The first home buyers - they were knocked before, will they be knocked again?

David Hargreaves looks at some of the issues ahead - particularly for first home buyers - as the Reserve Bank mulls tighter lending rules by October this year

22nd Aug 21, 6:01am by David Hargreaves

Okay, so those first home buyers. What to do? All the FHBs out there could be justified in feeling as if they are trying to climb up a ramp, and the ramp is getting more steep, because someone is increasing the gradient on the ramp as they try to go up it, thus making it harder and harder for them.

And the 'ramp' of course is what the wannabe FHBs first have to scramble up if they then want to get on the 'ladder' - as owning a house has become increasingly known.

Just when the FHBs might have felt things were starting to go their way, with investors being clamped down on, the Reserve Bank (RBNZ) has said it plans to tighten lending rules from October of this year.

Assuming that all does happen, (and I'm writing this as community Covid issues are still developing here, so many bets could yet be off), then much focus will go on the FHBs.

The RBNZ is proposing to, in part, take the loan-to-value ratio (LVR) rules back to their starting point in October 2013.

At that time the banks were given a 'speed limit' of 10% - meaning that only 10% of their new lending could be for high LVR mortgages. And for the purposes of the calculation, high LVR meant loans greater than 80% of the value of the property. (Or to swing it round, it meant buyers with deposits of less than 20%).

That was a pretty tight limit, and it had an impact.

At the moment, the 'speed limit' is double what it was then. It is 20% now.

So, it is being halved. That sounds on the face of it like it could be a bit lethal for the FHBs, but will it be?

The first iteration of the LVR rules included, as explained above, a blanket rule for the banks of no more than 10% high LVR lending - to anybody. So, no differentiation was made between the different buyer types, IE the FHBs, other owner-occupiers and investors.

There was much outcry that the rules naturally disadvantaged the FHBs - since they, by nature of trying to get a deposit together without any housing collateral, were, well, at a disadvantage.

A detailed review the RBNZ subsequently undertook on the LVRs, and which was published in 2019, revealed that the initial iteration of the LVRs had indeed "disproportionately restricted" purchases of houses by first home buyers.

The clock has NOT turned back

Well, so, what's going to happen now? Will it be the same? FHBs completely frozen out?

Actually, I think there's some hopeful grounds to believe maybe not.

The RBNZ is tightening the LVR rules, but it is not exactly turning back the clock.

The big difference is that we now have the LVR policy that was first introduced successfully in 2016 in place. Yep, that's right, this includes the 40% deposit rule for investors.

Where in the immediately post 2013 LVR era the investors could happily just outbid the FHBs it won't be as easy now.

So, I think the FHBs possibly have some reason for hope that their share of the monthly mortgage advances, which as of June was 19.3% can at least be kept somewhat higher than in the early days of the LVRs when it sank below 10%. And not coincidentally, the investors' share of the market at times in the mid-2010s hit 35%. In June that share fell to under 17% as the reimposition of tighter deposit rules has hit.

Having a detailed look at the latest (June) borrowing figures for the FHB grouping shows that in the month they borrowed $1.649 billion. Of this, $621 million (37.7%) was for loans where the deposit was less than 20%.

They need the high LVR loans

So, the above figures tell you how dependent the FHBs are on being able to borrow at high LVRs.

All of this was out of a total borrowed in June of $8.526 billion.

In the month of June the 'other owner-occupiers' borrowed $5.365 billion. Of this, just $188 million was high LVR borrowing, so, a much smaller proportion than going to FHBs. Some of the owner-occupier borrowing will have investment property as collateral, in fact quite a bit.

So, this needs breaking out.

The total of borrowed money in June that either wasn't for investors or didn't include investment property collateral was $5.683 billion.

Okay, so the total of high LVR borrowing in the month ($621 million for the FHBs, plus $188 million for other owner-occupiers) was $809 million, which on a 'raw' basis makes up a bit over 14% of banks' total new lending in the month that DIDN'T either go to investors or include investment property collateral. So, in other words just over 14% of the figure of $5.683 billion.

Right, now remember that from October this figure/percentage will need to be under 10%.

But of course some types of borrowing are 'exempt'.

The high LVR amount will have to come down

If we take borrowing that was exempt from the LVR rules off that $809 million figure (and exemptions are offered for things like new builds) then we remove some $180 million of exempt borrowing.

After we've removed that figure, it leaves us with a high LVR percentage of the borrowing of 11.4%.

Now, that's not 10% is it?

So, that figure is going to need to come down.

And we know from prior experience the banks like to leave a bit of leeway so they don't inadvertently breach the rules. In reality then what you might see is banks aiming for a figure of more like 7% or 8% of high LVR lending.

If we were to say the banks would aim for 8%, then based on a figure of around $5.5 billion lending not involving investment property, this would give the banks room to lend about $450 million on high LVRs - before exemptions are applied.

The RBNZ figures don't break out the exemptions in terms of lender category. But if most of those $180 million of exemptions in June were applied to FHBs - and I would suspect they probably were, then certainly we could be looking at FHBs still being able to borrow $550-600 million of high LVR mortgages a month. So, maybe, just maybe, not really much change.

The non-FHB buyers can actually help

But, perhaps ironically, this logic would depend on other non-FHB owner-occupier buyers remaining strong in the market and continuing to soak up large quantities of low LVR loans.

Because, of course, if the overall total of bank lending drops, then so the amount of available high LVR money drops. For example if banks were only to lend $3 billion for non investment-related loans in a month, applying our notional 8% high LVR figure again would leave just $240 million for high LVR lending. And the FHBs would be fighting for their share of that.

And if the demand from the FHBs stayed at current levels that would be a problem.

However, the other unknown at the moment is the extent to which the current wave of FHB buying represents the release of pent up demand from previous years. And maybe we will see this tail off of its own accord in coming months.

Either way, we will find out when the new rules are applied.

And if the FHBs do get squeezed out, we will know about it.

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133 Comments

by tothepoint | 22nd Aug 21, 6:30am 1629570606

It's always been a fight to land one's own home.......

But for most, the fight's been worth it.

