Interest deductibility centre court, as the back and forth between the Government and Reserve Bank over mortgage lending restrictions plays out in the background

What makes Grunty thinks throwing more toys at the market will lower prices. The disconnect between can only be held by a string - popularity politics with a splash of pork barrel.

Agree tax change is the best action, so far but the way housing market is moving up, much more is required as LVR to investor is not much of an issue as their existing investment have already gone up by 30% to 50% in just one year, which can be used.

BLT, Is also not much of a detterent as thinking is that one has to pay taxes even in business but atleast in buying / selling house, one does not have to worry about compliance, employees....though tax has to be paid, which otherwise would also be paid if doing other business but no other business can give easy, fast and big money as much as housing. Besides perception is and not out of thin air but based facts that neither government nor RBNZ wants to stop the party.

DTI as a tool is more to control FHB from over leveraging themselves under FOMO. Not able to buy a house is disappointing but buying and than having problem with mortage will be a disaster.

If anyone of them in power were serious would have stopped interest only loan to new purchases as is a tool used which if control will target mostly speculators ( IO Loan is required for emergencies and should only be used if required and not for spevulation). IO loan doubles the purchasing power of speculators in suction room compare to FHB who are on P&I loan.

Mr Orr represent a class where he mostly mingle and they are mostly investors and rich, so he sees things from their perspective alone in the name of economy but people had expectation from Jacinda Arden but forgot that she too now is one of the elite - belongs to multi million dollar club besides belongs to a breed where will do anything to be power - Politicians.

Moral of the story : Both Robertson and Orr lacks intent to control. Of the two more in favour of ponzi is Mr Orr, hence the resistance. Otherwise what is the point of raising issue of DTI, when not plaining to introduced when needed most - is just a distraction used by Robertson and orr.

sad that they were given a majority to lead the country and make the tough decisions and they cant stop dithering and dicking around.the property elephant isnt in the room anymore,he has kicked the door down and is running amok.

The housing market is cooked..

'Sustainable House Price Increases' is the government's stated goal.. time for people to move on. It's all just a little boring.. more of the same.

Not sure way people concern themselves with a cooked housing-n-rental market when nothing is going to change - really it's just a bunch of mentally-ill, fixated people laboring under the fantasy they'll own property.

Do whatever you want to do now this market cannot be tamed, it's too late.
Labor action for curbing this madness is slow & soft rather than fast & hard.

Everyone seems to have the mandate but no one seems to have the guts to do anything. To and fro, all I can say is looks like too many chefs spoiling the soup.

Been attending a few auction rooms, for the last one week. From what I observe, all these talk of what restrictions are coming is only spurring more interest in quick buying now itself, driving prices high. 40% over CV for 2/3 bedroom houses in distant suburbs is becoming the norm. The heat is increasing for mid range properties. Which is hitting FHBs more than investors surely.
Top end is a different beast, not affected by these rule changes. It solely thrives on availability of loan approvals for high income earners or rich people (may be from overseas) with loads of cash.
Both Treasury and RBNZ can do zilch to move the market to the direction they want.
They can only screw it up further by their dilly dallying and back and forth with different policy ideas.
Even the cry wolf about inflation and interest rates increase is driving the frenzy to close deals now.
Good luck, FHB.

This is another example of adding inefficient & ineffective complexity to the system.

Using DTI is an example of costly micro-management by this government.

Increasing interest rates is the obvious way to control house prices.

The government’s effort to improve affordability for First Home Buyers has failed & resulted in a crisis for renters and those in emergency accommodation.

Rents will rise faster than they would have if interest deductibility rules had not been introduced forcing more people into costly emergency accommodation.

Supply of lower end rentals will diminish as landlords abandon this type of investment due to the tax changes & risks around getting good tenants. For these people this will be a crisis never seen before in NZ.

If the government had carried out due diligence with a benefit/cost analysis on this it would have never gone down this path. Almost no benefit for First Home buyers & a huge disbenefit for a large number of renters.

