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Westpac economists say the Govt's housing taxation changes will 'dramatically tilt' financial conditions in favour of owner-occupiers and 'cashed-up' investors, who will now determine the market price of houses

Westpac economists say the Govt's housing taxation changes will 'dramatically tilt' financial conditions in favour of owner-occupiers and 'cashed-up' investors, who will now determine the market price of houses

Westpac economists now see house prices 10% lower in the long term after the housing changes announced by the Government last week.

And in Westpac's Weekly Economic Commentary, Westpac senior economist Satish Ranchhod says "there could be a much sharper fall while the housing market realigns itself".

He says the Government's policy announcements are likely to "reshape" the residential property market over the coming years.

"We have frequently highlighted that financial considerations (such as rental yields, mortgage rates and tax) have played a larger role in determining what prospective purchasers are willing to pay for housing than physical factors such as housing supply," he says.

Up until now, the tax treatment of mortgage interest costs has given leveraged property investors "somewhat of an edge" over owner-occupiers.

This has meant that investor demand has been a major driver of the prevailing level of house prices. In the current low interest rate environment, investors search for yield and the potential returns on rental properties (both rental yields and capital gains) has underpinned rapid increases in house prices, Ranchhod says. 

"For leveraged investors, removing the deductibility of interest costs will dramatically lower the yield on rental properties and will significantly reduce the prices that investors are willing to pay for houses. That will be reinforced by the extension to the Bright-line test.

"These changes to the tax system will dramatically tilt financial conditions in favour of owner-occupiers (and cashed up investors), who will now be the ones who determine the market price of houses.

"A rough calculation indicates that occupiers’ average willingness to pay is about 10% below current prices, which suggests that house prices could eventually fall by that much in the long term. While that would be a large decline, it would still only bring prices back to where they were four months ago.

"However, there could be a much sharper fall while the housing market realigns itself. Without interest deductibility, property investors will need to see a higher rate of return to justify their investments. That could mean higher rents, although that will be constrained by tenants’ ability to pay. The more likely way is that highly-leveraged investors will sell out – at a reduced price – to owner-occupiers or less-leveraged investors. We saw similar outcomes in the UK, which began to phase out interest deductibility from 2017."

Ranchhod says for the Reserve Bank, these policy changes will make hitting its inflation target more difficult.

"The housing market plays a key role in shaping economic conditions in New Zealand more generally, with rising house prices typically associated with increases in household confidence and spending. Economic activity is already below trend as a result of the Covid outbreak. And now with a material softening in the housing market looking likely, the recovery in demand is likely to be even more gradual.

"This reinforces our expectations that  [Official Cash Rate] hikes will remain off the cards for the foreseeable future. Indeed, more monetary easing might be needed to support the economy through the transition phase, and a negative OCR is still a possibility (on this front, prior to the announcement of the changes in housing market policy, the RBNZ’s February policy statement highlighted that a negative OCR is a viable policy option if needed). That’s important as continued low interest rates will help to limit the downside for house prices, at least in the near term."

Ranchhod says weaker house prices will also have a dampening impact on home building activity.

"However, this drag may be modest. New builds remain exempt from the extension to the Bright-line test and are likely to have some tax advantages over purchasing an existing property (for instance, the Government may consider allowing interest costs on new builds to be tax deductible for a limited period, though this is yet to be confirmed).

"Furthermore, the weaker outlook for house prices also signals downward pressure on land prices, which are a key hurdle for many housing developments. We still expect high levels of home building over the coming years, with a large number of projects already in the pipeline and many regions still struggling with shortages of affordable homes."

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I would be more than happy if there's a sudden fire sale.

Active listings both nationally and in Auckland ironically are falling.

Yes, although you might expect falling at this time of year. The seasonality is significant.

At 4 months ago prices, no thanks.

That’s 10% deposit wiped for FHB who’s purchased recently. Ouch.

This will impact the wrong group of people, investors look at the long term picture, if they can cope with the extra tax, the next up turn will make up for the short term loss.
They are not building enough houses, Jacinda knows very well about what is going to happen but she will be retired by then not her business. She is just buying time.

I advice people to sell and put cash in term deposit for 1%!

"I advice (sic) people to sell and put cash in term deposit for 1%!"
At best shallow thinking.

BTC and sit back and have a Pina Colardarr

“At best shallow thinking”

My point exactly....

Reel it in Kev.


