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ANZ economists say after the recent housing policy changes by the Government there's a greater chance that interest rate increases could cause investors to sell up; RBNZ may wait too long to raise rates

ANZ economists say after the recent housing policy changes by the Government there's a greater chance that interest rate increases could cause investors to sell up; RBNZ may wait too long to raise rates

There's now a greater chance that interest rate increases could cause investors to sell up, meaning a "faster braking impact" on the housing market, ANZ economists say.

And they also say that they think it is possible that the Reserve Bank will wait too long before increasing interest rates.

Commenting on the impact of the Government's recently announced housing policy changes in the latest ANZ Property Focus, ANZ chief economist Sharon Zollner, senior economist Miles Workman and senior strategist David Croy say there are "a lot of highly indebted households out there" who would be very vulnerable if interest rates were to increase or incomes were to deteriorate.

"And in terms of investors, it’s worth noting that interest rate increases no longer bring a larger tax offset. There’s now a greater chance that interest rate increases could cause investors to sell up, meaning a faster braking impact on the housing market than previously. We’re anticipating this policy change to have a relatively muted impact in the near term, but it makes mortgage rate increases even scarier for the housing market."

The economists say the "now-increased risk to the broader economy" should not be understated.

"We aren’t forecasting house prices to fall, but from these lofty heights we certainly would not rule it out."

They say it is important for policy makers to attempt to engineer a soft landing for the housing market.

"If housing tanks, it’ll likely take confidence with it, and that could spark a negative feedback loop, resulting in economic momentum going the wrong way. Unfortunately for policy makers, there’s no getting away from the interconnectedness of housing from the broader economy. And a soft landing from a vertical take-off can be difficult to engineer, as Elon Musk recently found."

'The state of the housing market has a big impact'

The economists say slowing housing-induced momentum shouldn’t be too concerning for the broader economic outlook "so long as the pipeline of planned activity doesn’t turn south" and confidence doesn’t materially deteriorate. A pivot towards a trans-Tasman bubble (and later, generally open borders) will hopefully see the key driver of underlying momentum pivot from housing to international tourism and services (where there is certainly some spare capacity). Rising export prices are also providing a boost.

"But the economy is still pretty vulnerable this year, and the state of the housing market does have a big impact.

"That feeds into our expectation that the RBNZ will be very cautious in raising interest rates, and possibly wait too long.

"The lesson from the 1990s was that tightening policy too late in the face of rising inflation pressures meant interest rates (and the exchange rate) had to go higher for longer, as policy really struggled to rein things in.

"It’s possible that happens again, but we’d note that any increases in interest rates are likely to impact things pretty quickly, given both the tax change and household debt levels."

The economists discuss and differentiate between NZ’s "cyclical housing woes" and its "structural ones" – "in other words, the cycle and the trend".

"It’s a popular view that monetary policy settings are to blame for out-of-control house prices, and from a perspective of 'what drove house prices up recently', then yes, that’s undeniably true. That is, after all, how monetary policy is supposed to work.

"But that’s only the cyclical part of the story.

'If we had enough houses, prices would be lower'

"If the decades-long, structural under-supply of housing problem were to be magically resolved, and market participants knew it would remain that way, then lower interest rates would have had less impact on house prices than otherwise.

"Simply put, if we had enough houses for our population’s physical needs, house prices would be lower.

"What NZ really needs now are policies that will address the structural issues, and that will continue to do so through the cycle."

All up, the economists say, the Government is likely to be successful in taking the heat out of the market, but tilting the playing field from investors towards first-home buyers will never be enough to address New Zealand’s homelessness problem, overcrowding, and high cost of living for some of our most vulnerable.

"For that, the Government needs to continue to aggressively pursue positive supply-side policies (such as freeing up land and cutting red tape) to such an extent that it will challenge the narrative that housing is scarce and always will be, and that house prices are a one-way bet (not our view).

"But politically, that’s not easy to do when so many voters have already bet on housing for their retirement."

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Not to fear, I'm sure these investors borrowed prudently - less than 3x their annual income. Plus, even if times do get tough they can always fall back on their emergency fund of 6 months expenses.

Not to mention, with banks stress testing mortgages at 6% there's a lot of wiggle room before anyone actually feels a pinch.

Something tells me we're in for a nice soft landing :)

ho ho ho yes Im sure they prudently borrowed at less than 4.5x income.


