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Roost report shows home loan affordability improves in May to best levels since April 2004 due to low interest rates and lower house prices

Roost report shows home loan affordability improves in May to best levels since April 2004 due to low interest rates and lower house prices
It now takes 51.3% of one median income to pay the mortgage on a median priced house purchased in May, down from April’s 53.0%(r). A typical buyer is assumed to be in the 30-34 age group.

By Bernard Hickey

A fall in house prices nationwide and continued record low interest rates helped improve home loan affordability in May to its best levels since April 2004, the Roost Home Loan Affordability report shows. 

Affordability improved in most cities and provincial areas, including Auckland Central, Wellington, Hamilton and New Plymouth because of a drop in median house prices. Affordability worsened around Christchurch and Timaru as median prices rose amid demand for houses not damaged by the earthquake.

House prices and activity remain more buoyant in Auckland where a shortage of supply because of leaky buildings and little new building is adding to firm demand from migrants from the rest of New Zealand and offshore. Prices are broadly flat to weaker for most of provincial New Zealand and Wellington.

Interest rates remained flat at record lows in May, although the Reserve Bank commented early in June that the Official Cash Rate would have to rise gradually over the next two years. Wages rose slightly in May, helping to boost disposable income for borrowing.

First home buyer affordability also improved slightly in May and is at its best levels since November 2004, just before house prices started accelerating.

Banks have eased their lending criteria in recent months in an effort to boost lending volume growth from its record lows of around 1.4% a year. Lending was growing at 17% per annum in 2004.

 “We are finding banks are increasingly keen to compete hard to win new business and keep existing customers,” said Rhonda Maxwell, spokeswoman for mortgage broking group Roost Home Loans.

Banks are offering loan to value ratios of up to 90 and 95% and are discounting establishment and legal fees in competitive situations, Maxwell said.

“First home buyers now see the best loan affordability ratios since 2004, particularly in smaller cities where house prices are lower and have fallen,” Maxwell said.

A young couple earning the median wage could afford to buy a first quartile priced house in May, with 21.1% of their disposable income required to service an 80% mortgage. This is down from 21.6% in April and down from a June 2007 high of 35.1%.

The national median house price fell to NZ$350,000 from NZ$360,000 in April and a record high of NZ$365,000 in March. The first quartile house price fell to NZ$248,750 from NZ$252,332 in April.

 The Roost Home Loan Affordability report measures affordability nationally and regionally for individual income earners and households, taking into account median house prices, interest rates and incomes.

The Roost Home Loan Affordability measure for all of New Zealand showed the proportion of a single median after tax income needed to service an 80% mortgage on a median was 51.3% in May from 53.0% in April. The worst level of affordability was 83.4% seen at the peak of the house price boom in March 2008 when 2 year mortgage rates were close to 10%.

Affordability has been improving since December 2009 as house prices have flattened out and interest rates have fallen, the monthly measure calculated by in association with Roost  found.

More than 50% of home owners are now on floating mortgages and most new borrowers are choosing to float, given floating rates at around 5.75% are cheaper than average longer term fixed rates at around 6.2%. The Home Loan Affordability reports are now using the floating rate.

Affordability is difficult in Auckland, Wellington, Christchurch, Hamilton and Tauranga for those on a single median income, but homebuyers in smaller provincial cities will find home ownership much more affordable. Households with two incomes are also in a stronger position, particularly those bidding for homes priced in the lower quartile.

Affordability for households with more than one income improved slightly because of the fall in interest rates. This measure of a ‘standard typical household' found the proportion of after tax income needed to service the mortgage on a median house was 33.8% at the end of May from 34.9% in April and a record high of 54% in November 2007.

This measure assumes one median male income, half a median female income aged 30-35 and a 5 year old child that receives Working-for-Families benefits. Any level over 40% is considered unaffordable for a household, whereas any level closer to 30% has coincided with increased buyer demand in the past.

The survey’s measure of a ‘standard first-home-buyer household' found the proportion of after tax income needed to service the mortgage on a first quartile home fell to 21.1% in May from 21.6% in April and a record high of 34.9% in November 2007.