LOL this is incorrect on so many levels. It's actually the FHB who look at the long term picture (I'm pretty sure they didn't buy that home to sell it next year) and short term speculators who will be worse off. Investors come in many shapes and forms, but I've got a feeling that during a frenzy, the short-term speculators outnumber the long-term investors.
Funny how spruikers here keep changing the narrative from "FHB's should ignore short-term fluctuations, it's the long-term that matters" to "this will ruin FHBs who just bought their home", then back again, depending on the latest news.

You are right, FHB do look to long term. Just doesn't make any sense not to allow a small correction, as it will reset prices for many years of FHB to come. Unfortunate for last few months FHB but eventually will level out. Better for so many in future and the whole of the economy. Why is this not obvious? Why are so many people so hopelessly 'bad at maff' and lacking in critical, logical thinking. I worry

Sadly I think you are right.
They are writing their Spin for the Budget in May. It will not be pretty. But they will present it as an oil painting.

Yes the budget looms. Taking the tenor of Mr Totters article here today this government he thinks have not only jumped out of their own shadow but also that of the bureaucracy. Along the road to that, whether justifiably or not, they have wilfully broken promises that they never need have made, which some interpret as outright lying. So be it but have they then got that bit between their teeth and will now assume they can proceed with other contradictions of their manifesto and associated pronouncements. It has always been a fear of the electorate that Labour governments’ great panacea have always been an increase in taxation. Having now broken the ice on this , how much more do they believe they can get away with!?

Legalise weed! Also labour swept to power originally on the promise of addressing the housing crises. So one could say they are now getting back on the straight and narrow.

Also most people I know (most my immediate network are asset rich) support these measures. I think most investors understand that the current situation is a mess that needs unravelling.

Seriously what difference does it make to FHBs who purchased recently, they bought a house they still have a house, their mortgage didn't go up. Apart from the warm fuzzy feeling of looking at their net worth. Even if you sell and buy a new home the one you will be buying will be 10% cheaper. First home buyers are in it for the long haul, probably more so than investors. That effects investors more they are leveraged to the hilt to maximize profit, they can no longer buy more property. Sure they may be able to weather the storm if it is temporary, but not if it is a sustained drop.

To put it simply, if you are investing in (gambling on) house prices going up then you need house prices to go up, if you are buying a house to live in the value of the house you live in is irrelevant, you can still live in it just as well if its worth $1, or $10,000,000. You just feel richer if it is worth $10,000,000, and sad that you overpaid for it. Also if it burns down tomorrow you only need to pay $1 to replace it.

You see this kind of comment a lot on share forums - "I wish the price would fall so I could buy more for 20% less!", "if only I'd bought more before the price went up!".

One the share price is in free-fall they have largely disappeared and most are too scared to buy, not knowing how much further they will go. This could be particularly true in this case if the sentiment continues to shift to stable/falling house prices being good for the country - looks like the Government is well on this road and they set the direction of travel.

If you think we're scared of falling prices, you are sorely wrong- we are unlike your herd.

They all say that, too.

Catching falling knives. Buy in a rising market, not a falling one.

Never sell at the top and never buy at the bottom, because you've probably missed it

Who is "we"?

Once you purchased, your are an investor no longer FHB.

mfd... good isn't it? We are finally on the right road and hopefully it is a long one.

Swooping in on the carnage to enlarge your portfolio?
I want prices to drop, but not to enable more parasitic behaviour..


Deja vu? I believe I've seen this headline before...


At least we can now eliminate the possibility of a 10% fall.

Being an 'Economist': the business of making stupid predictions on a daily basis.


"We have frequently highlighted that financial considerations (such as rental yields, mortgage rates and tax) have played a larger role in determining what prospective purchasers are willing to pay for housing..."


The largest role played in this disaster, by far, is ...... Westpac and it's commercial and regulatory brethren issuing virtually unconstrained debt in the misplaced belief that prices can go up forever.

Repeat after me " What can I pay = What have I got + What can I borrow?"

Astounds me that none of the media see it this way, and yet no one seems to disagree.

you are very right

I wish the journalists would ask the banks to explain how they see this working out.Why and how they aren't going to go bust?....

Will they have to bite the bullet and begin to engineer a soft landing too....what changes will they make and when?

My guess they start to restrict the access to credit and begin to sort the wheat from the chaff from their customers...with a particular focus on the borrowers.Phased coincidentally over four years but we won't be told that.

I can see a really ugly situation where parents who have helped their children into homes will be required to provide more equity. People will do this because houses might be falling and in the false belief that the market will return they think it is better to give the banks $100k now, rather than face a $250k loss by realising it by sale.