Yeah or they could always cut back. How about working a second job, or going back to study? Are they spending too much on avocados?

bottom caption line “the RBNZ may wait too long to raise interest rates,” think may should read will.


Property investors can just increase rent to offset any cost increase imaginable though right?

"Interest rates are going up....harrumph....must be due to the gummint so I'll claw it back from my renters".


Just like they decreased rents when interest rates dropped...

Ahem...that was the new ranger rover on tic...

Actually there's not much to be scared of, a drop would barely be noticeable since the sales volumes during the recent prices spike was really low. A few over-leveraged borrowers may be hit by getting into negative equity but we should be thinking about the common good of the whole country. ANZ's message looks more like a warning for the government to not to introduce further measures, which seems inevitable at this point.

what's the "common good of the country'?

the next generation not being able to afford to buy a house and all the social problems that will bring

How many will leave for Australia at the first opportunity?

I think I meant just the opposite as you understood gnx, falling house prices are inevitable and necessary for both a healthy economy and the individual households.

Recent polls indicate what investors are calling 'asap rent increases' and they will be big.

If they big increase isn't paid by tenant, then they sell.

Either way, investor has de-risked.

Loser here is tenant who gets a big jump in rent right to up to market rent, a splash of paint and heatpump, perhaps now upper quartile.

Or. They sell and tenant is homeless and competes for other rentals which are all in similar positions, all upping rent , especially if in between tenants.

Fear of rent freeze and likelihood it will now happen is in part fuelling this, as well as anyone whose done the math in a spreadsheet.


Are you able to point us to the "recent polls"?
I strongly suspect I will continue to pay my rent (despite having the ability to buy) and my landlord will be happy with that and leave the rent as it is.

follow Tony Alexander for survey results and other insights closer to the coal face than any bank economist (although 70-odd % of these also said rent rises will result from recent changes too).

The big picture is

1. the US prints out $$ and let them flow into the world
2. global asset price increase, commodity price increase
3. market instability happens across the world
4. the printed $ flow back the US
5. the asset price in other local market crash
6. the US investor jumped to take over

this process happened many times.


So China copied this to, like a lot of other things...?

If Robertson / Orr could have raised the interest rates to put a brake on the housing market that would have been as comfortable as old slippers. A contracting GDP and world wide low interest rates have taken that off the table for a while so they have had to take the blinkers off and look outside habitually used levers. Interest rates are unlikely to move for 12 months and who knows what will be happening then? Borders might be open, or we may be in lockdown 4 with a variant. Long term forecasting is sheer folly under current operating conditions.

"If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem." - J. Paul Getty

Looks like ANZ is feeling the pinch from all that lowered interest rates. Perhaps their Aussie parent must had been harsh wringing them for more income to pay Aussie dividends.

Forget Aussie owned ANZ.

Go Squirrel, 100% NZ owned and operated. 5% deposit is all you need. Be quick.

I don't think it's about dividends. My guess it's about impaired loans and defaults.

It could also be about the $4b that keeps leaving term deposits each month....

Not a run but a bad leak....and the problem with leaks is the tank runs dry

What a doozy this will be

Except banks have an unlimited ability to borrow from the RBNZ so you don't get bank runs these days.

Who’s going to buy bonds off the rbnz and at what price if our term deposits shrink by 50% or more ?.... which they look like they are doing

Why would the RBNZ sell bonds? It just created a special lending pool called the TLF, it doesn't need to sell anything, it's a reserve bank.

You also have bail-ins. Are we surprised no one wants to leave their cash in the bank so the bank can give you 0% returns while taking on dodgy loans and potentially bailing in depositors money to save themselves in any coming crash? Drip Drip.

Except for the fact that the rest of it is funded by Resimac NZ, whose parent group are Australian.

"And they also say that ........that the Reserve Bank will wait too long before increasing interest rates."

If reserve bank will take too long before increasing the rate, more the reason to act fast on Interest only loan as zero or low interest rate mixed with interest only loan is a deadly combination to boost the ponzi.

Also earlier the ponzi is tamed, better for economy as bigger it grows bigger the consequences of trying to control it and thereby allowing it to blackmail both government and RBNZ to take any measure to stop it ( even now both RBNZ and government even if want to control are shit scare of the monster created by them, still now, can act as is late but better late than never).


Agree that by not acting to control housing ponzi, Jacinda Arden and Mr Orr has allowed themselves to be blackmailed

Well said alittle.