This measure assumes a first home buyer household includes a median male income and a median female income aged 25-29 with no children. Any level over 30% is considered unaffordable in the longer term for such a household, while any level closer to 20% is seen as attractive and coinciding with strong demand.

Question and Answers about the report

How does work out these numbers? gathers data from Statistics New Zealand and IRD on wages in each region, data from the Real Estate Institute from each region each month, and data from banks and non-banks on interest rates. It has calculated home loan affordability going back to the beginning of 2002.

How is this survey different from the Massey University survey of affordability?

The Massey study is only done quarterly rather than monthly and uses an index of Home affordability rather than actually measuring home loan affordability. It uses an index rather than the actual measure of the proportion of after tax pay needed to service an 80% mortgage on a median home. The exact composition and meaning of the index is not detailed.

Why use a single median income rather than household income?

It’s true that most homebuyers are using a combination of one or more full or part time incomes to service their mortgage. Each household is different and may be using incomes from different sources. The best measure of average national household income is calculated officially once in every three years by Statistics New Zealand. chose to use the median income data series from IRD and Statistics NZ because it can be measured monthly and can be drilled down by region and by age. We do include a chart showing how many median incomes are required to keep mortgage payments at 40% of take home pay. It is currently around 2 median incomes.

Why is home loan affordability important?

It is a useful way to work out if a housing market is overvalued. It’s clear house prices stopped rising when the national affordability ratio rose above 80% or 2 median incomes to service the average home loan. It’s a way of comparing affordability of housing markets with a national average and comparing housing values from one year to the next. For example, the affordability ratio in 2002 before the housing boom really took off was around 41%.

About Roost

Roost is the sponsor of this Report, and the Reports must be referred to as the Roost home loan affordability reports. Roost, owned by AMP, is one of New Zealand’s largest independent home loan and investment property mortgage brokers with 16 franchisees nationwide. Roost offers to source the perfect loan for its customers from a panel of lenders and insurance advice from Roost insurance specialists. Roost was established in 1996. For more information please visit

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


must be a weekend away is it?

You can afford it ...yes you can...can't you....oh shite you can't...and rates are going to rise...ok they're going to explode higher....that's good isn't's what's that aint gonna borrow to buy property...but the bank...what's that....stuff the bank....hadn't thought of that....!

It has never been about affordability.

It's always been about whether you can obtain the loan.

Obtaining the loan is the easy part.

Most people don't think in terms of affordability.

When they get the money, they spend it.

You cannot demonstrate your status to the world if you haven't purchased lots of shiny things.

Far better to buy a huge trophy home and owe more than you can ever repay than to live modestly and be financially secure.

That's why we are regarded as "consumers" instead of "citizens".

Anon, I wish it were so... most people can't afford to buy a home, let alone all the trinkets that go with it! Most Kiwis are just getting poorer... Mostly we're just becoming tenants in our own country...

What's wrong about being a tenant in my country? If foreigners owen 100% our properties, and 100% NZer are tenants, this country is still a lovely clean country and every NZer is living in a cheaper (compare house price) accomodation.


Dr Roof Ron

How long do you think NZ will remain "lovely and clean" and "cheaper", once it's owned and controlled by people who don't live here and who are hellbent on profit at any cost?

People such as yourself are one of the main reasons NZ is in such dire peril.

"Owned" and "controlled" aren't the same thing Malarkey.  Whether you're a NZ citizen or a foreigner you have to abide by NZ environmental and other regulations as regards treatment of land in New Zealand, and you will still face penalties if you don't. 

Neither are people "who don't live here" and people "who are hellbent on profit at any cost" the same thing.   There is nothing about possession of the right of residency in New Zealand that automatically makes you financially selfless and environmentally responsible, any more than being foreign automatically means you don't care about New Zealand's beauty and wildlife. 

Disingenuous much?

There was a recent instance of a NZ environmental regulator attempting to apply our laws to a certain sector, who howled like banshees about "meddlers" and "obstructionists".

So the government stepped in and replaced the board of that regulatory body with a bunch of cronies, who immediately began fast-tracking the consent applications of the howling banshees.

Where the profits of their most ardent supporters are concerned, governments believe the NZ's environment and environmental regualtion - indeed, all NZ's laws - are fair game.

