The Reserve Bank is being squeezed from all sides and will have to think long and hard about its next moves

The Reserve Bank is being squeezed from all sides and will have to think long and hard about its next moves

By David Hargreaves

Well, that didn't take long at all, did it?

Take a decent bit of late summer weather, add a vigorous round of 'open homes' ...and there it goes ...the Reserve Bank's latest initiative to dampen the Auckland house market fire - up in smoke.

That the Auckland market was bouncing back from a quick pause after the impact of new tax rules and of recent new RBNZ restrictions was not an enormous surprise. Anecdotal evidence, plus already released figures from Barfoot & Thompson and from QV, suggested this was happening. But the extent of the bounce, as demonstrated by the Real Estate Institute figures for March, was staggering.

RBNZ Governor Graeme Wheeler - who had stressed that the March REINZ figures were the ones the central bank would look most closely at - must be sporting singed eyebrows today after getting too close to the scorching data.

Here's the Auckland story in three figures: The median price in the region dropped by $50,000 in January, then lifted by $30,000 in February, and then absolutely rocketed by $70,000 in March.

The $70,000 gain in price is a record for a month-on-month increase, easily beating the previous high of a $45,000 climb in the median that came last March. So, Aucklanders have seen the value of their bricks and mortar gain $100,000 in two months, with the median now sitting at a record $820,000. What's more fun people, going out to work? Or staying at home and watching the value of your property climbing $1600 or $1700 a day?

The people finding all this distinctly un-fun will be the folk at the RBNZ. What to do now?

If we go right back to the time of development of the RBNZ's 'macro-prudential toolkit' in 2013 and subsequent introduction of 'speed limits' on the amount of high (above 80%) loan to value lending the banks could undertake, it should be recalled that the central bank was not keen on the idea of regional targeting. 

The RBNZ did an about-turn on this last year with the announcement that Auckland housing investors would need minimum deposits of 30% and that the 10% speed limit for banks on high LVR lending would be retained in Auckland - but in the rest of the country it would be relaxed to 15%.

We have lift-off

Subsequent to all this, housing markets elsewhere in the country have caught fire as well. I suppose we can only speculate whether the RBNZ's attempts at targeting have actually helped to spread the fire elsewhere, or whether that's just something that would have happened. It's fair to say it HADN'T happened at the time the RBNZ made the initial announcement on Auckland targeting last May. But equally, it was surprising it hadn't occurred to that point.

In deciding its next step a key thing to consider for the RBNZ will be whether it keeps going with the regional targeting or drops it as a bad bet.

At the press conference for the March 10 Official Cash Rate decision Governor Wheeler appeared to indicate that the RBNZ was prepared to allow the rest of the country a period of 'catch-up'.

He stressed that Auckland had a "very high" house price to income ratio of 8.5-times, while in the rest of the country on average it was just 5.1, making the ratio "70% higher" in Auckland.

“There is more scope in essence for house prices to adjust potentially in the rest of the country,” he said.

Does this, therefore suggest the RBNZ might consider 'doubling up' on its efforts to target Auckland and leave the rest of the country to sort itself out for now?

It would be risky. We appear to be moving quickly from a situation in which one regional housing market (albeit the country's titan-sized one) is on fire, to having the whole country ablaze.

Enough is enough?

If the RBNZ decides enough is enough for the non-Auckland parts of the country it could very quickly reimpose the high-LVR 'speed limit' for the banks at 10% and perhaps introduce the 30% deposit rule for investors outside of Auckland too.

That would redress the balance somewhat - but sure as heck wouldn't fix the problem in Auckland.

I'm increasingly of the view that the only way for the RBNZ to keep its financial stability concerns in check is by acting directly against the banks, who are the fixers and facilitators of all this. Logically the best way of reining the banks in is by forcing them to hold more capital against their mortgage portfolios. This essentially would do three things: It would make the banks more financially secure in the event of a housing downturn, it would give the banks less scope to lend, and it would make the banks less profitable. And, yes, they could be expected to scream blue murder about particularly the last of those three.

But I don't really see that there are too many other viable options.

Raising interest rates is a proven house market dampener, but that isn't going to happen. Indeed the RBNZ may be under pressure to still further reduce the Official Cash Rate from its current record low 2.25% as soon as at the next OCR decision on April 28. On that one, much will depend on the inflation figures out next Monday (18th). If those figures point to ultra-benign inflation too far adrift of the RBNZ's 1%-3% target band then the central bank will be under pressure to do another cut. The high New Zealand dollar is another factor putting downward pressure on rates.

Bucket of petrol

It goes without saying that a further interest rate cut would be another bucket of petrol on the house fire.

Levels of household indebtedness are rising. The ratio of household financial liabilities to disposable income has blown out to a record high 162%. This apparently stressed financial state of affairs is currently largely buried by the low interest rates - which are making debt servicing costs, even at these higher levels, quite a bit cheaper than they have been at times. But when interest rates do finally start to 'normalise' - whatever that is now - then, hmmm.

I'm not sure that right now even higher capital requirements for the banks are going to necessarily take that much heat out of the housing market. But what they would do is provide a much bigger safety net for the banks and our economy if a big market correction came.