TTP

by donny11 | 22nd Aug 21, 7:36am 1629574562

This just wasn't the case prior to 2000, before this time if you had a decent job you could by a decent home.

by tothepoint | 22nd Aug 21, 12:21pm 1629591694

During the Muldoon era, trading bank interest rates reached 11 per cent on first mortgage - and around 21 per cent on second mortgage.

So it was damned tough for first-home buyers of that era.......

But roll on 40 years and we can assume that very few of them would regret their decision to have bought.

TTP

by Teddy | 22nd Aug 21, 10:23am 1629584607

Sounds great to me, double the interest for second mortgage, triple it for the third mortgage.

by Pragmatist | 22nd Aug 21, 10:48am 1629586084

Second mortgage means second mortgageon the same property.. So two mortgages with two banks on one house.

by Lanthanide | 22nd Aug 21, 10:46am 1629585983

And wage inflation was also running at 15-20% at the same time. So what.

by Dale Smith | 22nd Aug 21, 1:23pm 1629595405

The price of a house was 3x median multiple and the cost of the mortgage was inflated away with the same % growth in wages. And then they have benefited from a systems change where supply was limited and interest rates fell. The perfect storm for rentier gain.

But it wasn't good management as to the potential capital gain that was expected that made them buy then, because past history had shown their was very little.

Anyone buying today should keep that in mind.

by rastus1 | 22nd Aug 21, 1:54pm 1629597286

TPP conveniently ignoring the massive life time debt now required to get into a rat hole. My first home had high interest but the mortgage was equivalent to less then a years pay. Bloody big and depressing difference for today’s fhb’s. You are an ignorant/arrogant son of a b.

by Shoreman | 22nd Aug 21, 10:26am 1629584811

donny11 - "This just wasn't the case prior to 2000, before this time if you had a decent job you could by a decent home"
This simply is not correct. Sure capital values are much higher but interest rates are a fraction of what they have been in the last 40 years.
The percentage outgoing housing costs per week per household is currently quite low when compared to the last 20 years.
Sure interest rates are sure to rise but not by alot.
It has never been easy to by a house, sure it probably was done on one income back in the day but households only had one income and the discretionary left was next to zero.
An attitude of it was always easier in the past and it's not fair serves no one.

by Kauri | 22nd Aug 21, 10:48am 1629586083

I will have to disagree. Some things were much easier in the past, some weren't. 20 years ago house price to income ratios were much lower. Case in point, I bought my first home about 20 years ago. Price was about 4x my salary at the time (and I was earning around average salary). Sure it was a not exactly a 'decent home' but it did the job - A bit like my car at the time. It took me about 3-4 years of saving for deposit and it helped that interest rates on term deposits were ok. Now saving for deposit for young person very long and hard.

by Lanthanide | 22nd Aug 21, 10:48am 1629586103

Outgoing costs may have been a bit higher in the past, but required deposits were much lower, and saving rates much higher.

These days the barrier is the deposit, which is extremely difficult to save for when you're also faced with high rents and low savings rates.

by kiwiwayne | 23rd Aug 21, 1:56pm 1629683796

Two points… kiwi savers can now be used for a first home purchase and this includes monies from government, you employer plus your own.
Secondly if Labour truly wants to help first home buyers let them use a 10% deposit and even extend the mortgage term if needed!

by Calaverite | 22nd Aug 21, 11:50am 1629589828

Not sure if you’re being purposely disingenuous but all you need to do to figure out how much harder it has become to pay off a mortgage is inflation adjust the payments. Yes the initial payments may have been higher 20 or 30 years ago but they rapidly fell as the principal was swallowed up by inflation. From this point in time FHB are facing massive payments for the lifetime of their mortgages unless there is huge wage inflation.

by Carlos67 | 22nd Aug 21, 12:16pm 1629591380

Totally pointless to compare the "Then" and "Now" just about everything has changed right down to the building code. You cannot even compare a home built then to a home built now. Peoples attitudes and expectations now have gone through the roof these days. Families only had one old banger of a car and were prepared to live in a Keith Hay home with a second mortgage back then. Even if a time machine existed, none of the Millennials would go back to the 70's after you outlined what they were in for. Total waste of time even talking about it. The modern generation are simply not prepared to take the good with the bad.

by frazz | 22nd Aug 21, 12:45pm 1629593124

Thats just your opinion Carlos...if asked to foresack some modern living for 3x homes values..many would happliy go back in time.

by sadr001 | 23rd Aug 21, 10:04am 1629669851

The good news is that for those willing to forsake modern living (motorways, malls, cellphone coverage, proximity to modern amenities) there are still plenty of places in rural NZ that cost about 3x median income.
For example the median wage in the bay of plenty is about $58,500 and below is a 3 bed house that can be purchased for your 3x multiple (completely ignoring the difference in servicing cost due to interest rates).

https://www.trademe.co.nz/property/residential-property-for-sale/auctio…

by GV 27 | 22nd Aug 21, 1:25pm 1629595554

"The modern generation are simply not prepared to take the good with the bad."

Maybe we're just fucked off that in some cases, the exact same 70s house now costs 300% more than when sanctimonious Gen Xers were buying them as first homes?

by Dale Smith | 22nd Aug 21, 1:31pm 1629595882

Incorrect, I've made comparisons on subdivisions developed under today's rules vs rules from the 1980s, including building to today's standards (which are still pathetic), and other than the rules, you can easily develop housing circa 3 to 4x median income.

It's only Govt. policy decisions that are preventing it.

by Miguel | 22nd Aug 21, 7:50pm 1629618608

What a load of crap. People back in the 70's would buy a "starter" first home because they could actually afford to buy it in their mid twenties. The average age of people buying now is so much higher they are purchasing at a different stage of their life - and like generations before them wanted a more comfortable home going into the their late 30's and 40's.