When a bunch of (foreign) zillionaires snap up much of NZ, then wave their cheque books and lucrative BoD job offers at MPs, it's a foregone conclusion that those zillionaires will be permitted to do whatever the hell they like in NZ.

And it was all foreigners, was it?  No New Zealander would ever behave like that?

Mandalay, The houses are affordable. I just searched trademe, there are 1465 houses listed in Trademe are asking less than 300K.  It is really affordable.

Where and what do you get for NZ$300k? And taking into account the average income, those properties cannot be described as affordable. Just because a bank will lend people the money to buy a $300k house does not in any way make that house affordable. All it does is trap yet more low-income people into debtor Hell.

Most kiwi's can afford to buy a home - at last census 67% of people owned the home they lived in.  You've got to go back to the 1930's to get to a time when most people (more than 50%) didn't own the house they lived in. 

Many/(most?) kiwis don't own their own home, even if they live in it, bob; the banks does, until they repay the debt. Read any mortgage document. The bank has the title - ownership - until its discharged.

Banks don't öwn the property.

Read the CT and the mortgage document!!!! 

Ownership does not transfer to the mortgagor (Bank or financier).

Yes they have a mortgage encumberance which extends the bank certian powers in the event of a default.

To be honest i struggle with the level of knowledge by some bloggers on this site. 

Yes , only in those states of America which have non-recourse loans , can you say that the bank owns the house .....

...... Here in God-zone the mortgagee is 100 % liable for the loan . The bank has 0 % ownership in the house , at all times .

Okay, Money Man. Go and try and sell a property for less than the mortagor is owed, without their consent, and see how far you get. Ownership is the state, or fact, of exclusive rights and control over an object, land or real estate. I'd argue that the mortgagor is the one with the exclusive rights in the case of an movment of property title? The person with the name on that title's intentions are immaterial if the mortgagor vetos the deal.

That's misleading Bob...better to say most have some equity in a 'property' they live in/at....I'd love to see the stats on the % with no debt on their 'property' and a scale showing the % all the way up to those in negative equity....

That reflects on the time when housing was affordable. A large proportion of that 67% would have bought before 2000, before housing prices got out of whack with incomes.  

So? - doesn't matter when they bought them, the statement "most people can't afford to buy a home" is false.  If 67% own the home they live in then most people can afford a house. 

Not all of the remaining 33% can't afford to buy a house either as this figure includes the likes of NA who can afford a house but choose not to. Also 12.7% of this figure is people who occupied dwellings they didn't own rent free (trusts).

In 2009 30% of all households reported mortgage interest payments as part of their household expenditure so half of owners have no mortgage at all. shows a reduction in mortgagee listings.

Accoring to the statistics most people can both afford a house and afford to pay their mortgage.


I'd believe the statement "most people who don't already own a house can't afford a house" or "most first-home buyers can't afford the house they want"

With a high lending ratio though, only a small % have to default and goto a mortgagee sale and the bank ration is broken, then baks have to raise more capital. So the fact most ppl only have a small or no mortgage doesnt make the situation safe/containable.


Never said that the situation was safe/containable or sustainable.  Simply pointing out that the statement "most people can't afford a house" is not true.

How quiet this topic has become over the past months. Once there would have been scores if not hundreds of nay-sayers and snorters  predicting the end of civilisation as we know it.    

Where are they now?

Gone, slinking away like thieves in the night.  

The whingers and whiners have been proved totally wrong just as Olly predicted. The market has turned just as he said it would.  

See Olly's website and latest comments  :

"Gloomsters Humbled"     

The “woe all is lost” gloomsters that predicted  the end of the world and the collapse of the property market have been well and truly humbled by this latest report. Those of you who  have followed my columns and talks over past 2-3 years will recall that I always maintained  that the GFC would not effect New Zealand to the same extent as elsewhere. Leaky homes, a moribund building  industry, low interest rates, slow but steady immigration, and the Christchurch tragedy have combined into a cocktail of chronic shortages.

Shortages= price stability and eventually  price rises.

Soon we will see the smug renters who championed renting as the only way to live, scramble back into the market. Renting is fine for those who need to rent, but renting means that you never even own  the letter box .