Sometimes the banks need saving from themselves. I think we've reached that point.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Agree with your view here - thank you, David. I do hope the RBNZ do the right thing for this country. Slightly reducing the profits of highly profitable Australian banks surely has to be a small price to pay to reduce the risk to our economy and give a small shred of hope to New Zealand's young people. If they do they will get my respect, for one.

Don't hold your breath! We are into the second decade of ineffectual tinkleling around the edges by the RBNZ!. Everyone seems to forget that THEY too have skin in this game, loads of skin and will never do "the right thing". They would rather employ the OBR, hence this option even exists!

C'mon people, GET REAL!

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THIS IS NOT AN RBNZ PROBLEM . Its an immigration and poor governance problem .

Firstly , until we turn down the spigot at Auckland Airport , we will continue to have massive demand for housing

Secondly , poor governance is from the failure by the Beehive to take steps to prevent foreign speculators driving up prices with their money they have borrowed at 3% overseas .

Foreigners pay no taxes , no transfer duty , no gift taxes , and no capital gains tax

They buy a property yielding 5 % ( cost of funds 3 % ) and print money from day 1 by get a 75% return on the money they have borrowed ....... that's right their yield is cash positive from day 1

New Zealanders are borrowing at 5 to 6% and they cannot fund the shortfall if they bought the same property as the foreigner with access to cheap funding at 3%

It is their problem if it leads to irresponsible lending because of the OCR or obvious perception that everytime they drop it, it's a brand new cheaper playing field for property speculation. It DAMN WELL IS THEIR PROBLEM because Boatman they along with many other RB's created this following the Greenspan Plan post 2001.

Justice , I sense you are really angry , but its not something the RBNZ has control over , and while it may be their "problem" , they have no solution whatsoever that will solve the problem .

Their Monetary Policy tools are useless , we now know that for sure , we have LTVR restrictions (round two) , pressure from RBNZ on the domestic banks to ensure lending is risk assessed , etc , and nothing works

Certainly higher interest rates for Kiwi homebuyers will NOT solve the problem , when foreigners are not bound by the same handicap or restrictions .

A Hong Kong based buyer can access funds at circa 2 to 3% against assets there , and buy investment properties here yielding 5%

Its a no - brainer apart from the currency risk, which they seem comfortable with

This is a political issue and there is ZERO political will to do something about this rort

The reasons for Government failure to take action elude me

They aren't working because it's all just tinkering to appear like they give a toss. Saving face. Example: why don't they just put in place an LVR of 90% nationwide for investors? Stuff like this is not rocket science. If WE on these forums can see what needs doing then ask yourself why they can't? And my anger is with you basically attempting to let these RB's off the hook! They got us here and never forget it!
Politicians are well known idiots and liars. What's the RB's excuse? They claim to be experts!

Clarence - sounds logical but that's not the way it works - if the RBNZ forces banks to apply more capital against housing loans the banks will just pass on the cost to borrowers through higher rates and still continue on lending to those that can still afford it. Effectively all the RB will be doing is raising rates, and they know it. Maybe the Arab might do it for that reason as it will have less impact on the exchange rate than an OCR hike, bur probably not.

And still we haven't seen any published data being collected in regard to the rule changes last October and November - were to be released 3 monthly - six months have gone by - silence

OIA request?

Where's my Lamborghini?
My daddy's rich and my Lamborghini's good-looking

http://www.smh.com.au/world/my-daddys-rich-and-my-lamborghinis-goodlooki...

"In Vancouver, there are lots of kids of corrupt Chinese officials," said Shi Yi, 27, the owner of Luxury Motor, a car dealership that caters to affluent Chinese. "Here, they can flaunt their money."

There are plenty of white people in the "that's racist" crowd but the Chinese themselves are not bothering to hide it. I guess corruption is just business as usual in China.

At least Shi Yi acknowledges that there is an issue and the issue stems from a place that shall be nameless, in case I get ticked off, as others have before..

Our Dear Leaders do not acknowledge the simple fact there is an issue, even though it staring us all in the face and was implemented by said... Dear Oh Dear ...Dear Leaders, to produce dear oh so dear, dear houses.

As far as they are concerned, all is going to plan, all is plain as a pike staff, all is definitely, not ...racist.

Deniable....yes, factual.......read just about any other web site around the World, bar those hidden behind the Great Wall...and I do not mean the motor Company.

Yes and lets not forget how the they get rich and the true cost to their peoples lives.

BBC article; 'Left behind' child tells of wait for parents
As China has developed, many millions of people have moved from the countryside to huge cities to work in factories. But their children have not been taken with them.

http://www.bbc.com/news/world-asia-china-35994479

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Said it before - regulate by putting a cap on the max rent for any house at $200 per week. Will stop it dead in its tracks. The "free market" is killing this country and must be dumped. Why not start here?

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The "free market" is killing this country..

It's not free while a set of unelected officials acting in concert with their political masters get to determine what banks' near term benchmark domestic funding costs should be, regardless of the risks undertaken by captured and as yet unrepresented OBR depositors.