All this will happen privately and just like the GFC when all the finance companies went broke(and for all of us a case of an aunt or cousin too) we won't see mass protests on the street or violent incidents.

As to "Why and how they aren't going to go bust?", that is an easy one to answer, it is because tax payers will bail them out, the government guarantees deposits. The people bear the risk while the bank makes the profit, its a sweet deal for them why would they stop.

No bail outs!! The tragedy is we can see this coming from a mile off. Banks have one main job: lend for specuvesting in residential housing. They keep lending at the same rate 1/ Because they can't lose market share 2/ Because the whole thing falls over if the supply of money dries up.

All of the above and encouraged by all political parties via the Reserve Bank and Treasury


That means it may go back to January end price level.

Fall of price / backward by a month, is it a big deal ???


Exactly. The 20% froth acquired by the market over the last 12 months needs to disappear just as quickly before more people are locked in at stupid prices.

If your wish were to come true think of the carnage accross the board, and it would not be born my those who caused it.


How much of the blood in the water will belong to investors rather than FHB's? Who is at more risk if prices fall sharply?

The fact that FHB's equity in their house drops by 10% just means they own less of the house, but probably wouldn't affect their ability to pay their mortgage, nor the fact that the bank has their cold hard cash in its pockets.

Investors who leveraged the increase in their other properties to purchase more with interest only mortgages may have their banks tapping them on the shoulder asking for cash because their existing property values no-longer cover the 30% deposits they required.

In either case, they'll be some that'll be stung with low equity fees if their LVR increases above 80%.

Agreed, maybe not "a big deal" but just as important is the uncertainty.
For those selling and buying on the same market they can just get on with life.
Potential FHB will be in a dilemma and there will be different opinions.
To me; a home isn't primarily a financial investment but rather that a home with financial and social security as well as intrinsic value; a home is long term and short term market fluctuations are irrelevant compared to the ability to service the mortgage; and a 10% fall isn't far off the buying poorly / buying well range so that is just as important. So, yes, 10% isn't a big deal.
There is uncertainty and even Westpac, the other bank economists and RBNZ didn't pick the market future correctly last year. Does a FHB wait and try to time the market - could be of benefit if they are currently happy in their rental however, those that did try to time the market this last year (with what I consider was a far bigger threat to the market) proved to regret it.
Me? Due to the uncertainty, I would just get on with life, be prudent, not pay over the top, make sure that house is sound and that I can service the mortgage even if rates were to rise a bit.


After reading the article in this morning's Herald about how many multiple rental properties and farms that are held in trust by our politicians, one can understand why property prices have been allowed to get out of control. These MPs will be doing all they can to keep prices going up.

Just like 'Right to information' we should now have a law where politicians or any person in authority when deciding for rest of NZ, should declare 'Conflict of interest, if any'.


I think the headline for Barfoot & Thompson's weekly auction results this week will be along the lines of:

"B&T's clearance rates dives to below 50% for the first time in…(a long time) following the extension of the CGT & loss of interest deductibility for investors"

Agreed - currently lots of fear and uncertainty out there so there will be lots of hesitancy.
The big question is where will be house prices be this spring/summer?

There will be a period of stubbornness, before some vendors are forced to meet the market.

The good thing is, this drives volumes down, so those few forced sales can have an outsized impact on sentiment. That's assuming it does go down at all. With FHB demand inflamed through additional government funding.. who knows.

With FHB demand inflamed through additional government funding.. who knows.

The additional government funding in the policy package for FHBs was actually very modest, and only targets the bottom 12.5% of the market anyway. It acts as a price floor, pushing those eligible houses closer up to the median of the bottom quartile. But will have little, and reducing, influence at prices above that.

Thing is if you can afford to hold on to the property, most will try their best to, because it’s usually hard to buy it back.
Pay more tax bear the temporary loss or sell up and put money in the bank for a great return.......not.

Good for first home buyer.They can see their value of their house is falling.For example,they buy a house for 800k, the value should be fall like 700 ,600, 500 ,400 300.......

Yep good for FHB, what about the FHB's who bought in the last year, how is your scenario looking for them?


They should get some sort of a break. Not investors though.. They didn't need another house so stuff em

dago, why not confiscate the houses owned by investors and gift them to the FHBs? I'm sure you'd like that


Investors are a little too quick to jump straight from a slight increase in taxation to bewailing the onset of outright communism. Investors have been subsidised and protected for years. A slight and overdue balancing of the tax-free ride may only recapture a smidgen of that.