How do we know home ownership is harder now? Just look at the numbers - home ownership rates have been falling steadily. And the number of FHB's who can buy without financial help from families is a tiny fraction of what it was.

by kiwiana02 | 22nd Aug 21, 2:31pm 1629599461

It was way easier back then, especially after mid 1980’s when credit availability became deregulated and you could buy a house without a second mortgage. Sure interest rates were way higher but so were wage increases, and house prices were around 3 x income, and the debt just became inflated away. I know because I was a fhb back then and while it wasn’t easy at first, it just got better with year after year of capital gains. Today’s first home buyers are gambling that they won’t buy at the very top of a collapse of a one of the biggest housing bubbles in the world. I don’t envy them.

by Teddy | 22nd Aug 21, 11:07am 1629587239

They sure built allot of crap leaky homes in the 90’s. A decade crap that needs to be fixed now just adding to the housing crisis. Why didn’t they just stick to tried and tested weatherboards and eaves. These days you get a new warm home with 1/4 the land that is atleast four times the price.

by Lord Dowding | 22nd Aug 21, 7:47pm 1629618468

My parents bought what turned out to be a lleaker in ‘94 Epsom non DGZ for 400k. It’s still standing and it’s a nice home with a few minor leaks but a buyer would likely knock it down and put 3/4 townhouses on there. Land value alone 2.5 mil.

You can’t beat a 60s weatherboard for longevity and minimal maintenance imo

by PonziKiwi | 22nd Aug 21, 2:28pm 1629599291

I agree TTP

However banks created excess credit and Leverage if a crash occurs "unlikely" debases the currency of working people saving to buy a home. Also possibly costs them their jobs.

by kiwiwayne | 23rd Aug 21, 2:19pm 1629685160

You are 100% right houses were not handed out like lollies prior to 2000 like young people think but on the other hand the deposits now required far outweighs kiwi savers and other savings. Simple solution let first home buyers in at a 10% deposit and allow an extended term for their mortgage!

by Dale Smith | 23rd Aug 21, 2:36pm 1629686202

These types of solutions, while well-meaning, ignore basic principles, and thus make housing more unaffordable over time.

And the basic principle is, that all savings made in a system always increase the price of the most restrictive part of that system.

So when for example you make it easier to buy a house with a lower deposit and/or extend the term of the loan, but by not make housing supply more plentiful relative to the extra demand these savings cause, then the price of the most restrictive part, which is the land (although materials and labour are also restricted at the moment), then the price of the land will go up by at least the same amount as the saving, or a multiple of it depending on the extra demand pressure it puts on it.

Further, because lower deposits can allow you to leverage more, then the multiplier can be even greater.

And the net result, every time you bring in a saving, without removing the restrictions, housing becomes less affordable over time.

by Brock Landers | 22nd Aug 21, 6:50am 1629571848

FHB should just leave this dumpster fire of a country.

You only live once.

by CrispyKahawai | 22nd Aug 21, 9:57am 1629583073

I agree with a lot of the things that you post, even this. That being said, my partner and I have just gone conditional on a place in a central Auckland suburb. We're FHBs and it's a s***load of money, which makes me feel a bit sick sometimes. But, although I can't help but feel a sense of betrayal (by both our successive governments and some of our [wealthy] people), NZ is home. Besides feeling a strong cultural connection to this country (my mother is Māori), my whānau is here, and I feel an obligation to stick around and contribute to perhaps making things better; even if it's just through my vote and small grassroots level things. It might sound a bit idealistic, and I know that I could easily be making around half a million/year working in Australia, but it's something I feel quite strongly about.

by Kauri | 22nd Aug 21, 10:52am 1629586335

Kia kaha brother. Good on you for sticking around. And for all those who complain about current govt lack of action (as do I) - they at least are trying to do some things which is better than previous govt.

by pacifica | 22nd Aug 21, 2:13pm 1629598396

They are stripping housing from families with disabilities at an extremely high rate and removing the rights of people with disabilities to basic housing. More people have died homeless under their watch than previous governments. Wellbeing and health has significantly dropped for the most vulnerable and many do not even have access to basic vaccinations and GP services. Yeah they are doing some things better than previous govt. They are literally doing far more physical and mental harm to the most vulnerable. We should just ask them to stop. Please stop.

by sadr001 | 23rd Aug 21, 10:08am 1629670122

You realise house price inflation has been the worst under Jacinda Arden, was next highest under Helen Clarke and was the lowest in the last 20 years under John Key. The key difference is that Jacinda says she wants to do something whilst never intending to deliver, John Key just went ahead and delivered without making a big deal about it.

by rastus1 | 23rd Aug 21, 11:38am 1629675531

..delivered what exactly (aside for mass immigration and intensive dairy pollution)?

by Small Kev | 22nd Aug 21, 11:06am 1629587182

Well said and congrats.
Many people I know left nz for the “better” and eventually came back home worse off..very sad. They should’ve stayed.

by Jesse1 | 22nd Aug 21, 2:11pm 1629598283

Someone would only come home worse off if they didn't make the most of the opportunity to save a whole lot more. I lived in Sydney for 7 years and came back with a lot more than if I'd stayed in NZ.

by Small Kev | 22nd Aug 21, 4:05pm 1629605123

People come home for all sorts of reasons, many came home because things weren’t going well or didn’t fit in.

by Brock Landers | 22nd Aug 21, 12:30pm 1629592242

Sticking around in an abusive relationship rarely tends to work out well.

by pacifica | 22nd Aug 21, 2:09pm 1629598192

You could always do what our family is, donate land to a charitable housing company which offers 30% income rent to own schemes over 10years for low income families. But come to think of it most people say they want to improve things but very very rarely put money where their mouth is. You do not earn points by saying you want change. So don't bother saying it until you are actually putting significant amounts of your time, sweat and money into that change for those who have no hope of basic housing.

by CrispyKahawai | 22nd Aug 21, 6:46pm 1629614814

I don't have any land to give away, and I donate to multiple charities (automatic payments) every month. I work in an extremely busy job with unsociable hours (medical specialist). You're aggressively making a lot of assumptions about me.

by printer8 | 22nd Aug 21, 10:23am 1629584602

Brock
You keep saying that but do nothing about it.
Your repetitive comments over considerable time about this country being "toxic" and how glowing things are in Australia and that you are going, but not doing so are making you seem inept in able to get your act together.
And yeah, despite it being very tough for FHB but you claiming to be high six figure salary, unlike 60,000 in the past year most who are likely on a far lesser incomes they have become FHB. So you really don't seem to to be able to get your act together on that account either.
Need to start looking at your self son.

by Cheetahlegs66 | 22nd Aug 21, 10:37am 1629585472

We do pretty well with our free education, health and social welfare systems. Could be better but NZ is a relatively poor country (GDP per capita), and the strain of the increasing welfare costs is compromising the former 2. There's only 2 or 3 countries I'd consider living in but at my age it's too late to relocate. As an immigrant I am so grateful to live here and not in my homeland, England.

by Brock Landers | 22nd Aug 21, 12:16pm 1629591409

Hi Printer7,

I'm so glad you have managed to pass judgement on so little information. Truth of the matter is that you know approximately zero about my personal circumstances or my actions because I'm not in the habit of sharing them with morons and bullies on the internet.