If you don’t need to, then why would you?

Link http: 


Everybody is laughing at you.

Big Daddy the people who live in the real world have probably just got sick of knocking their heads against a brick wall. Where I live which is one of the strongest provincial capital cites in New Zealand ,economy wise, we are continuing to experience month by month drops in housing prices. Prices started to go backwards in 2007, we had a dead cat bounce in 2009 and since then a slow and steady drop in values month by month. If it was not for the current emergency interest rates it would be worse.  People are just coping with the ever increasing daily costs of living such as food. I spoke to a Kiwi who has just come back to NZ after 15 years away in the UK. He just cannot believe how expensive houses are when you consider how poor our incomes are. He has hit the nail on the head. It is so fragile. If interest rates were over 7% as they are currently are in Australia we would be in deep trouble. You had better pray that interest rates do not go up in New Zealand for some time and that people pay off large parts of their current housing debt before they do rise which is inevitable.

The only laughter will be from gallows humour. 

How much have you lost so far Fatdaddy...the debasement plus what?....come on be honest....

Up $2M (plus) in last 12 months.  

Gotta hand it to you Fatdaddy...with your losses up 2 million in just one year...brave face and all that....

As you may have noticed , BigDaddy , many of the bloggers here cackle alike cynical hyenas at the mention of any success . Witness the diatribe hurled at Graeme Hart recently  , over the ramping up of his debt , to fund new acquisitions .

...... Hart is the richest person in Australasia ........ and the guys here at who are deriding him , they are how rich ?

Yup ! ...... That says it all .

The person behind the sockpuppet currently known as BigDaddy isn't being criticised by others as a result of envy.

That person is being criticised for their seemingly limitless dishonesty.

There is not even a single reason - good or otherwise - to believe a word they say or write.

Thankyou for enlightening me ( simple Gummy believes that people tell the truth , unless proven otherwise ) ...

... I'd  thought that  the guys were  just doing a knee-jerk response to BigDaddy's property enthusiasm . .......

..... actually , I do remember him in one blog claiming to be a cashier , earning $ 13 / hour ...... he must've put in a hoo-a lot of overtime , to be doing multi-million dollar property  deals !

Cheers : GBH

"Gina Rinehart's  $10.3 billion mining fortune has propelled her into the position of Australia's wealthiest person..." Things move fast at the top of the tree, Roger! It seems like only a few months ago that Twiggy Forest was worth $12 billion, before FMG took a 'correcting'...But,I think Graeme has been usurped.

So GBH you believe Newland is credible? You think his prediction of a doubling of rents in 2-3 years is credible? 

" Yes "  and " no " , respectively .

 "New Zealand financial institutions are preparing for Christchurch residents to walk away from their debt". This will happen all over the country, for a variety reasons, as time passes. The one common factor will be...too much residential property debt. Hey! If you can do it in Christchurch, then why not in Auckalnd, when the going gets tuff, for whatever reason. May as well do it when other are; looks a lot better than way.

Yes Nick and the "not in our make-up" attitude is dying with the city and the market. As time goes on and the recession grinds along as it will for another decade at least..expect fewer Kiwi to live with the debt burden and an increasing number to say "stuff this I have had enough". The banks have only themselves to blame. Then as the banks begin to falter the taxpayers will be handed the bailout bill...leading to yet more recession....

Sorry Wolly, it's just not going to happen!

What isnt? the banks being bailed? the Govn has no choice, without banks the entire economy and society falls apart really fast....hence why Dr B. is looking at structural if a bank goes toes up the eftpos machines still work the next day and ppl can get food.


The government does have a choice. A bank's assets don't disappear just because a bank fails. The bank remains - it just gets a new owner with fewer liabilities. Initially probably the government who will be the one keeping the eftpos machines working.

Wolly, good imaginations, Dr roof ron

Ppl will walk away?  I think there will be an increasing number of first time buyers who have bought in the last 5 years where that will be the case, if as I suspect the market collaspes 50% or more....and there will be little likeyhood of ever recovering that makes no sense not to be declared bankrupt....its clear in 7 years? compared to 25+ or more likely never?  Makes prefect financial sense to me...