Pointless talking about what the Reserve Bank will do as it all comes down to what the Federal Reserve will do, as has been the case since the GFC. Most of the posters, financial journalists, and economists who discuss and discourse here on 'Interest' have the same hive mind on this matter: Mr Orr is powerless, Mr Orr can do nothing, we must follow whatever course the Federal Reserve sets for us - even if we are marching to our doom.
And when in doubt, blame Richard Prebble as he 'helped set up the independent (guffaw) Reserve Bank'.

So ANZ are now starting to feel concerned about investors. Who let investors leverage up? ANZ et al. Sounds to me like ANZ are nervous, really nervous.


ANZ say that a 'soft landing' must be engineered. How lovely.

They lend money on residential housing like drunken sailors, all unable to pull back as they would immediately lose market share...and the PTB have to engineer them a nice 'soft landing'

In the event of another financial crash, the outcome will be horrific for the NZ housing market and the 'all eggs in one basket' banks.

"Captain, the number 3 engine has fallen off, the number 4 engine is on fire, and we can't extend the landing gear. Now how about a nice soft landing".

I read that as unable to pull out.

Bad things happen that way.


This is what blackmail is... Now put pressure on RBNZ and government that if you act on ponzi, will be disaster.

So ANZ are now starting to feel concerned about investors. Who let investors leverage up? ANZ et al. Sounds to me like ANZ are nervous, really nervous.


Shows why more regulation on lending is required because banks cant help themselves to see past their own bonuses.

Let them eat cake.

So ANZ are now starting to feel concerned about investors. Who let investors leverage up? ANZ et al. Sounds to me like ANZ are nervous, really nervous.

Whoops, bit of lag on my Save button today. Please delete my multiple posts. Apologies.

I think you're obliged to change the duplicate to a good joke.


Westpac in NZ is for sale. This is called 'getting out at the top'.

If the supply suddenly met housing demand. Sure prices would ease a bit. But not by very much. The cost of new builds spills over onto the values of existing stock. It's been that way as long as I can remember.

In our system, which is now so out of balance, supply might only for a brief moment in time meet demand as the counter cyclic curves cross. Our system is designed to always limit supply to demand, whatever the demand is.

But as the cycles are now so out of balance we might get an oversupply, and a fall in demand in certain sectors at the same time, like is happening in Aussie

You are correct about the cost of new supply spilling over into the price of existing, but this is because of the supply restrictions. For example, if new builds cost more because of new and extra healthy home inputs, then you would expect the existing homes to be discounted back in price to allow for renovation upgrades needed to bring them up to the new standard, but this can only ever happen if the supply of new housing is allowed to meet demand.

Cost of building is a small part of the total price, the over-inflated part of the equation is land.


Just a question to all .......has anyone done what I have done and just be satisfied with one house (home) in NZ and try at all "costs" to minimize anything paid into the NZ "FIRE" economy (ie finance costs (interest), insurances, mortgages and rents (real estate) etc ? ......and just try to "enjoy the moment" rather than slaving your guts out like a mouse in a wheel, waiting for when everything "lines up" for that so called "Golden Day".

I can only speak for the Auckland market, but I would think you would be mad to buy an investment property now (in Auckland) as totally overvalued, but everyone has a choice.

So my concern is, if this housing market goes "belly up" and the banks get nasty, forcing mortgages to be paid back (remember in NZ the debt, even after the house is sold, can not be wiped, as in other countries) I just hope these big 4 aussie banks don't go "cap in hand" for a bailout ie from the government via the taxpayer (like BNZ)...otherwise instead of "Occupy Wall St" from the late 2000's, it will be NZ's turn at seeing in full view, what a housing downturn can really look like..... having seen it in the USA.


They will.....'too big to fail' and all that. We need a political movement to counter the odious banks and property grifters.


@Tom V .....Kiwis haven't got the guts to stand up against such things .....they would rather listen to their uncle etc around the BBQ who has multiple rental properties in his portfolio, while all hoping to be like him one day, so instead of solving this housing problem, they become part of the problem....

The huge issue is that the financial literacy of the average Kiwi is just abysmal ......... and that's not to say we are uneducated in any way, it's just that the "powers that be" have cleverly avoided financial education, especially in the early stages, as it would not suit their "narrative" for everyone to be a mortgage slave.


"B-b-b-b-b-but Mom and Pop landlords only have 1 rental property, they're not the problem" x 100,000.