A great deal of the toxicity of this country stems from the condescension, greed and stupidity so rife in the older generations here.

Must be something in the water, or dementia.

P.S. I'm not your son.

by printer8 | 22nd Aug 21, 1:39pm 1629596359

Brock
Sorry son; nothing there that you haven’t previously posted - including the $100k plus salary. :)
Cheers

by Brock Landers | 22nd Aug 21, 2:10pm 1629598236

Did you have a point to make of some kind?

by AJ123 | 22nd Aug 21, 2:11pm 1629598317

Printer8 is a retard, seems to be high on something just ignore him

by Lord Dowding | 22nd Aug 21, 12:31pm 1629592297

If Brock is earning in excess of 100k he should easily be able to buy something around a mil or just over provided he’s seen sensible able saving the deposit over the last years.

Probably like many FHBs doesn’t want to move into rougher area to start. Would rather rent in Ponsonby for life.

by frazz | 22nd Aug 21, 12:47pm 1629593276

Funny thing back in my time Ponsonby was the rough end of the neigbourhood..let me guess lord you walked barefoot 10 miles in the frost to attend school carrying your baby sister?

by Small Kev | 22nd Aug 21, 4:15pm 1629605745

Rough end of the neighbourhood still get to wear the “Aucklander name badge” that’s why so many people ain’t willing to give up and move out.

by Brock Landers | 22nd Aug 21, 12:56pm 1629593807

Being able to "afford" something and being willing to pay are different things.

Screw Ponsonby would much rather live near the countryside.

by PonziKiwi | 22nd Aug 21, 2:31pm 1629599502

Lord Dowding

I agree on the ponsonby renter sentiment. But you are using 1970s logic to describe the housing market. Otara is now unaffordable. We need more banks and especially more smally banks to lend to small businesses. While no crash will occur it's because of our central planners manipulation of currency.

by Miguel | 23rd Aug 21, 9:48am 1629668892

What an ignorant comment. The truth is the vast, vast majority of people purchasing their first home these days only do so because of financial assistance (gift/loan) from family. The estimates where around 70% in the major cities (and that was a couple of years ago - it would be far worse now). And that doesn't include the people who inherit wealth, or get non-financial assistance (free place to live while saving).

This "pull yourself up by your bootstraps" crap doesn't have any basis in fact. Of people I know personally i'd say around 80-90% who purchased in the last 5 years were only able to do so due to outside financial help of some form - none of them did so purely through working in NZ and saving the entirety of the deposit from their own salary/income.

by Shoreman | 22nd Aug 21, 10:31am 1629585060

BL - Off you go, go seek your fortune somewhere else, put your energy to use in a helpful way for yourself, spare us your anger and negativity, goodluck !

by Rob Reid | 22nd Aug 21, 11:39am 1629589152

It's right there BL, a long Kool-Aid.
All you have to do is reach out and take one little sip and everything will be fine again. /sarc

by tothepoint | 22nd Aug 21, 11:00am 1629586819

"FHB should just leave this dumpster fire of a country." [Brock Landers]

That's an emotive remark, Brock.

No FHB should assume that their personal experience will replicate yours.

In any case, I can't imagine anyone wanting to migrate to NSW or Victoria now, or in the foreseeable future.

NZ holds many advantages.

TTP

by Brock Landers | 22nd Aug 21, 12:37pm 1629592629

Hi Tim the pointless,

It is an emotive remark. But it also happens to be substantially true. Seems to trigger those that rely on young people being captive victims.

Most people arent so stupid to be cowering in fear of coronavirus or to think NZ is "safe".

by MortgageBelt | 22nd Aug 21, 7:32am 1629574336

Maybe once we get out of this 2 month lockdown then the pent up demand for houses and cocooning May drive up prices another 30%?

by FCM | 22nd Aug 21, 9:02am 1629579722

I think you be right, coming out of LD just as spring hits...boom

by Squishy | 22nd Aug 21, 8:20am 1629577209

House prices are about to go up again, all aboard this rocket ship to the moon.

by Nifty1 | 22nd Aug 21, 9:15am 1629580536

The moon? Looking more like Mars & beyond at this stage...

by flyer | 22nd Aug 21, 10:35am 1629585352

Mr Orr will do nothing this year in terms of raising the OCR. He will use the Delta as an excuse.

Good news for those in the game

Unfortunately bad news for everyone else.

by Lanthanide | 22nd Aug 21, 10:51am 1629586308

He pretty much said they would have put interest rates up by 0.25% if not for the lockdown.

Country is very likely to be back at level 2 at worst by the time of the next meeting.

by Carlos67 | 22nd Aug 21, 12:23pm 1629591809

I disagree we are going to be VERY lucky now if we are able to get the current outbreak under control. So far nobody else has managed it. The longer the lockdown goes on the more and more people begin to ignore it. Simple question, how long can we maintain a level 4 lockdown ? a month ? 2 months ? beyond that its a no go, summer is coming people are NOT going to stay home.

by HouseMouse | 22nd Aug 21, 1:05pm 1629594300

A lockdown beyond a month would REALLY hurt the economy and the state of the country's finances.

by flyer | 22nd Aug 21, 2:56pm 1629601017

If this outbreak and lock down lasts too long, Jacinda's elimination strategy will have to change. There would be too much pressure to get on with life with higher vaccination rates.

by Brock Landers | 22nd Aug 21, 3:00pm 1629601258

That would be far too bruising to her over-inflated ego.

by flyer | 22nd Aug 21, 3:02pm 1629601366

True, but this time I don't feel the public is gushing over her and Bloomfield as much as previous lockdowns. Most people, rightly or wrongly back in 2020, thought level 4 would never come back again, yet it did.

by Squishy | 22nd Aug 21, 3:56pm 1629604614

Possibly, it's more difficult to manage this time because of the perception of a slow vaccination campaign and really unclear guidance about the future. We'll have to look at the political polling over the next few months.