What leads you to believe that the housing market in NZ will collapse by 50 % or more ?

..... and why should people walk away , when there's a perfectly good bus service available ?


House prices collapse,

1) Price to earnings ratio is overblown at 6 to 1, so 3:1 or say 3.5:1 is the norm this means a roughly 50%  loss....this is at present salaries....and 2011 prices.

2) In a depression wages decline so that 3:1 could mean an easily bigger than 50% if we say see a 25% cut in wages, that 50% loss will be bigger in $ terms.....I see not less than a 10 year depression and the longest suggested Ive seen yet is 100years....Interesting that the last long depression or the "The South Sea bubble is an interesting example of ppl ruining themselves....on crazy speculation, just this time we have houses.

3) In a credit collapse prices could fall to whatever level ppl have in cash...which would be 10% or so, maybe 20%....of the deposit saved.

The Great Depression was also a credit driven event....and look how bad that was...

How fast could that 50%+ be achieved? the suggestion again by the person specualting on 100 years is 2 to 3 years.....

Buses, no deisel mate you know how I am with Peak oil...



Excellent , I am now well informed , thankyou . I shall plan my finances accordingly ....  A 100 year depression you say ........ I'd better pack some extra Gummy-Bears away , then .

........ re. the buses , I was figuring on electric / or hybrids ..... not sulfur belching old diesels .


oops double post

Meanwhile, In Australia ( Olly Newland could give us a comment on this; he's just been to check out his portfolio?)

"RPData .... are now suggesting that it is not an issue of concern that the market is falling overall, because it is only the top end of the market that is having any real problems. The rest of the market is “in for a soft landing”.

Newland is just one of the greater landlord class of property owners in time most Kiwi residents will be tenants or serfs to a bank...the system is and will protect the current debt based scam.

The time will comes when a huge % of the families will discover they are free to move at will  and this they will do....the flow across the Tasman will become a flood event...leaving behind empty rental rubbish and the landlord bloats on their boats trying to avoid the banker's demands for payments.


still a glass completely empty kind of fellow you are, hey Wolly?

Property is still ticking along and people still buying it for bundles of lovely RMB. A friend told me this very evening that she put her North Shore property on the market yesterday (Friday 17 June) by 1800 this evening, they already have 5 offers... all over the asking price, which is much higher than their purchase price at so-called peak... They can't afford to even up scale in the same suburb, Northcote as prices are just booming. This is no BS... clearly Auckland is like Vancouver and bucking the world trend.

I guess those pigs eating at the trough from around the globe have decided Auckland is the place to live and they'll come and live in our swill...

I don't like it, but there you have it... property really does keep boomimg booming booming in little ol' Akl...

MD, you still need to go to south and west auckland, many houses have been on the market for months. People purchased in 2006/07 for $360k, now they can only sale $260k.


Dr Roof Ron


Re Chinese buyers of Auckland properties:

In other words, embezzling $15 million in government funds is criminal, but skimming unlimited sums of bribes and "gray money" is simply normal life. As the Claude Rains character memorably says in the classic film Casablanca, "I am just a poor corrupt official." This line might be spoken by hundreds of thousands of lower-rank officials in China.

If $120 billion was embezzled by a relative handful of top officials, then ten times that amount has been skimmed in the course of normal business by lesser officials who have literally done nothing wrong within the current system.

So skimming $500,000 and transferring it to an account overseas by one means or another is "normal" and indeed expected. Having an overseas account and house and a green card or equivalent escape from China is an important "marker" of status in China. In other words, only the poor have no way out of China when the inevitable happens and the next revolution overthrows the current Status Quo.

If nobody considers this a risk, then why do the Elites all have overseas accounts and resident status outside China? We might rephrase this question several ways: what are they afraid of? If they trusted the current Status Quo to be permanent, then why make sure their families have green cards and homes in Canada, Australia, Thailand, etc.? What does this reality say about China and its leadership's expectations?

Dreaming again Wolly.

Just had friend who have returned form Assie after 5 months. Could find work but no where to rent. After 5 months living out of suitcases in a friends house they had had enough. Those Aussie roads aren't paved with gold.

So many desperate "friend of a friend of a friend" stories from the dregs of the "Get Rich Quick With Property Investment" brigade.