BUT to address the question of who should be helped / protected if worst comes to worst, FHBs seem more the innocent victims of policies perpetuated and campaigned for by investors, rather than complicit in the blowing of the bubble from an influence and policy point of view. How many of our politicians, reserve bankers, high-level analysts, industry representatives have been investors vs. FHBs.


Yup, when government and central bank policies all support their investment its declared to be the free market working as intended, and they are just savvy investors. If governments put in place policies that harm their investment suddenly its a communist revolution and theft. The hypocrisy is quite something


Absolutely. It's funny how tax fairness which has been largely ignored for the last 30 years is suddenly a major issue in the last week.

Also landlords threaten to increase the rent to cover the cost, yet not a single landlord reduced the rent when interest rates decreased. I have heard some big investors moaning saying the change is almost criminal. What a sad world they live in!

Landlords will try to increase rent, it is a similar thing to how petrol prices go up really quickly but don't seem go down when oil prices drop. As a landlord I did not reduce rent when interest rates dropped, and will not increase it when either, no mortgage why would I care. However I also haven't increased rent as rates, insurance have all gone up significantly. Of course if they reduced rent they would have to wait a year to increase it again.

Landlords are people too, we should care about them as well, and we should care about tenants, and I do I charge well below market rent, and it is why I haven't increased my rent because of other expenses, I think I am better placed to cope with it than my tenants.

Can you not see how having a set of rules that you have invested your money under changed could suddenly could seem unfair, rules that apply to every other business as well. I tend to agree with investment you take on a certain level of risk, and you get the reward but you just have to cope with the loss. But it doesn't mean we should not also empathize with their plight as well.

If I told you could make millions legally, would you not take the opportunity to do so, and once you did the rules changed would you not be annoyed and think it was unfair.

This type of attitude that I see in society trying to blame one group or another, is frankly worrying. Most people are just trying to get along in life, grouping them as black, white, Maori, Asian, boomers, millennials, women, men, investors, renters, and then vilifying them is just bigotry. I think this will only end in a society that is worse for all of us.

If I told you could make millions legally,

People pretending they didn't buy for capital gains in order to evade applicable taxes isn't really the definition of making millions legally.

Come on Yvil...thought you were better than that..hang on no thats about right for you


They gamble, they lose, their problem. Why should tax from renters with restraint bale out someone hoping to win in a ponzi?


Because we live in a society where people who make good choices have to bail out people who make bad choices. The slogan is "Be kind" not "Be smart"


Privatise the profits, socialise the losses. Usually.

Really - did not see that occurring in the GFC 2008?

Yes, always comes back to that "poor choice" people made by being born in the last 25 years. Haha what a bunch of Idiots.

Lucky you were born in the right place Miguel and not in a South America or in Africa or some other poor parts of Asia, you have the freedom to take charge of your own life.

Fair comment. A situation for NZ is that no great sustained fall in housing has ever occurred. We have old friends in the UK who bought a standalone two story south of London in the 1970s. They still own it and are now mortgage free. But at least twice early on, they found themselves with a mortgage greater than the value of their property. Seems to be with ebbs and flows etc, you have to be astute enough to pick the right time to buy or sell or for the ordinary folk just stick it out.

Nobody can pick the right time though. Better to buy property in an area that hasn't boomed as much relative to areas that have

Good location properties rise first and hard, fall later and slow. I think you should buy properties in the area that has shown the sharpest rise.

Thing is, you got to live somewhere, so why not put all that money you'd be paying into your own home?

Because of the interest rate risk.


There’s always going to be collateral damage regardless of what policy is implemented. FHBs who brought in the last year are a tiny minority compared to the vast number of FHBs that are locked out of the market currently. Does that make it fair to those FHBs, no of course not but if we were too scared of upsetting a minority (as most governments have been with landlords who are a minority) in the hope of improving the situation for the majority we would never make any progress.

Wishing you all the best also. Nice to see that you have a bit of empathy.

FHB who bough in last year will feel bad for notional loss as are not selling now and are in for long term.

All announcements will loose the momentum unless they allow restriction on Interest Only Loan.

THAT should have been the first step but still never too late but if they act now.

They never explain what they mean. 20 houses could go from $600,000 to $540,000, but would be evened out by one house that goes from $3m to $4.2m.

They have no idea what's going to happen.