That was exactly the goal of those who bought into Milton Friedman's economic theory - a few in powr being able to manipulate factors to favour a few to get richer at the expense of the majority. "Free" means free of regulation, not free from manipulation. It is the latter that is causing the problem.

Rates are too high, not too low. Look around the world. Our dollar is massively over valued, hurting our exporters. No one guaranteed you 7-8-9% return on your savings. Its swings and roundabouts. Us young borrowers have sucked up 12% interest rates in the recent past. Time to take your medicine.

I have at your expense. I just love these and remain indifferently happy you will underwrite my extended NPV returns today.

Thus, then, while Keynes was hell-bent on impounding the “unearned” interest income of the “parasitic” rentiers with his left hand, he would inadvertently grant unprecedented capital gains to them in the form of exorbitant bond price with his right. I suggest you read more and understand what you are wishing for.

Don't you like the way they are currently pulling back in price to give me another shot with a better entry point? I can also recommend Aussie Commonwealth Government securities as a first point of investment jurisdiction diversification. Read more It's up to you, but others are keen.

Why not make it $50? Dream on! You can't regulate rents like that. Everyone would want to rent in Remuera when they can afford Otara. Communism doesn't work

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If you are buying a property you will not live in, you must have 50% cash to dump in to it. No leveraged of other assets or any other bs, Cold hard cash.

An admirable addition to the corrective conditions necessary to contain this current bout of over exuberance.

The US Federal Reserve imposes minimum deposit levels to purchase securities in margin accounts - it currently stands at 50%. Read more

Dear bank "A". Please lend me $350,000. I provide property H1 as security. Thank you.

Dear bank "B". I am buying property H2 for $700,000. Please give me a mortgage. Here is the required 50% deposit of $350,000. Thank you.

Problem solved. And 100% of the interest on the $700,000 is deductible.

Dear bank A - please conjour into existence $350,000 that you don't have and loan it to me for property H2 and let's legalise this non-existant money with a loan contract based on English common law principles.

Dear bank B - please do the same as bank A.

Oh our glorious Ponzi scheme. The bubble just got bigger.
And no this house price inflation is not included in official inflation figures. Housing inflation is excluded.

Conjure

Please don't forget the $ 1600 - 1700 / day is after tax.

No need for Panama tricks here.

Beats investment in manufacturing and I see the US now at 0.70 for exporters.

This is well into bubble territory.
How do we know - It's like pornography - You'll know it when you see it !

And I see it now ...

No its not! If you sold that house you would get taxed at 33% on the profit.

Sorry, you are dead wrong there, only in few cases will you pay any tax, and it will be very rare to pay 33%.

You forgot the /sarc tag.

Remove the interest deductibility as the UK has done and wait for the squeals !

Well yeah, if you did that here and the squealing started, you'd realize how close to the bone everything really is.

And rents just jumped up 16% in my area of West London because of it. Now people saving for a deposit just give away 16% more take home pay because of this "genius" Govt policy.

Sheeple dumb enough to put up with that kind of thing, and I'm looking at Auckland renters as well, can suck it up and enjoy it.

Nonsense. If landlords thought the market could tolerate a 16% bump, they'd do it regardless of policy.

On many occasions I have asked my property managers to not up the rent when they have suggested it.

Yeah me too Zachary. I certainly wouldn't do it for good long-term tenants. However, where the tenants have given notice to move out, I normally increase the rents by a tiny fraction for the new tenants. Amazing how fast the tenancy is taken up, which shows that there are a lot of people out there fighting for good quality rentals especially in a good location close to the CBD. Also I notice that the rents for 2-BR properties have gone bananas. As the saying goes..."Life is still good in the landlord land".

You are so smug DGZ. How would you feel if you lived in Auckland and had just started your first job after university. Put yourself in their shoes. You have not been clever just lucky. Lucky that you were born in a certain era and was able to buy up assets before they got to their current values. I was also lucky. I had a top of the range income for 30 years and was able to build up an equity holding to the point where today I own 1% of a NZ public company. The first shares I bought at a dollar and just kept buying when I could afford to buy more and even borrow money at times to buy more. I was lucky. If you could buy them today for a dollar everyone would them. Our generation had the benefit of being able to buy assets when they were cheap. We were not clever. We were extremely lucky. My children and relations have bought shares in this company but at much higher prices than I did. Timing is everything. I feel very lucky that I was able to retire younger than most. Certainly not smug about it. Helping others less fortunate than self is certainly one thing I try to do. I hope you are doing the same.

Gordon - I suggest you research history of economic collapses. Their are many examples.

Every situation where currency debasement has occurred has always ended in failure.
We are madly inflating the currency via various means on a worldwide scale never seen before. That inflating effect flows to asset prices.

What goes up must come down.

The lucky generation will end up homeless along with the rest of us.

Things to watch out for:
Falling world trade
Falling world GDP
A debt default of some kind, probably from large super funds or a derivative default. And then risk will re-rate worldwide.

What goes up must come down.
The average house price in 1960 was around 7K. Have they ever really gone down?