Neigh, we have bail-ins now haven't your heard. The central banks have demanded that banks plan on taking deposits instead of demanding bailouts this time. Why do you think everyones putting their low return deposits into real estate. The wealthy don't want to get caught in the bail-in with their cash down.

Yes Crazy Horse I have followed what you have done but to enjoy it you have "Already made it financially" and your not greedy by nature so your happy to sit back and enjoy life instead of trying to make the next million dollars. However that said, for those further down the ladder its turned into a lifetime of being a mouse on a wheel and the vitriol on here is clear to see. I think I would change the wording to everyone had a choice, now not so much.

Fair call Carlos67 ....I wouldn't like to be starting out again with all the "greed" in the market .....the sad and dangerous thing is greed can turn to fear very quickly ...even Hosking is lamenting the potential drain of the best and brightest to aussie example of greed turning to fear.


"Simply put, if we had enough houses for our population’s physical needs, house prices would be lower"

I think there are more empty houses, holiday homes, baches, Airbnb's than homeless families, therefore we do have enough houses for our population. The problem is NOT supply, it's low interest rates. People with money in the bank get no return on their money, therefore it's better for them to put their money into buying a holiday house with a very cheap top up from the bank to get an even more expensive holiday house.

Houses are going up because money is cheap, period.

I think houses have stopped going up and quite a few owners are getting very nervous about their financial affairs now that the tide of tax and regulation is starting to turn agsinst them.

...yes Yvil and the value of the dollar is being inflated away ....while the only way NZ Inc. can keep up with inflation, is to raise salaries/wages, but this won't happen and the classic example are the NZ fruit growers, who would rather lose their crops, than pay a decent hourly rate, to attract workers.

You and your multiple property owning buddies keep thinking you can raise rents "ad infinitum" ......but there comes a time where the taxpayer will just get sick of tenants going for the accommodation supplement or a top up of it, while the Govt. aka taxpayer goes more into debt.

My whole take on this situation is a complete "total free market" where rents are sent by income only - then you can "work it out" for yourselves, what rent you will receive, according to "actual" market conditions. Then when you go to purchase that overpriced, damp, poorly built south facing dump, you may give it a second thought......

Ahmen. But that will require a reset of epic proportions. Int only speuvestment would likely loose the family home (main equity point). What will Hoskings and the like do.....

"My whole take on this situation is a complete "total free market"

Do you really mean a total free market or just in selected areas of the economy? For example would you be happy if state houses were done away with and winter energy payments ceased

Nah, Crazy Horse means "total free market" when it benefits him only

Yvil ...that comment is ONLY your assumption


HW2.... it will take a very long time for the psyche of most Kiwis to get used to a "total free market" when governments throw money at all 'n sundry, to those who think they are entitled to it....while I see no difference between a landlord whose tenants receive the AS and someone living on welfare, when there is no reason they can't get work.


That doesn't make sense; if a house is been used as an empty house or Air BnB etc then that is not available supply. Demand exceeding supply is not about how many houses there are compared to only residential demand, it's compared to total demand, even empty house demand etc. Houses are going up because supply exceeds demand. Interest rates (more specifically affordability) decide how much it goes up.

"Houses are going up because supply exceeds demand"

You sure about that?

Ill leave it to you to figure out what I mean...


Greed drove them up. Fear will eventually gain hold. It pays to be diversified. Residential, commercial and equities. And lots of cash earning nothing in the bank ready to pounce when a particular equity or market has a bad day.

And yet in other jurisdictions with just as cheap money, house prices have not gone up. Period.

The availability and cheapness of money are only acting as an accelerant to increasing house prices when supply is restricted as the availability of the money increases demand, and the land restrictions prevent the supply from increasing to meet that demand. The main restrictions are land supply, followed by consenting times and cost.

When the ANZ says "Simply put, if we had enough houses for our population’s physical needs, house prices would be lower" they should mean the 'enough; means supply EQUALS supply as I defined above, not an under or oversupply but equal.

Our present system does not allow supply to ever equal demand and prices to come down, unless we oversupply, which could happen because our supply and demand curve our now countercyclical.

Look at what is happening across the ditch

When supply is allowed to equal demand in almost developer real-time, ie the supply curve lies almost on top of the demand curve, then supply becomes responsive both to increases and decreases in demand, and prices remain stable, irrespective of the cost of the money.