I agree. After everything that has happened, credible commentators should simply say “I don’t know”.

Actually credible commentators should be looking at what happened in the UK and trying to map it onto our market. That seems to be what Westpac has tried to do.

This ( otherwise sensible .. ) approach is constrained by the fact that UK measures are far less drastic ( deduction at 20% tax rate will remain ) than those proposed here. What Robbo is trying to do is basically unprecedented.

Don’t forget CGT of 28% plus stamp duty. And all second homes incur CGT and most homes attract stamp duty. Plus tenancy laws are tougher than here.

Stamp duty is higher if you have more than one property too, by several percent of the purchase price. Essentially a tax on buying a second (or third etc...) home. A nice idea.

That’s fine for me if this is correct which it’s probably not. Means my mortgage rate stays low for a long time and my 20% capital increase comes down 10%.

The worst thing to do would be keep renting for the next few years.

Especially when it's been revealed today that Labour are seeking to begin a propaganda campaign against rising rents. Problem is that there is nothing to support their propaganda, rents have risen faster under Labour than the previous government.

Agree with your sentiment.
Rent freeze then . . . we really would be back to the Muldoon era.
The bottom line is that there are so many things out of kilter and this is not of the makings of actions in the last couple of years.
Homeownership for 25 to 35 year-olds has fallen from 65% to 35% (and now probably lower) over the past 30 years. There are fundamental economic factors that have caused that and they clearly predate Orr's time in RBNZ.
We need to take a good hard look at our economy and look to a reset similar to that under Labour in 1984-1990. This was mooted by Robertson at the time of Covid but it has been tinkering ever since.

What would you propose?

DTI of 6.5 problems solved

Answer Sam Hill,s question please

So you want high inflation with 15-20% mortgage rates P8? Sounds good when people are taking out $800,000 loans to buy the average house in Auckland.

When you want a serious discussion without making wild assertions let me know then we can.
Pathetic, but consistent with one calling a bubble burst for six years.
Cheers :)

The propaganda machine rolls on. The relentless battle for hearts and minds. When these 'experts' talk, it calms the nerves of the hoi polloi, if it's framed appropriately.

Now get out there and spend.


Westpac, can you make up your mind? Last year you said there was going to be a severe correction.....then a few months later the house prices went the other way and you guys then changed your mind and said housing prices will grow by XX %. Now you are telling us it will drop again.

How about sticking to a direction and not jumping on the bandwagon?

They need to add more caveats to their forecasts. As we have seen, things can change very quickly due to a range of factors.

And Kiwibank forecasting a 25% rise in house prices this year !!!!! Jeez, these guys wouldn't have a clue...


Of course the new tax rules tilt the balance away from investors and towards FHB's. Many commenters believe, understandably, that as a result the number of FHB's is going to significantly increase. I'm really not sure about that, I'll be very interested to see in 1 year's time if the number of FHB's has actually increased by any notable margin. It will certainly increase as a percentage of total sales because there will less investors buying (simple maths) but as an absolute number, will there be more FHBs in Fy 22 over FY 21 ? Time will tell

yes agree, one thing that might change is that a FHB may have to only go to 3 auctions to be a winner instead of 10

The 10% difference between what a leveraged investor and a FHB can spend means that the FHB has always been either given that scraps or had to get hold of more money. So I do like the evening of the playing field. I also think that interest only loans should never exceed 6 months.

Blah blah blah blah...

In an effort to stem the tide of investors into their property market and rising prices the Irish government ( after a little consultation ) removed deductibility of interest on borrowings for investment in residential property followed by a flat rate 9 percent stamp duty on investor properties. House prices did what ?

10% decrease in house prices is insufficient.
Long term social and economic sustainability, and the need to re-balance the economy, would require a gradual decrease, up to 30% total, off current price levels.
While the Government's first moves are some timid steps in the right direction, much more needs to be done, in the areas of taxation, housing supply and especially in the monetary policy field, where the current ridiculously loose monetary conditions must be progressively reversed.

OCR in a few weeks. Housing now in RBNZ remit.
Will be interesting on ORR's comments as the ball is in his court as Gov made some changes.

RBNZ to drop interest rates to keep house prices stable?

Don't think they'll shift them either way. But I expect the twelve month mortgage interest rates will start to come down. Heartland and HSBC are already offering 1.99% Banks will seek to subtly protect their client base. Who knows, these folk may even want to but more property. And banks want to grow their lending portfolios.