...end up homeless along with the rest of us.
Are we all going to end up living on the street while our houses sit there, empty?

I don't really see how doublegz is being smug here. He is just stating the facts about how things generally work in Landlord land. Sure, there is an element of luck but a lot of work and risk goes into it as well at various stages. We are not writing about generally helping others out but rather specifically that Landlords don't gouge their tenants and most treasure the good ones. Maybe a tenant will read these comments and a win-win relationship will be formed down the track.

you prove again that you and DGZ are one and the same. Using the words "landlord land" for example.

We have sort of unofficially teamed up and can't resist teasing the 'one and the same person' rumour. However at the risk of sounding smug I like to think that we have simply been communicating a success story and suggesting to others the way it is done, pointing out current trends, what might be best to look at buying now, fighting doomsterism, that sort of thing. Historically there has been steady house price inflation in Auckland for as long as I can remember. I thought it would stop at the turn of the century due to low inflation and wages not rising as fast but lower mortgage rates and high immigration, especially from newly affluent China, has kept the trend going.
The rise of the super-cities, the appeal of the European majority British Commonwealth countries and the illegal migration issue in Europe and America may see this trend continuing.

So success is house prices in Auckland going up to levels that those joining the work force now will not be able to afford them. Do you ever think about anyone else other than yourself. If you have children which I doubt are you buying them homes.

@gordon you'll find that both Zachary and I have kids and you never know, they may be friends at school and play together considering we live in largely the same area.

Success is simply becoming richer. If everyone concentrated on activities that made them richer society would have fewer problems. A lot of people are the authors of their own misfortune, either through stupidity or neglect. I do think about other people but my largess is limited to a narrow subset of all people. Yes it is likely I will assist my children to get into their first homes.

Zach. You are riding on the success of a random market ripple. A feature that is destroying the lives of many many New Zealanders especially the young.
Success comes in many forms, and your gloating reveals you have yet to achieve most.

To the one and the same ZS/DGZ. I bought my first home in the mid eighties for $69500.00 and borrowed $45,000.00. My wife had a great job for 18 months and the loan was paid off and when the house was sold in 1987 for $93,000.00 we were debt free. We then bought our second home for $135,000.00 and the loan was $45,000.00. That home was sold in 1996 for $310,000.00 with a $100,000 loan to be repaid as we had carried out major renovations on it. We then bought our current home for $490,000.00 and had a $100,000.00 loan as I sold some shares to help with the purchase. That home is now worth $1,500,000 or so and is debt free enabling me to buy homes for my children to live in. I think I have been lucky to live in the times I have. Houses were cheap and the loans were small. X and Y face a much bigger burden when they buy their first home now, especially in Auckland where the costs of living outside of owning a home are so much greater than I have ever faced. Not everyone is born with the same amount of grey matter. There are a large number of people in Auckland who through family circumstances or just plain ability are unable to earn anywhere near a living wage. Don't we as a society have a duty to care for them. Your smugness and lack of basic humanity and charity is embarrassing. Life is about people not things. You can own all the property in the world but it will not make you happy. Being generous with your time and possessions makes you the happiest.

FYI gordon I am a Gen-X.

Yes you have had it easier than they do now DGZ/ZS. I cannot for the life of me understand why you have no sympathy for those entering the work force now and who are facing so much debt to service if they can manage to even buy a home first.

Generation X starts in 1965 so you might not be a lot younger than me. Y and Z certainly have it hard. Those at university today face huge debt servicing possibilities just to house the family which is not fair when you consider what the Boomers and X faced in the same situation. Not the time for smugness. A bit of human warmth and compassion would be more endearing ZS/DGZ.

Very late half of Gen-X

Gordon, what were the loans in relation your earnings, i am guessing 3-5 times.
where as a young person now is looking at 10 + to service the loan
i like you am mortgage free , took a slightly different route, i can not see how the young people that i sit next to day to day can ever get to where i am without the help of rich parents ( which many of us dont have)

I think as a young professional I was earning around $18,000 in 1984 so less than three times as we borrowed $45,000 for our first home. And it was a nice little character home which sold well in 1987 when we bought a four bedroomed two storey character home with three living areas for $135,000.00. I have simply put these figures on today to show easy it was for the boomers to buy. We were very fortunate to be born when we were as housing debt was always easy to service. As my income rose from my professional endeavours I was able to retire debt very quickly and then start saving for the early retirement.

double up sorry.

double the trouble

This is where your rich parents step in and decide to downsize and give you the deposit on a house. Your parents of course bought when property was "Cheap" and everything was easy so they may even have more than one house. Basically your parents giving you a head start is the way forward, worked for me, they gave me half of the deposit required.

Restricting banks lending will lead straight to the loan sharks who wilh have field day.
That is not the answer.
One solution is to impose a solid stamp duty payable on every sale (FHB exempt to $400K) as this will require much bigger cash deposits without actually increasing the sale price.
Stamp duty legislation from the past still exists set at 0% but could be brought in overnight.

Ummm, banks are....... loan sharks. Infact they are worst as they have a license to create 'funny money' on a mass scale (hence the problem globally we are in) where as a basic 'loan shark' can not. Sure they both charge interest.......