Completely agree


I find it somewhat entertaining when the banks come out and bemoan the RBNZs governance actions, whats stopping these individual banks from prudential control of their own book without instruction from without?

profits dear Watson, Profits

lol...indeed, though the profit disappears pretty quick when the defaults accumulate.

1.5x to 1.64x factor now applies to mortgage rates for new lending to investment properties (assuming 70k plus income bracket).

So 4% mortgage rates of a couple years ago equivalent to 6% for investors.

6% goes to 9%.

Yes it is scary and unjust and will not just impact investors but possibly destroy the nz economy completely.

Labour have no idea how their reckless idealistic law making on the fly is going to impact the country. Ird and Treasury did. They recommended not to make the tax change.

So not allowing interest deductibility will destroy the economy ? Wow those specuvestors must be running a knife edge, no rainy day fund ? All your wealth on paper ..... better BBQ stories.

These specuvestors will destroy the economy. Parasites that are technically trading insolvent.

nah just a 20% drop in house prices will kill an economy that has at its heart housing as an investment. Developers all stop in their tracks. The loud whining of FHB's is gone.

The FHB's are way too scared to buy now that prices are falling! are you crazy! we hate it when prices rise and we miss out, But falling prices! no way, im not losing my deposit - ill wait until prices start rising again then complain even louder as I miss out on the next up cycle... and repeat.

Meanwhile - rents will go up - landlords will look at commercial or bitcoin or gold to store wealth (whos providing all the rental accommodation then?)

Confidence plummets - 0% OCR but no-ones spending.

GR killed the economy.

So the economy is crashing and residential speculators are piling into commercial, sounds smart and completely not feasible. And when they get out the houses dont just disappear, someone will still be living there...

The reality is, the great real estate crash (yes followed by the economy) is going to happen sometime, I have no idea when, but I think a lot are looking at the astronomical debt they are carrying and are starting to realise they will die before being debt free and tax free cg's arent going to save them. Bank enslavement leads to a very small life.


The mad frenzy in house price spikes is showing signs of the la la party ending. Now comes a big chorus of cries from banks for the government engineer a soft landing. Hmmm! Where were they when house prices were spiking? Signs of RE lobby cranking up.

House prices will never fall, RBNZ and Government will always bail housing out.

When house prices were increasing at astronomical rates, Jacinda was silent. Then we heard her say Kiwis expect their house prices to go up. Confusing, wasn't it? Didn't she campaign for house prices to go down?

Well now ANZ are warming the market for a soft landing. They know that with the new rules, a lot of investors will be forced to sell (they have the data!) and are not trying to spook the bulls that would cause a stampede. What happens in the next few months - we'll see. But make no mistake, ANZ expects house prices to go down. This will enable more FHBs into the market and tilt the balance to owner-occupiers versus investors.

Fast forward to the next election - the last thing you heard her say was kiwis expect house prices to go up. With more home owners than renters, she will get what she wants - re-election!

I am not a natural supporter of JA - but she never did campaign for house prices to go down .

what non PI's are missing is that even if in best position - say 100% cash - buying today you'll get 3% yields.

But wait - there's 101 rules that all favor the tenants now - take 0.5% off that yield for issues here.

But wait - every home needs a super-powered heat pump to operate at 0 degrees - and about a dozen other niggly things to maintain - maintainence, actual depreciation of heatpumps, extractors, range-hoods, windows, joinery to stop draughts etc - take another 1% off the already low yield.

1.5% yield return on an all cash investment - with these risks - no way anyone would do it - Or those that have assets all paid off would sooner have that cash in bank earning 1% then risk their million dollar rental getting trashed by tenants.

Are this if the landlords with ZERO debt.

All other landlords with debt used to feel slightly better off as they borrow at 2.4%, gross earn at 3%, preferably more, and after all taxes come out about even but have paid down some principle. These landlords are now dead meat - they will need 10k extra per year for taxes on a million lending -

So an otherwise fairly neutrally geared property that is providing rental accommodation (subsidized by the landlord as such low yields) is now completely un-able to be considered as an investment and banks will laugh you out the door - whereas before march 23 this year the banks would have loved to sell a mortgage to you if you earned a good enough salary to subsidize the tenant over time.

So - whos going to subsidize the tenants now that this "highly geared, neutral property" no longer exists or is unable to be held by an investor?

More motels ?

Or will rents just rise ?

Or both?

Tenants wont be subsidised mate, the old paper BBQ wealth is tinder dry and about to be hit by lightening.

No mention of immigration of course, in their analysis of housing supply shortfall.