At current trend it looks like Labour approval ratings will cross within this year. Polling itself will intersect Nationals next year. That's very strange to me as they have been converging on many of the same policies over time. It's like choosing between Tide and Persil.

That said a new crisis tends to boost the Prime Minister in polls, perhaps a new one will come along before the next election?

by Nifty1 | 22nd Aug 21, 1:04pm 1629594265

You're dreaming Lathanide - lockdown will be extended. Even your mate Hipkins is starting to hint at it...

by HouseMouse | 22nd Aug 21, 1:07pm 1629594473

The next MPR is 6 October. We are in massive trouble if we are still in lockdown then...

by Nifty1 | 22nd Aug 21, 1:46pm 1629596812

Yeah prime time real estate season - the economy of housing will stall

by pacifica | 22nd Aug 21, 2:22pm 1629598959

Not likely. Last lockdowns have shown record market growth and sales. Fun fact many do buy property without physically visiting it and even having phone in auction options. It has been an industry truly more capable of being remotely run without buyers and sellers physical presence yet people persist in this idea that the buyers intend to live in the property and not just hand it over to property managers. NZ has a massive competitive property manager market that is mostly unregulated, for years. The property market likely will not miss the FHB not being able to bid. It will shrug off any lockdown. It may even increase the margins that real estate agents receive as they no longer have to run open homes but virtual walkthroughs that have been available for over a decade.

by HouseMouse | 22nd Aug 21, 2:51pm 1629600683

I wouldn't automatically assume the housing market reacts to the current lockdown the way it did to previous ones.

by flyer | 22nd Aug 21, 3:00pm 1629601207

On the first day of lockdown, my neighbour's house, which had been on the market for 5 months, was finally sold at their second auction for 1.72m. They hardly had anyone through the door during the 5 months, despite being in a new and popular suburb. CV, albeit out of date, 1.3m.

This may be one small sample but the fact that it took 5 months to sell, and was sold on day 1 of lockdown, may be telling us something. FOMO! It was a phone / Google Hangouts auction and I know the person who bought it had only viewed it once, a day or two before lockdown.

by HouseMouse | 22nd Aug 21, 3:05pm 1629601518

Interesting anecdote.
Note I didn't say the market won't have another lockdown boom. All I am saying is it shouldn't be automatically assumed.
A 4 week plus lockdown could be really financially damaging, and the cumulative impact might tip many businesses over that didn't tip over last time.
Or maybe not.

by flyer | 22nd Aug 21, 3:08pm 1629601700

Low unemployment + no skilled workers coming in + money in the bank not being spent are factors that will keep propping up the housing market for some time, not to mention low interest rates and rising building costs.

Boy, the perfect storm.

by HouseMouse | 22nd Aug 21, 3:24pm 1629602688

Over confident.
A long lockdown this time could potentially break many businesses, unemployment could potentially rise significantly.

by flyer | 22nd Aug 21, 3:28pm 1629602936

I think for hospitality and tourism yes, unfortunately.

You should look at the number of ads out there on Seek - it hasn't stopped like last year when we had the lockdowns. Businesses are booming in many other industries.

by Lanthanide | 22nd Aug 21, 4:32pm 1629606755

Not dreaming at all. Nowhere does my comment say lockdown won't be extended. It says we're likely to be on level 2 at worst by October 6.

Try reading what I write next time instead of what you imagine I've written.

Also Hipkins is not my mate.

by Pathos | 23rd Aug 21, 9:52am 1629669164

Totally agree. The timing is convenient. To play devil's advocate, could we speculate that our lockdowns (at various levels) will be extended until well into (and maybe to the end of...) September? The RBNZ will then tell us that it finds it prudent to put rate rises on hold. Bets on the table?

by Audaxes | 22nd Aug 21, 9:44am 1629582282

How long before this trend dominates the NZ residential property landscape?: Lloyds aiming to become giant UK landlord

by Ezy | 22nd Aug 21, 8:09pm 1629619778

Banks are hedging against crypto. The timeline for their irrelevance is probably about 6 years. Given they already own most of the housing stock, and the "investors" on their books can't handle more than a few full points of interest rate rises - they're just planning accordingly. Smart business on their part, and I'd be doing the same in their position. Mum and Dad tinpot property investors are easy pickings.

The young and dumb will just be collateral damage. They'll rent the same houses back to them, and that apathetic generation will do nothing about it.

by Pathos | 23rd Aug 21, 10:07am 1629670074

Thanks for this interesting link. So, it's Blackrock in the US buying up all the residential properties it can and Lloyds in the UK!
Socialism/communism here we come. It's not difficult now to see where all the pieces of the jigsaw are going to fit and how everything currently transforming our society is working together to shape that future which may only be 8 years away.

by stuart786786 | 22nd Aug 21, 10:27am 1629584827

David Hargreaves, Let us admit that FHB are always thrown under the bus and irony is that reason given that are doing is to actually help FHB... maybe are helping by killing them under the bus - their defination of helping FHB from the pain.

Robertson and Orr idea of help-Kill/Remove FHB.

Housing Ponzi is SoooooooooooooOO BIG that Orr or Robertson cannot even think of touching it as both have vested biased narrow thinking and not looking beyond their term.

If have to help FHB and target investor only, why cannot 40% LVR is increased and not to forget - open challenge to you and all experts and likes of Orr and Robertson...restrict interest only loan - blood money for speculative active and see how the crisis can be tamed. You and experts are to be blamed as not raising the silver bullet - IO Loan.

by flyer | 22nd Aug 21, 10:33am 1629585199

Everything thr government has done has not helped FHBs. It just amazes me how much more difficult every change has meant to FHBs.

From an Auckland perspective, looks like L4 for at least 2 weeks and L3 for a week, all going well. You are looking at close to 4 weeks of some form of restriction.