Fail to meet inflation target due to people pull back on spending, low confidence therefore keep interest rate low. This is all part of the plan.

Can we get a prediction from them how much longer Westpac will exist in New Zealand?


Just been out with a friend to view a rental in Kohimarima. Thanks landlords for allowing yet another New Zealand property to fall into neglect. Seriously, it is an absolute disgrace. Worst house on the street almost guaranteed to be a rental. Time for a big change and a serious bum kicking to people who buy these places and basically leave them to decay. Oh and we aren’t talking $500/:$600 a week. This place was $1100 per week! It is shameful!


Housing in NZ is a debacle.

Some of the leakers in Kohimarama need to be condemned & bowled over ASAP. It will cost our country a lot more long term as the health system pays for their respiratory illnesses.

Yep, the place we went to looked like plaster central.

Westpac really made enough forecasts (more than me in fact!)
10% drop "long term" - how brave a guess is that?
What is"long term" supposed to mean?
About as defined as "affordable" in respect to one earner when all in Auckland virtually need 2 earners with over $150k in total to get a mortgage.
Prices unlikely to go down til interest rates go up.
Prices not really determined by supply and demand but by what banks will lend, to whom.
Demand will not fall and supply will not move much either.
No one refers, I notice, to what sales will do overall.
Sales will flatten then fall, because of huge rise in price over last 12m.
Plus, all sales for a year were mostly condensed into 6 months, so reversion to mean needed.

10% drop "long term" equals how long it takes for leveraged investors to do the calcs and call agent. Also has anyone noticed that property investors are kind of 'plain' - maybe their rent seeking ways are compensatory for rejection or school yard bullying

Being an Economist is like being a modern-day soothsayer or oracle. You read the entrails, sniff the air for danger, and come up with some daft prediction on what will happen next. (Why is the scale of any fall fall always predicted to be '10%' btw)? Yet these people never predicted the GFC or any other crash for that matter, and they sure as heck won't be predicting the next one. Why do the media give these corporate hacks and drongo's the time of day?!

Doesn't your typical FHD do the same?

As long as I can remember, this site has been inundated with property bears everyday for the last decade.

Property bears exist for a reason, price won’t go up without property bears, you need a positive and a negative for things to work.

Sorry about this Tom.
Its a no-brainer, I'm definitely sticking with bank economists if you think you are the alternative.

As Galbraith said - there are two types of economic forecasters, those who don't know and those who don't know they don't know.

If you are a FHB reading headlines like this it plays in to your hopes of a correction. Why would you then buy if you're expecting better deals down the track? The interest tax break changes are tapering in gently enough that landlords aren't being forced to sell. In fact with the bright line test you could argue that supply may even drop in the short to medium term. Tumbleweeds at auctions for a few months. It's be Spring before we see what the new landscape is really like I think.

Stupid question i know,but how does this Gov think that you can pay higher rent,save for a house and trade your car in for an EV on 2 wages.
Mission Impossible.

If you track the sales history of any adequately maintained house over say the last 50 years, there is only one direction the sale price goes. And there is nothing new in all the discussion on this topic. I bought a house in 1981 for $45,000.00 - sold it two years later for $70,000.00 - 55.55% profit

The new thing is the government is finally willing to do unpopular things to put a stop to the craziness. Lets hope they keep at it - we could end up living in a country with cheaper and stable house prices, where our wages go further and we invest our money in productive enterprises that make the world a better place.

Fingers crossed, eh.

Didn't wages inflate even faster than houses at that point, so that technically the the price to income declined?

And its only got worse Peter. Took you 2 years to make $25K now you can make that in a month. Thats the real problem here now, even small percentage gains now result in huge dollar increases on million dollar houses. The average wage in NZ is now wiped out in a matter of months by the gains.

And by pretending you didn't buy for capital gains you can successfully evade due taxes!

That is because central bank policy around the world has been to allow people to take on higher and higher levels of debt. The entire banking system nearly collapsed after the GFC and their solution was to issue more debt. When you look at a graph of the amount of debt in the world the GFC is a tiny little blip. Now that debt has increased exponentially. Central bankers are printing like there is no tomorrow. It is unsustainable. Many are predicting a double dip recession. Businesses will go bust, zombie companies that have managed to stay afloat by borrowing more will go bust. People will need their debts restructuring or declare bankruptcy. The debt in the system is like an avalanche building up. Just a little bit more snow could be all it takes to trigger the avalanche. Zoom out and Look at the bigger picture. Debt across the world is soaring. Government covid survival payments to businesses and people are coming to an end. Covid is mutating and resurging around the world. Panama canal is blocked, oil refineries and mysteriously catching fire. All these things are government actions to try and prevent a cataclysmic disaster. But all they are doing is adding more snow. But if you want to ignore all these signals and continue to believe that house prices will continue to go up because they have done for the last 50 years because somehow NZ is immune to all these external factors then good luck.

petermay..with financial stuff like housing 50 years is almost an irrelevant, meaningless time frame.