The answer is not more tax. Dont you pay enough already? I know I do. Envy taxes are usually suggested by people that will never have to pay them.

LOL, brilliant, BigDaddy suggest an envy tax. I'm sure some people will find it funny.

I'm not convinced BigDaddy. Stamp duty has not curtailed prices elsewhere. If anything it could be argued the effect is an increase. Look at Australia. It would generate a lot of government revenue.

We need to see auckland reinz index data before we get too carried away.

The 30% rule on investors may have killed the lower end, even apartments, and some re-newed buyer confidence of people trading up might be skewing the median.

Edit: Just seen the index graphs have been updated, auckland index looks like it has risen slightly above its peak toward the end of last year and has indeed risen very steeply.

I think with auckland apparently heating up it makes it less likely for the 30% rule to be imposed outside auckland as that would increase aucklands attractiveness in a relative sense; I guess the relaxing of rules outside auckland may have been engineered to try funnel some of the $ looking for a home away from auckland to slow the auckland market, more than to pump up the rest of the country which is what it seems to have done.

Wheeler needs to stop being such a blouse and cut rates hard. Hes been late on everything and hes late on cutting rates now.

NZ is fighting deflation hence the manipulation that is being done in the house price market. If house prices had remained at last years prices NZ''s interest rate would be 0% or below. I wouldn't be blaming the households too much either for all the debt as they are getting their information and advice from the media and it hasn't been exactly rock solid.

No no, the RB is still fighting inflation in their 80s/90s paradigm.

The bank economists have been pretty forthright in their views, which have proved to be utterly wrong. The right wingers like Roger, totally wrong, Peter Schiff, wrong. Right wing biased media, yes, wrong.

Meanwhile. some like Steve Keen seem to have been spot on but vilified into moving across the planet.

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Anecdotal evidence = oxymoron.

The RB may as well give up on the housing market. It's actually not their job anyway.

Housing on fire?
Unfettered Immigration. Tick.
Unlimited International students. Tick.
Open access to property purchasing by foreign offshore buyers. Tick.
Zero returns for small business/ farms / legitimate investments with onerous tax. Tick.
Renters viewed as 2nd class citizens with fragile tenure. Tick.
So.... The money pours into property.... Where else?

Well said, totally agree.

Or the RB could include real estate inflation into its inflation metrics. Wont happen, I know.

RBNZ mortgage data for April suggest a continued acceleration , mortgage numbers and average values increasing.The reality when every second car in Auckland is a new porsche cayenne or audi, or indeed some bizarre looking mercedes , the RBNZ needs to review its outdated models. Whatever they do will simply see a reaction in the opposite direction. They do not seem to understand that they are indifferent to change, and by pressing some lever up or down will not have the same effects as previously understood.

Stamp duty will sort out the investors if the level is high enough 15-20%. Reduce the demand from the largest segment of buyers (40%+ are investors) and lets see much prices rise. The beauty on it is that any stamp duty tax can be used to improve infrastructure. Worst case scenario it has no effect however millions of dollars of tax is collected from investors local and foreign which could be used to improve NZ's infrastructure.

Why are the other political parties not asking to see the data that is now collected since October ? When are we likely to see this ? Not sure why there is a wait on this.

They just raised stamp duty in the UK. In my area of London people think - "mmm shall i move and pay 50k stamp duty or spend that on a loft conversion or extension?" The end result is no one moves and there is even less supply. I get 30-40 flyers a week from RE agents basically begging to see my place. Stamp duty does not work.

Not sure that is true. What they have successfully done in London is force the overseas money out by several means including raising stamp duty.
The foreign money went in and dragged property prices up from the top end. Where the London property market is now is that they foreign buyers have gone and suddenly there is a glut of flats in the market worth over £1.5m with no buyers in sight.
In the meantime the "working classes" as I will call it have been buying due to cheap interest rates and the sub £750k market has been very strong with a bit of a rush to buy due to the budget changes on buy to let.
In London the top end is going down and the bottom end going up(IR convergence of prices)which is a lot healthier than what we are seeing in AKL right now.

Well I hate to tell you, but it is true and it's basic economics. Would you pay tax, lawyers, estate agents, all the stress of moving, move further out or get that same square footage added to your house for less than the tax?

1) Yes, BTL investors have rushed to complete before the double stamp duty kicked in. Or they have gone incorporated to avoid it.

2) The flats you refer to are in an area called SW8 where there is huge over supply, poor transport links. Most Londoners hate new buids anyway. They would prefer a 150 year old rock sold house that will be there another 150 years.

3) Auckland is at least 5 years behind London. There are no schemes for FTB, no schemes for developers, IR's need to drop at least 2.5% (coming slowly but surely - give it 18 months). The Govt is importing smart wealthy people at a decent clip who need to live somewhere.

Stamp Duty is a failed measure that is about to me done away with in Australia, possibly to introduce a Land Tax.

Why would this government alter the present course while their popularity in opinion polls is running at around 50% ? Nothing is likely to change between now and 2017 let alone by 2020.