It will likely mean one thing - pent up demand which will push up prices. Simple supply and demand theory. No new or minimal listings over the next 3 to 4 weeks.

by Brock Landers | 22nd Aug 21, 12:40pm 1629592828

If Jacinda wants to keep pursuing her "elimination" vanity project it's going to take much longer than a couple of weeks.

All it takes is one case to still be out there...

by flyer | 22nd Aug 21, 3:01pm 1629601271

When vaccination rates are high enough she will drop it overnight and say how wonderful Labour has been vaccinating everyone "so quickly" and allowing us to live with COVID safely.

by tothepoint | 22nd Aug 21, 3:06pm 1629601577

That's an irresponsible comment, Landers.

Shame on you.

TTP

by Brock Landers | 22nd Aug 21, 5:20pm 1629609642

What on earth are you on about Tim? Irresponsible how?

by Ocelot | 22nd Aug 21, 10:38am 1629585500

Can we stop pretending that people being able to borrow buttloads of money is good for people trying to buy homes. It simply pushes up land values. The real solution to making housing affordable is to reduce income tax and GST to incentivise the productive part of the economy, and fund it with land tax, to disincentivise inefficient or unproductive landholders.

by nktokyo | 22nd Aug 21, 10:59am 1629586758

What the government should do is build tens of thousands of homes just for first home buyers.

by Rob Reid | 22nd Aug 21, 11:44am 1629589440

What would be the deal - how many years would they have to own it before they sold?

by Mountie | 22nd Aug 21, 11:46am 1629589606

Agree. And this should have started 12 months ago. But they didn't. They sat on their hands.

by flyer | 22nd Aug 21, 3:13pm 1629601994

Kiwibuild has built how many?

Where are we going to get the builders to build?

Where is there land they can build on right now?

Where are the materials to build?

And the Labour government delivering on their projects?

by 7jai | 22nd Aug 21, 11:43am 1629589403

As a recent FHB myself, I worked my rear end off to save the deposit, and learned different skills to upskill myself which in return paid dividends back in terms of promotability and salary. Theres two options in life; sit and moan about how life is so unfair, or do something about it. You control your own destiny and with some effort and hard work, you can buy your first home too.

People have to stop whining about why house prices aren't 200K per house. Life and society have moved on, its your choice if you want to sit around or move with it.

by Dale Smith | 22nd Aug 21, 1:37pm 1629596244

So what you are saying is because of working so hard and educating yourself, you don't mind that you are carrying a mortgage twice the amount you should be, and approx. half the value of your main asset is made up of non-value added costs.

Keep in mind that if policies are put in place to reduce prices, and/or they fall due to an outside event, then we won't hear any whining from homeowners.

by 7jai | 22nd Aug 21, 3:21pm 1629602462

What I'm saying is stop the complaining, focus, and work hard. You can do all that while you moan and argue about how the government continues to fail in their policies.

Sitting idle, yelling at the government, and hoping for house prices fall is not a strategy. If that is yours, then the best to you. Either that, or you can enroll yourself to be a MP. Happy to vote for you if you are going to find ways to push down house prices.

by AJ123 | 22nd Aug 21, 3:40pm 1629603624

No one is doubting on your immense hard work and focus. But if a person can't focus & do hard work (like you) and do his regular job. What you mean he should not be entitled to have his own roof on his head.
Please understand no one is questioning your sacrifices & achievements it's outstanding but having home is a basic right it should be affordable or at least reasonable.
Here we are discussing a crisis situation for housing affordability not about hard work and focus.

by Flying high | 22nd Aug 21, 4:20pm 1629606029

Buy or rent a smaller home if necessary, no one has to have ensuite and WIR and a 4 bedroom house for a 3 person family ... our parents and grandparents generation there was big families living in small houses

by 7jai | 22nd Aug 21, 7:08pm 1629616108

Fully agree. People keep screaming unaffordability. Thats prob because they believe they should be able to buy a 4 bedroom, 3 bath house for less than 500K. Please, my folks never got that and lived in a modest 2 bed, 1 bath home with a small backyard. They still live there today. People need to separate their desires vs reality.

I also believe I should be as rich as Bill Gates. Its not fair that I am not as rich as him, let me blame everyone else for this problem.

by Dale Smith | 22nd Aug 21, 6:56pm 1629615370

Who said anyone was sitting idle. That is your assumption.

You should be working hard regardless, but everyone in NZ are hard-working fools, regardless of owning or not. We are paying twice as much as we need to, just because of dysfunctional Government policy. This is one of the reasons our productivity is so low.

One reason wanting to silence dissent is that it might actually get Govt. to change its policy, house prices would drop, and people last in like yourself would be the hardest hit.

by pacifica | 22nd Aug 21, 2:45pm 1629600309

With a family in the engineering and medical industries I fully understand the need for nurses, medical testers, trademens and construction workers to exist and indeed have homes to securely live in long term. You seem to not realize that the people who keep your family alive and built your home also need a place to live. I think you need to upskill yourself a bit more. You seem to have missed basic education and indeed basic mathematics. Perhaps you could just live without a home, basic infrastructure, and any medical services but the first infection and need for power you have you will learn how nice it is to die of sepsis in the cold dark of night. Protip that you have a home you did not build yourself already shows your high level of dependence on others. I swear you would not have much in that home that you made yourself and literally to dress yourself and feed yoruself you have depended on a whole chain of kiwis in different low income roles and others overseas who all need to live in a home too. Perhaps you could ween yourself off your high level of dependency but I suspect you do not have even the most basic of skills to do so.

by 7jai | 22nd Aug 21, 3:26pm 1629602780

Being a tradie myself, your comment is quite insensible and offensive to those in the field. You assume and categorize us from one single lens, without considering that there are many tradesmen (or any other job out there) who worked hard for what we got for years, even in a 'peak' housing situation we are in right now. Your comments categorizes these types of jobs as "low paying" or those who build houses as "the poor" is complete nonsense and you need to open up your eyes a bit, let alone, your so-called need for basic education and mathematics. I am deeply offended that you by de-facto categorize my job and my mates jobs as low income roles. As I said in my post, I worked hard for many years, upskilling where I can to get to where I am today. Could I complain? Yes absolutely, I can keep complaining about everything. However I chose to focus and work hard. Was not easy at all, but I am happy to reach to where I am today. All my mates in the similar profession would say the same about themselves. One thing we all did was we stopped ordering things like 'smashed avo' to save our hard-earned money. Others who don't do so should try that sometime, as you would be surprised how much money you would save.