Get an empty plastic bottle and half fill it with a mixture of baking soda and vinegar.

Quickly bung a cork in it and give the bottle a good shake, then prop it up upside down on the ground.

Move away.

With a whoosh, that bottle will soar skyward, before falling back to Earth.

All that is left is an empty bottle and the seeping remains of the propellent gas-generating mixture.

The property bubble was exactly like that.

A shell fueled by a mixture of liquid hype, generating large amounts of exciting gas, leading to a rocket-like ascent, before gravity won and it all came crashing down.

It's all about sustainability, but of course in this case there is none, and never was.

Some of the rockets are just about reaching the peak of their trajectories, but most are now tumbling downwards, or already littering the grass.

No amount of imaginary friend stories can change that.

.... do you need organic apple cider vinegar , or will ordinary brown vinegar do the trick ? ..

We have some baking soda from the Bin Inn ...... good enough ?

Perhaps the vinegar is just a metaphor for the bitterness the serfs are feeling.

Yes , but vinegar is an excellent curative for their gout ...... and those serfs need to be fleet of foot when Walter Kunz  & moi are chasing them on our steeds ........... tally-ho & orf we go ........ run you oinky little serfs , run I say ...... what-o !

Gee not so sure about that Gummy, I thought gout was a result of a high living. You know all that rich food and wine. Perhaps we have been lending too much money when the serfs can afford caviar.

Uppity little peasants  have been into the  winter store of mangel-wurzels  that I was saving  for the pigs . ...... if that isn't " high-living " then I don't know what is , matey ..

. . Bounders ! ..... Absolute shower , the whole bloomin' lot of them !

A. Its not a friend of a friend but one of my ex employees.

B. I am not from some quick rich with property brigade (even though I have two small commercial properties).

C. Don't apply that I am lying as per your last comment.

D. I am fully aware of the reason behind the property bubble as I was seeing the effects of it on a day to day basis (hence why I got into commercial property based on true cashflow returns and not distorted by peoples emotions and tax implications)



Actually I suspect NZers wont become serfs....banks will simply be disolved.....dont forget they only exist as long as most ppl want them to and most ppl have something to lose....once you pass that mark all bets are off.

Across the Tasman? same banks? whats the advantage/point?  OZ is no fact property wise it looks worse.


we'll all be laughing big time at Olly when his prediction of a doubling of rents by around 2013/2014 doesn't materialise

that is likely to be a very embarrassing prediction for Olly

time will tell 

"The global financial crisis will hasten an economic changing of the guard, putting China and India at the top of the world banking industry, according to international consultancy ..." 


And these top money makers are going to be buying property here, because Auckland is beautiful and there are nice people here and it's not congested like Beijing and Mumbai...

Prices are just going to keep boom BOOM BOOMING!!!


Only a matter of time before some Chinese banks look to establish a serious presence within Australia & NZ ....

.... And along with skazillions of hot yuans , yuan way or another , they'll be introducing mega-numbers of high net worth Chinese customers to our property market .

The only thing that is booming at the moment is dairy prices

These Fonterra options/shares look interesting. I'd rather buy some of these than the state asset sell off next year

The article provides a nice fairy tale, possibly best described as you do later for real estate:

Still the same old shallow reporting.....a great time to buy....

Note the disclaimer:

* Mark Lister is head of private wealth research at Craigs Investment Partners. His disclosure statement is available free of charge under his profile on This column is general in nature and should not be regarded as personalised investment advice. Craigs Investment Partners and Deutsche Bank New Zealand are capital markets advisers to Fonterra.

And here is a link to profiles of the board of Water NZ:

which real estate agency do you work for? you sure as heck sound like a desperate real estate spruiker

the stats show Auckland prices have edged down

with the Auckland economy likely to remain weak-ish, immigration weak and interest rates only likely to go up you can give up your fantasies of a booming Auckland porperty market 

Still the same old shallow reporting.....a great time to buy....