More immigration - tick
Increased house prices - tick
Tax havens - tick

Look after number one - all of the ticks.

Opinion polls stand at 50% also because the govt is deliberately filling up the place with people with low skills and from places where sucking up to the government is part of the social curriculum.

Just in case anyone wondered why Key is bringing in the paupers. The vote of a pauper is equal to that of an academic.

"Sometimes the banks need saving from themselves. I think we've reached that point."

Sounds like 2007 again. Except the we and the banks now know that they are too big to fail and will get away with any piggery. We are not looking at a lost decade, but at a big leap backward.

interesting meanwhile in the USA they are telling their banks to prepare as they will not help them next time

http://www.cnbc.com/2016/04/13/5-major-banks-fail-living-will-test-citis...

ObeseBallerina the stamp duty I am suggesting would not apply to owner occupiers so yes you can move ;)

Much like in the UK where they have added a stamp duty for a second home ie investment property. Apply the stamp duty to companies and Investors foreign and local.

High end priced London homes have cooled significantly due to the stamp duty. SO yes it does work.

http://www.ibtimes.co.uk/uk-house-prices-tide-turns-central-london-prope...

I don't mean to sound condescending but reading a second rate publication about a country you don't live in is not an accurate picture of whats happening. Ignore what you read about PLC. Im talking zone 2-3 West London where people would extend rather than move.

The banks need saving from themselves and the people need saving from the banks...

The RBNZ is in a very difficult position - other parts of NZ Govt are not taking any effective action and RBNZ must know that it can't deal with this situation without other action on both the supply and demand side. In effect the RBNZ is damned if it does and damned if it doesn't take action - and the arguments about whether the RBNZ is doing the right thing act as somewhat of a diversion from Govt inaction. Govt has a number of options short and long term - from building more houses to restrictions on foreign ownership, capital gains and other taxes - but chooses not to take them. My children will suffer financial because of this if their best employment prospects are in Auckland or other major centres with rapidly rising house prices.

Cause & Effect. Obviously a observation the RBNZ aren't familiar with. Of course they are......which leads to a disturbing conclusion. Wilfull neglect.
I will AGAIN remind those who think this is not the RBNZ's problem by pointing out that RB's around the world were the very creators of this mess from following Greenspan US FED plan in 2001, thus leaving interest rates far too low for far too long. Wall St , Banks etc just jump on that opportunity along with speculators of a different sort in this country. Its all connected, not created in separate economic vacuums. RB's have a duty to correct their disastrous mistakes. They regulate the banking industry! Government have much to blame for also but that is on the voters heads

FatBallerina who is to say I don't live there :)

Also I already told you exclude owner occupiers.

Why doesn't the RBNZ just ban interest only loans?
- It would slow the investor market right down (meaning less competition for FHB), many property investment seminars stress the importance of cash positive or neutral after tax and keeping loans interest only to gain the maximum tax advantage.
- it would increase the tax take without increasing tax rates (less interest cost deductions)
- It would build in extra financial security as LVRs would automatically reduce over time, even when property prices didn't increase.
- It's not an extra tax.
- Owner occupiers are p+i anyway so it wouldnt make any difference to them.

This has got to be the dumbest things I ever heard .

I recently came across someone who owns an investment property just off Lincoln Rd , out West which is cash-flow negative so he writes off the interest loss/ cost/ shortfall against other income ( he likely pays less PAYE or income tax )

RESULT = LOSS TO THE COUNTRY AND GAIN FOR THE LANDLORD

His tenants are a low-wage family , and they qualify for an income subsidy which helps them pay the rent (from WINZ)

RESULT = LOSS TO THE COUNTRY AND GAIN FOR THE LANDLORD

He thinks its funny

How can this be right on any level ?

It is a simple conversion of taxable income into tax free capital gain. It's common and harmful to the country.

Even if the rules are changed so that the write off only applies to income generating properties I know a lot of people who already have their rental businesses organised for that future change. They make capital gains at our expense. Is it wrong? Of course. No Government is going to have the balls to change this until the country's finances reach breaking point. No matter what we'd be in for a hard landing.

Many past Governments have been advised to change this but they've refused.

its costing the country billions, but why would those that are in on the rort (mp's) change the rules to disavandage themselves.
instead they will make hay while they can and are in charge and later on once they are gone they do not have to worry about the future balloning expense

If the property runs at a trading loss - cash flow negative - you are liable for capital gains tax. Beware. People doing this demonstrate to the tax department that their business intention was to make money by buying and eventually selling. What other explanation would there be for entering the deal.

You are aware that principal repayments are not a tax deductable expense?
So the amount of taxpayer support by way of tax losses would be less than it is now.

have a look at the fiqures, it is a lot bigger than you think, especially as in auckland for the last 3-5 years a lot of investor houses are being brought neg gear and the playing field is tilted to more investor houses than owner occupiers
also the Accommodation Supplement and WFF payment has grown
these fiqures will continue to grow with current government policies until such time as they suddenly become another welfare blowout or super blowout.
the minister the other day ruled out an increase in aucklands rate but it will come.
and the kicker this all comes from middle income taxes or tax credited to offset income.
personally instead i would rather this money was spent on health and education
http://www.treasury.govt.nz/government/financialstatements/yearend/jun15...