High dependency? Please. Your home was probably built by people like us. I don't need your patronage, and would appreciate you giving us a 'thank you' and be on your way.

by flyer | 22nd Aug 21, 3:19pm 1629602383

Well said, the situation can't be changed, why moan about it, at least try and do something as individuals to increase your ability to get ahead.

In Asia you don't hear people moaning about house prices, they instead work harder, upskill, and do whatever they can to get ahead. They see home owners as the vision of themselves in the future, rather than as the devil ruining their lives. You get what I mean.

by Just a farmer | 22nd Aug 21, 11:54am 1629590087

I would just like to know why the price of building (the price of building a new house on a section) has increased by at least 50% in the last year and nobody seems to be batting an eyelid.
I signed up my 192m house last April at $395k to build.
Now looking at other new builds in my area, quotes are around $550k building cost for a 150m house of similar specification!

All of my neighbours now are first home buyers because building was good value a year ago, but it is hard to see more FHBs getting into a new build at current prices.

by flyer | 22nd Aug 21, 3:15pm 1629602150

It's happening everywhere unfortunately. Eyewatering stuff.

Homes that were once 900k literally just before March 2020, is now asking for 1.4-1.5m.

Those in the game as you can suspect are enjoying the ride while telling their friends who may not be in it how horrible things have become.

by flyer | 22nd Aug 21, 3:17pm 1629602238

Oh and Farmer, why has prices gone up? Because people want to earn as much as they can while they can. Very innate human behaviour.

by Dale Smith | 22nd Aug 21, 4:49pm 1629607744

There is nothing logical in anything you said in that whole comment. Have a read of anything by Alan Evans or Alain Bertuad.

by Brock Landers | 22nd Aug 21, 5:23pm 1629609789

Musical chairs for "grown ups".

by Chris-M | 22nd Aug 21, 12:14pm 1629591297

In Germany when Hitler came to power. A few Jewish people saw the writing on the wall and left. Most however sat around angsting and rationalizing why the worst would not occur and somehow they would not be affected. It is a known psychological trick that our minds play with us. Generally we tend to rationalize events around us so that we can remain in the situation that we find ourselves. We view changing our situation as risky and uncomfortable so we prefer to remain in the status quo and rationalize everything around us to fit in with this. Well that did not work out very well for 6 million of them.
I suspect that NZ is full of young people who have little hope of ever getting out of our poverty traps and certainly no hope of ever owning their own home. They face a life of remaining a tenant serf to the property owning classes and business world. The various forms of social welfare are little more than holding payments that ensure that people can just survive and continue playing their parts as slaves to the system.
You have to ask why they remain in NZ when other countries present such attractive alternatives. I think that we may see part of the answer if we think about the 6 million unfortunate Jewish people who remained in Germany.

by Carlos67 | 22nd Aug 21, 12:30pm 1629592256

Except I suspect it was the rich Jews who could not bring themselves to leave without their money and possessions. Its far easier to up and leave if you have nothing and start again. Fortunately for mankind many did see the writing on the wall and got out. Some even had the balls to stay and fight, but many just stood in a line. Still that's one mistake they will never make again.

by False economies | 22nd Aug 21, 1:44pm 1629596678

"You have to ask why they remain in NZ when other countries present such attractive alternatives"
Can you detail which countries you are talking about and which metrics you are thinking of to define their attractiveness?

In lots of surveys NZ comes out very near the top, eg
3rd https://ceoworld.biz/2020/05/07/ranked-worlds-best-countries-for-its-ci…
14th http://hdr.undp.org/
8th https://worldhappiness.report/ed/2020/social-environments-for-world-hap…
9th https://www.bbc.com/news/world-europe-56457295

And if it all turns to custard we're number 1!
https://www.theguardian.com/world/2021/jul/28/new-zealand-rated-best-pl…

I'm pretty sure 1920s and 30s Germany wouldn't have scored so highly. And well done for invoking Godwin's law :)

by Chris-M | 22nd Aug 21, 1:49pm 1629596942

Certainly
The ones that are worth considering in Australia are.
Perth price to income ratio 4.8 Really nice city with nice people. Very prosperous with heaps of great opportunities.
Brisbane ratio 5.3 great geography and weather, pity about the Queenslanders, but you will find plenty of Kiwis and other immigrants to make up for that.
Adelaide 4.8 Very pleasant city and surroundings. Reminiscent of Christchurch as it was also developed by the Wakefield group.
There is a hell of a lot more to Australia than just Sydney and Melbourne. They are the last places that you should move to in Australia.
https://www.huntergalloway.com.au/brisbane-property-market-2021/
People should very seriously consider West Australia. The reason that it is so prosperous is that it generates 46% of the nations exports and has less than 11% of it's population. So the opportunities abound. I lived there for almost a year and among other things, I was struck by how young couples appeared prosperous, more mature and were really getting on with life; far more so than Kiwis of the same age. Unfortunately the young ones here are so frozen out of the economy, that they live in some sort of grey zone of suspended adolescence. Stuck. Little wonder many of them give up and go off the rails.
There are heaps of places in the States and Canada that have far better ratios than here and if you have good skills and education you stand a good chance of getting in.

by False economies | 22nd Aug 21, 4:37pm 1629607025

Thanks.
(It's interesting that aussie doesn't often show up higher in those lists. What are they missing?)
How do tax rates in Aus compare to here?

by Theoracle | 22nd Aug 21, 4:48pm 1629607727

Aus tax rates higher esp top tax rate but then they have the following:

1. Income free tax threshold which lifts everyone especially part time, low income and casual workers
2. Compulsory super paid on top of not out of your salary and 17% super for govt employees if you are an Aus citizen
3. You can access your own super at age 60 either as a taxable lump sum or transitional draw down no tax
4. Salary sacrifice into your own super so you pay less tax while earning if you commit to paying more super
5. Offset personal income against negatively geared investments including rental property
6. Super incentives to pay you a small bonus into your super for making additional contributions
7. Healthcare free or pay small levy and much better quality, way more specialists
8. Lots of pension benefits when you get to super age including large discounts, free public transport and one free inter state trip every year
9. Much larger and cheaper range retirement living options including for low earners, for example lifestyle villas for 55+ with high quality amenities which you can get a supplement for if you qualify for age pension
10. Much higher student loan repayment threshold
11. Cheaper fuel, food, electricity, clothing and new cars
12. Much bigger range lending options, about 200+ lenders offering rates 1 or more% lower including investment property tilt loans against own home
13. The big kicker... much cheaper housing than NZ
14. And of course higher wages

For average and hard workers Aus is no comparison.

