Reserve Bank makes surprising announcement on move to reinstate lending restrictions in face of searing housing market; has also announced further delay in introducing new bank capital requirements till 2022

There's a silver lining to higher house prices "BIRTH CONTROL" My partner and I have decided not to have children, it's just not affordable any more. I've booked my vasectomy procedure for next month. A lot of my friends have had it done and they too, have chosen to be childless couples. Apparentley the surgeons have never been so busy, especially for caucasian male customers. In fact they say it's becoming trendy, a lifestyle choice you could say. So keep up the good work RBNZ.
... (using sarcasm to drive a point)

Exactly, what you would expect from this announcement is more people rushing into the market before it ends.

agreed. they removed them more or less overnight, as i recall. but somehow putting them back takes at least 4 months.

The RBNZ are now in clear breach of the part of their mandate related to preserving the soundness and stability of the NZ financial system. Orr must be dismissed immediately.

Agreed. I do not understand the reasoning or logic here.

Having determined that the housing market is running super hot, and acknowledging that they're seeing a rapid rise in risky high leverage loans (that the so called conservative banks seem happy to lend on by the way) - rather than re-implement LVRs, which any logical person would never have removed in the first place, they put out an announcement that they'll consult for x months on whether or not to re-introduce them?

I do wonder whether Orr was about to do just that, but Robertson stepped in and told him he had to consult. That is after all Labour's playbook right? That would also explain why Orr sent the deputy to announce it - because he's been forced into 'consulting'.

I do find it strange that all the noises were that LVRs were coming back, and soon, and Robertson has a meeting with Orr last week and suddenly it's we're going to consult.

Either way it's a poor decision by Orr - either he should have stood up to the politico's and asserted RBNZ independance on this or he should have fronted and explained his reasoning. Both way's he comes off as looking weak here - and both ways likely lead to his exit.

The question is, what does Labour/Robertson get out of letting the housing market run rampant?

Shambolic and reckless are great words to describe them. Clowns.

Moreover, they will only wait until next month, and only "consult", and possibly re-introduce them only next year, in March

Adrian Orr didn't front for this media release. He sent the deputy instead. Delegating responsibility or realizing this central banking stuff is no walk in the park and he's possibly out of his depth?

It would be nice to see at least the banks themselves be responsible for their financial stability.

The irony of course is the banks have been great looking after their own interests, usually recording record profits.

The reality with the high LVR lending is the banks will have crossed collateralized any extra equity security needed, and then some with other property that does have plenty of equity. The risk will be all on the borrower.

I guess theoretically, it will temper demand. How effective that will be remains to be seen. Personally I think it will slow growth but not stop it. Housing in Auckland was already sizzling since late 2019. The RBNZs actions in March just poured jet fuel on the fire. DTI restrictions and ban investors from buying existing stock unless they have plans to build additional units in the short term is the sort of thing that would actually make a difference.

I'll offer you 10-1 they don't hike rates today dazz, how much do you want to do?

Won't someone think of the poor people who have enough cash in the bank to generate passive returns? Truly they are the real victims here, nevermind the thousands of young families drastically hiking the OCR would financially ruin.

Let me guess as a fly on the wall at their latest meeting. I suspect the consensus was something like "let's not create any surprises." Of course, they have limited understanding about behavioral responses. As we all know, the RBNZ doesn't have any behavioral economists onboard. Not one.

Free slave labour for all (rich business owners)!
Tenants works at RBO's business for minimum wage -> Pays 50%+ of their wage as rent to RBO.
...so I hope your comment was sarcasm.

No doubt it is, a lot of people who could not make it into a loan due to already highly unaffordable prices, which before would have required 20% deposit (let's say 150K) can now get loans with barely any savings at all. A common scenario is Kiwisaver funds being withdrawn for a first home purchase which in many cases happen to be just enough for the deposit required by many banks. So basically you end highly leveraged and no pension funds for a house is barely worth the timber is made of in an uncertain economic environment.

I don't think they were. It wasn't a "You must have 20% for owner occupier, or 30% for investor" situation. It was just that banks could only have a limited percentage of their mortgages being higher than 80%/70%. Their introduction was just so the RBNZ could say they were doing something.

But when property values increased by 20% in a year due to lack of supply, high demand, plummeting interest rates, no real alternative asset classes, and a stack of unspent holiday cash, it wouldn't take much to get that 30% equity stake in the next residential purchase.

For owner-occupiers though, they would be looking to upsize, so they would need to see significant increase in value, but at the same time, the properties they would be looking to move to would also increase, so it would be a while before they actually buy.

It would take a lot less time for investors to be in a position to leverage their capital gains of their existing properties to meet the 30% requirement for their next cheap straight-to-rental purchase.

Hence why the bulk of new mortgages have been to investors.