Note 2: Accommodation Supplement maximum rates for these clients are:
Area 1
Area 2
Area 3
Area 4

Two person family
$160
$125
$75
$55
Three or more person family
$225
$165
$120
$75

Okay... so I suggest a way to
- reduce investor tax losses and therefore reduce taxpayer funded subsidies to them and
- also strengthen the financial system and
- also help FHB by removing some investors from the market.
You and boatman bring up WFF and the fact lots of investors are negative geared... sorry don't see your or boatman's point.

because by being neg gear you can get your income down and claim WFF, another expense for the taxpayer
you are correct we need to tilt the playing field back to owner occupiers as in the long run that benefits us all in less tax spend and less social disharmony
but will this government or the next do it not likely as they have there hands in the cookie jar, have a look on the MPS list of assets to see who many own rental properties from all parties.
even the greens got caught out when they used to own them for their MP's super fund not a good look, they have sold them now after that egg on face moment
edit. i would prefer we paid the supplement to FHB to help them buy a house

I'm under the understanding that you cant reduce your income for WFF purposes by being negatively geared, (you used to be able to, but National changed the rules a couple of years ago so now you can not).
I am suggesting negative gearing is reduced as interest costs are less the lower the principal loan becomes. I'm still not sure what Boatman's point actually is.... I mean you could just be done with it and ring fence losses so losses can only be offset when actual profits are made (most reasonable people would probably agree), but that's not helping strengthen the financial system...

agreed should be so, now try to get a government to see it and do it, not going to happen until they are out of the game

Ring fencing property losses would be a lot simplier and easier to collect (as just no refunds would be given) and administer and probably produce a higher tax take than a capital gains tax.

Boatman - hundreds of thousands of investors run their rental investment properties like that - it is all legal and the government are happy to prop up the low wage family rents as it saves them having to provide/build more state houses.

These are not times of war, nor are they, for the most part, periods of national emergency, so why should one couple be able to settle down and start a family and another not, by virtue of the fact that one was born 15 years earlier than the other?
http://www.theguardian.com/commentisfree/2016/apr/12/house-prices-money-...

I've sat on the sidelines reading these comments for far too long, over a year of suggestions and complaints, some positive comments and a lot of moaning.
To the people that non stop moan about the current situation, it is what it is and the reason it is like this is due to simple supply and demand, once you grasp this concept you may realise that in fact there are no evil powers at be here. Quite simply the prices continue north because of the lack of consents and housing vs the number of people migrating to NZ. Is it the immigrants fault for buying a house to live in or an investor (foreign or domestic) looking for a good return on their money? Is it the money hungry smart folk that don't want to work 9-5, 5 days a week, for 45 years to retirement to wait for the Govt to help them out? Is it the RBNZ's job to consistently try to control the free market, is John Key, Wheeler, or other parties trying to destroy this good country on purpose?? Personally I think not. I don't think there is any bad intention around these individuals for getting rich or screwing the country over. Simply we have been caught in a supply and demand cycle and that is the way the world works, commodities, food, materials you name it, lack of supply and the price will always go to the highest bidder! Has anyone actually taken note of how much land is around Auckland? There is a stack of land and why has this not been made useful is beyond me?? The council should have seen the writing on the wall and they still seem to be lost somewhere in the sand. The same way we build infrastructure after the fact! Perhaps you may wish to point a figner at them, we did this to ourselves a few years ago! It's OK to free land up in the middle to lower sector but when an abundance of land is in the upper areas of the "leafy suburbs" it's all of a sudden an issue. Seems they don't want to contribute to development of the city to help the shortage, rather point a finger in the other direction. First home buyers, stop complaining and do something about it, live with your parents if you have to and buy out of Auckland, this market is tough and you need to be smart about it. If you think you are going to be starting out with a 3 bedroom house and a slice of land as your first home, like mummy and daddy did, news flash....it's a different market and a different world now. Most developed cities around the world have sufficient town houses, apartments and units to house their populations, most first home buyers start here, in the 1-2 bedroom range, not with a slice of paradise as a first home, that time has gone. New Zealand is a hot ticket for people to move to now and growth as far as migration is concerned is only going to increase with time. Complain about it and miss out! Some people make things happen....others wait for things to happen....and others wonder what the hell happened! If you can't buy your first home then get smart about it and make a plan to invest outside of AKL, make some money their to help fund your situation. The Indians, Chinese or whoever are not against you. Yes prices are inflated and it's a shame we are at this point now, but how the hell have we got so much land around us and never been able to see the writing on the wall to free this up, consents have been and are still too slow, the costs involved are high and this should have really been implemented early on. Maybe we should really be looking at ways to ramp the simple supply side up (yes you GOVT, yes you Council! ) and regulate the migration a little (we still need this money in the country though). You can do dip into as many financial tool boxes as you like to try and to slow things down. The one fact remains, you CANNOT SUBSITUTE HOUSING for something else, people need a roof over their heads. In short supply should be at the top of the heap to start reducing the inflated prices!

