danger):

Restrict lending (via ratio, similar to LVR) to sales or build where land value is X percent of total value. Say, 33%.


You'll destroy price discovery and just create another form of market inefficiency.

It is fraught

Back in 2005 a friend left NZ for a “better life style and opportunities”...he moved back in 2018 with wife and kids. Us old friends here in NZ most have established families and done ok in the property market, some done very well. He is now living in his parents house and let’s just say he is “busy” all the time when we try to catch up with him.

Grass is always greener on the other side.

Real estate lobby is always active but now will see them on war footing :

Two reason that market will change with LVR :

1 :, Anyone in real estate should remember how the market went into hibernation in 2018 due to introduction on LVR and ban on Foreign buyer

2 : If LVR has no affect that how come housing market jumped as soon as LVR was removed in June. So if removal of LVR along with low interest rate was the reason for house price jumping in double digit on a monthly basis than why reintroduction of LVR will not have reverse affect in absence of foreign money.

What is needed is housing that is AFFORDABLE!!! Whether it be rented or purchased.

Having said that, there is one big trap we could be walking into, and that is the one that could leave us with a lot more houses than we really need in the long run when all those with residencies of convenience and all the others who have interests and careers overseas who will leave these shores the minute the covid coast is clear.

I doubt that will ever happen. Both Labour and National will open the immigration flood gates should there ever be a hint of an oversupply of houses.