Re-introducing the LVR restrictions as they were initially done will not cool the housing market one jot.

@mortgage belt. Yes but never 5% lending at these crazy interest rates so makes a huge difference

There is what any of us would do... then there is what the masses of amateur property speculators will do.

Beat the deadline!

I think it was Westpac who claimed they aren't using the looser LVR rules. Changing the rules may change things somewhat but the low interest rates are fuel for the fire.

There hasn't been enough time for the flow on effects for all the job losses to be felt in the broader economy. This will start to change at the start of next year, and for the six months after the mortgage holidays end. Hard to say how bad it will be, or if there is enough time for people to find new jobs, start a business or become a student to ride out the worst of it.

But why would it have 'taken the economy down with it'?
With mortgage costs at historical lows, the vast majority of borrowers by far would have just kept servicing their debt. The 'value' of any holding doesn't affect the capacity to repay in the short term.
What would have been affected it the ability of those who relied on capital gains to realise their profit in due course.
It was a massive mistake to encourage New Zealanders to take on more debt during what was seen as a looming economic downturn. Massive.
I don't care what some dated set of textbooks or faded economic 'education' tells me when I look onto the streets of our country and see what we are inflicting on our people.

In the case of this announcement "March!" should not have come into it. There wouldn't have been a crash, as most participants don't believe there ever will be one, and would just have held what they had.
It takes time to build the circumstances for a Crash!! and that is exactly what we are setting the scene for by doing what we are doing today.

https://brrr.money/ is the short answer.

The idea is to pump as much money into the economy via mortgages to avoid spending halting. Spending is not just confidence, but also you can't spend money that isn't there. In 1929 to 1930s people would have loved to have spent money but there wasn't any.

If you ignore the frothing incels for a moment, there was actually some sound logic in removing the LVR's. The RBNZ did not want the banks in a situation where a fall in house prices inadvertently placed back book loans in breach of the LVR's - so they suspended them.

Notwithstanding that very few countries actually have them and they are far more punitive to first home buyers than those with multiple properties and high equity. But let's make it harder for the young to get ahead, by all means.

The verb 'to consult' has many different meanings in the Kafkaesque world of institutional bureaucracy. But what I think is at the essence of the word is a signal to delay any firm action now and to pass the buck so to speak.

The RBNZ and Robertson have over done it and need to deflate bubble now.

Be careful what you wish for. It's very easy to say 'destroy the bubble' but the unintended consequences are probably way bigger than you can imagine. The NZ property bubble is where the boomers' 'fake wealth' is tied up (fake because the prices are simply a reflection of money creation faciliated by the retail banks). They've created the monster and how to deal with it is way beyond what they know.

As I noted above - Form One Economics at its very best.

In March as Mr Orr is reluctantly forced to act as he no more can hide the crisis under carpet and has put March date to potray that is concerned and acting (keep people from speaking) but real intent is missing.

His intention were made ckear by his deputy that they want the ponzi to continue as can think of no other solutions otherwise 20% to 50% plus rise in few months is not possible.

Atleast shohld come out to calm FHB who in FOMO are taking huge risk as all this will come to haunt in future.

Am helping a friend in his house hunt and have observed most (have seen 12 auction agreement and of that 9 were Chinesse sounding name) people selling the house in Auckland are Chinesse name and have mostly purchased between 2016 to 2019 and are offloading now. When check the price that they bought in 2016 was also crazy like saw a house in Shelly park purchased in 2016 for 1055000 and now has a CV of of 1.1 million (so in 2016 paid high price to 2014 CV) are trying to sell at 1.2 million plus (As Auction failed) as have now got this opportunity to offload and many who bought last year are making a real kill and it is category thst Mr Orr and Mr Robinson are catering too by delaying the introduction of LVR or any other tools.

Window of 5 months given by Mr Orr is enough for speculators to ramp up the price further....May be Mr Orr wants Auckland median to be 1.5 million and is pursuing his dream as he can at the cost of FHB who cannot even dream of a house.

$1.35m for that? Wow.

The sooner you start seeing modern day New Zealand as an abusive parent, the sooner it will make sense to leave.

Life is too short and the rest of the world isn't this screwed.

It's horrible isn't it. Made even worse by the absolute glee most of the reporting on it is framed in the media, or almost anyone who talks about it who had the fortune of being born earlier and could buy when prices were at least somewhat sane.

Have you considered going to Australia?

WestieAJ...So if we do not restart mass immigration we can add house price falls to the long list of benefits to NZ.

I don't think it's about immigration numbers just now. I think there are quite a few people (remember we have 1.5 million kiwis living overseas) are buying something in NZ so they can return here if they need to. They aren't moving here just now. Only buying for later. So they don't show up in the immigration numbers.