"To the people that non stop moan about the current situation, it is what it is and the reason it is like this is due to simple supply and demand, once you grasp this concept you may realise that in fact there are no evil powers at be here.

Hallelujah! Thank you Upside for being fair to us all, and for the records Zachary and I aren't evil and we don't have any evil intention/power! In fact, quite the opposite.

I do have one word of advice Upside, and I do literally mean one word:
paragraphs

LOL that's hilarious!

I hope you like my paragraphs thanks to the thesis I did many years ago at the Uni :-P

Yup a bit much but that's months of ranting off my chest!
As you were.

I agree you are not evil dgz/zs. You are just plain greedy and very very smug. I have to say though you say very little about yourself so I think you are probably someone with very little property who comments on this site to make oneself feel good. We have had them here before and they disappear and then another fraud comes on board. Being born at the right time in terms of market gyrations does not mean you are clever. It just means you are lucky. Those who were born around 1990-2000 or so are unlucky as they are being hit by high house prices. Those who were born from 1945-1985or so are very very lucky in terms of market timing.

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Make up your mind, we are either frauds or we are lucky.

The fact you both comment very close to each other once again confirms you are one and the same and a fraud. Many on this site suspect the same.

It is eerie although I suspect there is a more mundane reason. We could both be in IT.

So you do not deny you are greedy and smug. Fine. And no information about yourself. Fine. Just a figment of your imagination as I suspected. Big on greed and smugness, fine on detail. To be expected.

If you look at the name of this website you will see written under it a brief description:

Helping you make financial decisions

Not moral decisions, financial decisions. I like to think we make useful contributions of this nature.

No DGZ/ZS you crush those less fortunate than you with your smugness. That is hardly a positive contribution. You are so smug and so cruel you cannot be real. Hence I think you are a loser who gets off by making the terrible comments you do such as making all of Auckland high class .

Both have not responded. Is that a coincidence or does it confirm they are one and the same as many of us suspect. There could not be two people in NZ who are so cruel to those who are younger than them and less fortunate.

Gordon, I have my suspicions also due to the amount of time they both spend commenting on here. Most business people I know don't have the time, but........they run 'real' businesses ;-)

Gordon I'm not sure what to write. I had no idea I had such super powers! Crushing people with smugness sounds like something out of X-Men. I am now designing my costume.
I may suffer a little from autism as I was honestly blissfully unaware that people would be upset by my plan to raise everyone up a class or two.

Not everyone can be raised up. Have some compassion. Some people will never have the income. Some people will never have the ability to work even at minimum wage level.

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One minute apart. Coincidence. No. Same person.

Have you got something against question marks Gordon?
We can't win with you, if we reply it is suspicious, if we don't it is suspicious too? What exactly do you want? Fine words and expressions of sympathy are fairly useless.

I notice both of you arrogantly criticize the grammar or lack of it that others on this site use. Coincidence? No as you are one and the same person. I also think that you are on a benefit and you are single and have minimal assets. No employee or person running their own business could spend so much time on this site as you do. No partner would put up with their partner spending so much time on the computer as you do each day. Having minimal assets it makes you feel better when you fantasize about assets that in reality you have never owned. Having minimal assets is the reason why you give no details.

No you are one and the same. You should us just one name for a while and when the other name gets used again don't use the same language and don't comment simultaneously. Then new commentators on this site at that time and who don't your past history and behavior might just think you are different people. Or simply retire one name and set up a third name and be more careful.

No many of us on this site will buy your explanation. Too much common use of language, same criticism of others grammar,simultaneous comments all day everyday, same themes, same lack of compassion and same smugness. Good effort but you don't fool us. Back to the drawing boards.

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No problems. Glad you had a laugh. None of your comments make anyone laugh as they are so cruel and so smug. You have no idea just how many people in Auckland are losing sleep as they face being incapable of ever owning their own homes. Those low class people you despise. People who will never have more than a minimum wage.

Please explain why they will never have more than a minimum wage?
Also a lot of people choose to rent and invest in shares, so why are they losing sleep over a decision they have made?

Gordon seems to be the one with the low opinion of people. He is over thinking this and imagining too much. Hard work and perseverance can trump smarts and often does. My younger sister who was rubbish at schoolwork and needed my help to proof read her work when she went back to school as an adult ended up with a salary almost double mine.
I'd like to know why Gordon feels he needs to be a champion of the downtrodden and if the downtrodden actually appreciate him doing this. Can someone answer this last question?

I think Gordon is trying to get us angry but this is impossible. We're too cool for that. We never hurl abuse at other people like they do to us either. I will write something amazingly positive and get all sorts of negative comments. I guess it is the Kiwi way.

I hope you read your comment gordon and think of some of the comments you have written about farmers on this site. Pot-kettle-black.

I am surprised you asked this question. Confirms your lack of sensitivity and compassion.Lack of ability to obtain qualifications. Not everyone is born with the same level of intelligence. Mental illness issues is another reason. I could go on but everyone except you will get my drift.

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