I've long proposed on here the supply of credit is the primary cause. I've not changed my mind and in ten years on here the narrative hasn't changed.

I've largely stopped worrying or discussing it. It should be clear to anyone now this ponzi doesn't get fixed, it gets to run it's course.

Why hasn't inventory levels increased since these policies were announced..?

For me, one of the main reasons for the big drop in inventory is interest rate levels.. itself
https://www.interest.co.nz/Charts/Real%20estate/Housing%20inventory

With the RBNZ driven financial repression ( ultra low interest rates ) more people are simply hanging on to their homes, rather than selling when they might have.
Deposit rates are so low that most people realize that down sizing and putting surplus money into term deposits is a losers game.
The flip side of that is that the ultra low interest rates resulted in a surge of borrowing ( buying power )...
https://www.interest.co.nz/charts/credit/housing-credit2

These proposed policies only impact the people at the margins... ie. will only exclude some people from the mkt.... who are not already wealthy.

RBNZ erred by dropping interest rates too low in response to covid and now they are/have erred by holding interest rates too low for too long and are trying to micro manage things with LVRS ..DTI...etc..

Adrian Err....

If the government fail to have any basic business understanding then you will probably continue in LaLa land and keep borrowing $770 million dollars every week. Sustainable my arse.

Interest deductibility doesn't target speculators as Grant Robeveryone would have you believe. In fact it harms long term landlords and thus renters. A speculator will buy a property, perhaps tart it up, and flick it on for a profit within a few years. They will be affected by interest deductibility for a those few years, but the main tax for them is being captured by brightline - which they are aware of and are not affected one bit by the brightline extending to 10 years, as they never intended to hold that long.

Conversely long term investors/landlords providing rental accommodation will be affected by interest deductibility costs for 10, 20 or 30 years (until the mortgage on the property is paid off). For the bulk of those years a significant additional cost will be borne by the landlord, and by simple economics you know that over time as the deductibility effect takes hold, those costs will flow onto renters, who ulitimately will be the ones who suffer most.

Top notch policy!

Another great article. Maybe rising interest rates globally will actually resolve this before the seemingly endless consultation process ends. You wonder why the RBNZ, if they wanted these tools for so long why they hadn't already done the required consulting.

The Govt and RBNZ have no mandate to tell people what they and cant borrow. They are infirnging upon our most basic human rights.

The actions of the Labour Government is clearly to reduce the number or private rentals. If you reducing the 600,000 private rentals you will make people homeless. Sure they might double the number of social houses but that will not even make a ripple on the market. Where may I ask is the moral mandate to make people homeless. How will making people homeless help someone buy a home for themselves. The collateral damage is worse than any possible benefits of giving some lucky rich kids a home of their own.

All these things help, but at the end of the day there is only one way to achieve price stability. That will only be achieved between the tensions of supply and demand of an unfettered total free and competitive market. At the moment it is any thing but. Just about every market lever is tweaked in favor of demand.
1 Force councils to release and develop land withing a very short period of time, otherwise take that function away from them
2 Land bankers should be given a short period of time to develop and sell their land before they are forced to pay the full rates that the council would receive from that area of residential dwellings. Either that or the land is designated and developed as natural reserves. This being able to be reversed at the councils whim.
3 Let house construction tenders to large overseas and very efficient house builders. Government build then the cash recycled through sales to FHB preferentially, rent to own, and latterly to anyone.
4 engage the Australian Commerce Commission to go through our building material supply industry like a dose of salts, reccomending law changes that will force free competition. Our CC is useless and should be made to sit on the sidelines, watch, and learn how to do this stuff.
5 Rewrite the building code so that it is not a non tariff barrier and suitable overseas standards are accepted
ETC
etc
the list goes on a long way
The important thing is do get of their backsides and do something significant instead of fluffing around and just tinkering.
If they do not, I predict that we are going to loose 100's of thousands of young Kiwis, who as things stand will never have a chance of buying their own home and have no hope remaining in NZ.