Young people have a much better quality of life starting out there.

I moved over and came back. Dumbest decision ever.

You can see people in NZ have worse teeth as can't afford basic dental care unlike most people in Aus.

Then there are the usual social problems in Aus but if you're comparing national and personal economy there is simply no comparison. Apples and oranges.

by False economies | 22nd Aug 21, 6:41pm 1629614467

Thanks. And is all that available for kiwis when they move over?

by AJ123 | 22nd Aug 21, 2:08pm 1629598125

Very nicely put together.
The country is hijacked by property investors & govt representatives (as they have personal interests if not property than career) there is no patriotism in current lot (labour) other than greed for money, the mass exodus will keep on happening not only now but many years to come. Only those will stay who can afford, new immigrant or dependent on govt charity/free money & these numbers grow multifold in last 4 years.

A sensible youngster full of life and want to grow do something for himself & family, will never want to live in a place where he have to pay for yacht to buy a dingey & there is nothing great about NZ now if you compare to our neighbors, other than people have families here.

by Flying high | 22nd Aug 21, 4:49pm 1629607787

I know people who left 30 years ago, they are now returning to nz broke. They have not paid taxes here or contributed to the country but they still expect to receive nz pension. We are constantly fxxxxd by australia

by Brock Landers | 22nd Aug 21, 5:26pm 1629609961

False. Educate yourself about New Zealand's social security arrangements with Australia, United Kingdom etc etc.

by PonziKiwi | 22nd Aug 21, 2:33pm 1629599594

Lockdown is lasting 8 to 12 weeks. OCR will be minus 0.25 by December.

by HouseMouse | 22nd Aug 21, 2:53pm 1629600804

I doubt very much lockdown will be 8-12 weeks.
If it is, we are screwed.
I pick 4 weeks.

by flyer | 22nd Aug 21, 3:04pm 1629601493

Either way, this outbreak will tell us whether elimination is possible or not.

One part of me hopes elimination isn't possible so we can all get vaccinated and live relatively safe lives with all other types of diseases out there.

Of course, the other part of me hopes we get this under control and go back to being COVID-free, but I also know this isn't viable mid to long term.

by HouseMouse | 22nd Aug 21, 3:07pm 1629601620

It will be interesting to see at what point the fringe anger and protests becomes much bigger.

by flyer | 22nd Aug 21, 3:10pm 1629601846

For me personally I am over this lockdown already compared to last year when everything was novel and "fun". Most "office based" business are still operating normally from home.

I feel fatigue will set in sooner this time round, and anything more than 2 weeks of level 4 will likely see an increase likelihood of protests, not that I support such actions.

by HouseMouse | 22nd Aug 21, 3:27pm 1629602855

Office based businesses operating relatively normally right now.
That might change if we are still in lockdown in 4 weeks.
Or it might not.
Any confident predictions are foolish.

by flyer | 22nd Aug 21, 3:30pm 1629603011

If this takes more than 4 weeks at level 4, I suspect the elimination strategy will be thrown in the bin.

by dumbthoughts | 22nd Aug 21, 4:31pm 1629606687

I suspect the spin doctors are hard at work figuring out how to transition from 'elimination' messaging to 'learn to live with it' messaging without causing too much outrange and panic.

by Lanthanide | 22nd Aug 21, 4:37pm 1629607077

Agreed.

Still too early to make mid term predictions, but we're tacking in the right direction - record levels of testing have been showing up 10-20 new cases per day, not 100-200.

by False economies | 22nd Aug 21, 4:51pm 1629607874

In 4 weeks we could have had nearly another 2 million jabs done...

by Brock Landers | 22nd Aug 21, 3:18pm 1629602332

It will be. Victoria and New South Wales have both given up with elimination. Too hard.

If we can pull it off it will be months and months to get that long tail down to zero.

by HouseMouse | 22nd Aug 21, 3:29pm 1629602971

If we are in lockdown for 8 weeks then the economy will suffer terribly, as will mental health.
Kids are losing out so much too.
I would consider joining a protest.

by flyer | 22nd Aug 21, 3:31pm 1629603077

Agree, not so much regarding joining a protest though but I would be mightily angry about the low vaccination rollout and Labour will lose their "glamour".

by Theoracle | 22nd Aug 21, 4:37pm 1629607031

If it were a bet I would bet against your prediction.

by Northern Lights | 22nd Aug 21, 4:41pm 1629607292

I think there should be a long term plan to get lower income people into housing.

We are going back to the 1930's in terms of the distribution of income so eventually NZ will have to go back to the 1940's- 1950's for the solutions to getting people into their own housing starts.

My grandfather was a dyed in the wool National party supporter but he had no problem applying for a state advances loan at 3%. Neither did my father. They were all poor but used the Labour govt policies to get into a house. In my grandfather's case it was a one bedroom house with an outhouse for a toilet that he added to over the years.

You might need a combination of subsidised housing and low cost loans for low income people to make it work and it seems possible with the current building and labour constraints to do it only over a ten year period. There would also have to be some penalty for antisocial behaviour built into the loan documents or else areas with high amounts of this type of housing would turn into unlivable slum areas.

by TheAnalyst | 22nd Aug 21, 8:55pm 1629622536

Agreed, but to do the above you need a government with balls, vision and competence. The current government have none of those attributes.

by Dale Smith | 23rd Aug 21, 8:59am 1629665987

State Advances Loan was not a Labour party policy

The general trend of history is anything to OWN your own home is a National Party policy and anything to keep you RENTING is a Labour party policy.