So I'm guessing Westpac doesn't believe we'll return to massive population growth via immigration?

When’s Westpac’s government contract due for review?

Westpac economists now see house prices 10% lower in the long term - If you agree with that, why would anyone buy a rental property now if there is no expectation of a Capital Gain? With the new tax rules it will be very difficult to be cash flow positive. Therefore overall returns for rental properties in next 5 years are likely to be negative. The risk of spending say $800k with a likely reward of less than $0 is simply not worth it.

the real risk is the bank has a bit of paper saying you owe them $500,000 and this is after the house has been sold in 2024.....

we have a lot of people in New Zealand who contribute a large chunk out of their earnings in child support....they have it very hard in some situations but struggle on....

Similarly we might end up with a lot of people who pay off their debt for thirty years....and take a real cut in living standards....

that's the bloody risk I see!

But investors buy for yield ..Tui

The whole thing looks like a game of Jenga. If the Jenga stack falls over, then the debtor (not the tenant) and possibly the bank, have a really really big problem. And thus so do the rest of us say the RISK junkies with their "im so smart" faces. I'm personally picking that bitcoin and its mates would really explode at that point as the RISK averse abandon the game of FIAT Jenga.

Specuvestors have been tricked into thinking that tax offset and interest only would last forever and is the formula for greatness. In the last ten years it probably was. On the other-hand it really looks like a monumental pile of debt, with insufficient income, being propped up by record low interest rates, lazy bank interest only lending and the ability offset some of the debt against your personal tax. Think of Jenga with no obvious moves left....

The bankers get their bonus though.

We yes its a giant ponzi, debt expansion needs to keep growing to keep businesses growing and that is done through housing.

Houses keep appreciating by 10+ % p.a. while wages go up 2%. So clearly unsustainable and sooner or later the poo has to hit the rotating blade of the fan.

The easiest way to fix the whole thing is DTI restrictions for both owner occupiers and investors, that solves your issues on an ongoing basis but puts the brakes on debt expansion and then businesses need to be more innovative and work for their growth.

DTI all the way 6 - 6.5 should be the ideal but you could start at 7 and drop it by .1 per year till the ideal is found

I've lived in many countries and major cities that went through similar situations where the Government tries to "suppress" or manipulate the free-market of house prices.

I can tell you that every one of those markets failed and the house prices are still at record levels.

But one consistent theme is that each of those cities/countries have failed in offering enough supply of houses (i.e. they've done everything but build enough supply).

May make some progress if they stick to reduce immigration levels.
I would hate to say what the prices would be if there was no COVID and they continued to rubber stamp applicates in very large numbers.
will be interesting on numbers if or when the borders open again.

You lost me at "free-market of house prices" - care top name one of these fabled cities?

Supply supply supply, what a load or horse sh*t

Look at China there are millions of empty homes, whole cities of them, they are called ghost cities, check em out on you tube

affordability is the reason for falling ownership rates.

He has done very well for himself, good luck to him.

Will David or Jenee in post cabinet conference raise the issue of interest only loan, why the delay when know that is the single source used by speculators to multiple their purchasing power over FHB and may be genuine investors :

Best tool to target speculator - Nearest to being silver bulleet.

Can only see the headline as I refuse to sign up to The Herald.

Good on you. I succumbed so I can read the 5 or 10% of their articles that are any good...

RBNZ would immediately be ready to deploy monetary tools to stop any back-sliding in property.

Not this time because
A. effects of covid are known quantity, economy recovered better than expected
B. we've already had 1 year worth of boom, can't risk another

Ya dig

We've had 30 years of boom, not 1

Yes and this has to be the last boom or politicians themselves won't be able to afford to buy a property

Must add.. multiple properties there, specially if it's the Real Estate/blue party.

Must add.. multiple properties there, specially if it's the Real Estate/blue party.

Must add.. multiple properties there, specially if it's the Real Estate/blue party.

Must add.. multiple posts ?

No one seems interested in what I have to say on this, but I will say it again because it IS significant.
Changes to the Auckland Unitary Plan notified later this year to give effect to the National Policy Statement- Urban Development will give property prices a shot in the arm.
Tens of thousands of properties being rezoned from 2-3 storey development potential to 6 storey potential = uplift in land values.
Btw this has to be done in the other larger cities too.
If you are interested read about the national policy statement on the Ministry for the Environment website.
This is massively sneaking under the radar.......

Can you please provide link to exact policy

And go to policy 3 on page 11 in particular, and think about what it means in terms of the huge areas of land to be rezoned to enable 6 storey (minimum) development, in Auckland, Hamilton, Tauranga, Wellington and Christchurch......there I have given you all what you need, if you are interested. Don't scream in 5-6 months when the plan changes have been notified.
I have bookmarked this post for reference later this year.

Consequences, of ever increasing mentality,.. addiction to $ growth, socio-economic decisions, not much different to the lame control of alcohol industry,.. nationwide now the ED dept. already screaming/being abandoned, no one interested to work there. In NZ? you're correct, inflated those Tulips land cost, Council want a piece of it/more rates, wages earner require more to pay more, more insurance premium, more of everything, more going up/land below is going up ? it's not a sci-fi, it's in the name of green, sustainability, climate, .. paid by future tax payers (both new migrants & the next generations). It took about 30yrs? for NZ to tweak a bit on their housing control lever into different spin.. ck ck ck.

So, what do you expect? Windfall gains for the owners of such properties currently constrained by height restrictions, then urban multi-story squatter camps springing up on those sites for desperate FHBs and long term investors deterred from buying existing property by recent tax changes?

The more I've thought about the interest deductibility change, the less I like it, I think this article is right, it will help a lot of the very cashed up investors get even richer, it's going to help the rich get richer.
It will help first home buyers too obviously.
But I think with the recent ring fencing changes, and the fact that people couldn't claim back losses against their tax after that anyway. This new change could have been a step too far, you're going to be taxing people on a profit they aren't really making, often they will be making a loss, but will taxed as if they are making a profit, it doesn't really make sense, other than to try to get a section of people out of the market in whatever way you can, fair or not.

Off course the more you have the skin in 'the game' the more you don't like it when the goal post changes slightly on different direction.
So far the past 30yrs, the goal post changes is one sided, even in 2020 we all witnessing the stellar injection of policy.. for the rich to get richer, even almost bankrupt? being floated/bail out, deferral, subsidy upon subsidy.. even the profit? is 'indirectly being subsidised'. Wow..
If not profitable? you won't see the amazing growth of 'investors the past 20-30yrs' - Give about 10-20millions to ComCom, NZ audit & IRD for start, to chase the cream from what you so called richer.. you'll see how all scramble to the ground, hide the wealth.. and claimed to be poor. BTW, check out the past 12mths stat alone who is the most active buyers (Expat bought site unseen, how many? FHB, how many? Investor, how many?) - next year min wages increases again JA said, to compensate for what? - apparently, every growth in numbers, requires more numbers of growth in other areas as a result. ck ck ck

I totally agree that investors have had it way too sweet, going back 15 years ago, when you could claim depreciation, and claim back losses against income, if you had the resources to you were almost mad to not have at least one investment property.
But now with the depreciation gone and ring fencing of losses also rightly gone I'm not sure if this this is needed too, the ring fencing of losses hasn't even had a chance to work yet, I think a lot of people don't even realize it is in place, it was only put in in 2019, and people have often only just completed all their tax returns for 2019 a few months ago, ring fencing hasn't even been given a chance yet to help make a change.
From a practical cashflow perspective, people might get $25K a year in rent, but have interest costs of say 20K, and might have a few other expenses like insurance etc, but after that they will be paying tax on a profit or around roughly $24K, but they definitely aren't making a profit of $24K, the real profit is more like about 4K, it seems a bit artificial to say they are making a profit of the size they aren't actually making.
Kind of seems like hitting investors on the cashflow side because you're not able to get them on the capital gain side, where they should have done it.

Economists have been so wrong when it comes to predicting house prices. This prediction is the same as any random person selected on the street. I personally think they are full of shi*t, and I have a degree in economics.

They could be, but due to these changes causing what will be a massive tax bill at the end of the year, for most property investors, on a profit they aren't really making, one of two things is going to happen, either they will sell, or they will need to find a way to recoup the thousands in tax they now face having to pay at the end of the year, and that will be put the rents up as much as they can.