At least they are telling it like it really is, unlike most of the MSM who didn't even mention the drops, or found a way to spin around it, so they don't displease their property advertising pay meisters "too much"   

Good to see some honest reporting for a change. A majority of the population are hurting.Just coping if they are lucky with those exploding daily costs. How the heck are people going to borrow enough money to stabilise the market. They certainly are not in a position to borrrow more to push up prices. Get rid of that debt before interest rates rise to push prices even lower.

They may not rise....with deflation and depression though house prices will be going lower.


see this for some more insightful and truthful reporting: 

ex agent, house price needs to rise first before mortgage rates rising. I cannot see the rates rise if the house stay same. Why RBNZ hike rates if There is no inflation and economy stay flat? for FUN?

Dr Roof Ron

You have a serious lack of understanding on economics and the cost of credit Dr Roofrun...

The RBNZ does not set the rates at which the private banks charge for credit...Bollard can only influence some of it..that being the floating rate.

The banks are up to their necks in foreing debt obligations and they have been desperate to spread their risk into covered bonds...but they cannot prevent an explosion in the cost of credit in Europe and the States from booting them up the bum.

That will happen and they will raise the rates here. It is a certainty.

And Wolly there has been a huge shift to floating rates in line with positive yield curve and just about all new loans written are on d floating rates and as existing ones are coming off their fixed terms they are reverting to floating.

The shift over last few yeats is about 10% floating to noe over 60%, maybe more.

Hence AB & RBNZ now have far more impact with small movements in OCR than in he past.

This combined with Core Liquidity Rato means AB & RBNZ have more effective tools at their hands than in the past.

How effective I guess is still be fully tested.


The fly in the custard MM is the need to separate macro from micro...too many believe Bollard determines the cost of credit which is impossible when the banks borrow offshore...two ways this comes unstuck: the first is what we shall call the 'piigs way' and the second is the Kiwifx way.

Govt debt is in Kiwi$ and to that extent provides govt with some protection but at the cost of long term lower rates ie S&P downgrading the Kiwi and future govt borrowing costing more.

Private bank debt will not all be in Kiwi$...that which is in foreign$ is impacted overnight by a 'piigs way event'...the Kiwi$ amount would be hit less quickly but it would still cop a wack.

The banks are not protected by the RBNZ from a piigs credit implosion event and therefore the mortgages here would cop it in the face.

Bollard could extend credit to the banks as he did before but this cannot go on forever as it leads to a NZ$ he would be doing a QE 2 nz style.

On top of this you have the fact that the NZ banks are really aussie banks and they are likely to scream for capital because they too will face the credit implosion.

The longer the can is kicked down the road and the BS used to pretend all is well in the world of ever greater credit creation....the bigger the economic nuclear event....there is no escape from debt.

Agree with some of your points and that Govt debt is not so much the issue but problem is the private debt and here RBNZ has done something  to reduce this via placing more requiremtents on Banks to fund via Retail deposits (OCR has impact on these) or longer term wholesale borrowing (takes longer for repricing on these to follow through).

Also Banks balance sheets are not growing o there is no debt surge going on.


Private debt as you infer has essentially stopped growing. Government debt on the other hand is going to grow by $20 billion dollars this year. The latter is the problem, and more so because we are all in the can for it.

If some of the private debt defaults most of us would be better off (bubbles would deflate). It would be the overseas owned banks that take most of the losses (presumably those defaulting are only doing so because they are already under water).

DRR there is enough inflation being caused by food, power,petrol,insurance premiums and alike to worry the Reserve Bank. Maybe you are comfortable enough to not see it but the average person is experiencing serious inflation in terms of basic living costs.Will the reserve bank just sit by and let it carry on. I hope so as interest rate increases will be catastrophic for those with too much debt.

LOL, seriously your way out of your depth here. The OCR is not set by "house prices". In fact it's getting hard to gauge exactly what does set the OCR by the day as REAL inflation IS on going WORLDWIDE but the global reserve banks are keeping that "obvious" fact under wraps in the hope to protect the financial debt bubbles they have created. Property being one particularly there in NZ. The "neo's" like Bollard are continuing to stick their heads in the sand  hoping the next big consumer debt spend is just around the corner that will pick up the economy and then they can raise the OCR. In the meantime they protect the very people they shouldn't at the expense of those that ACTUALLY have very little personal debt, did the right things from 2001-2007 and have the actual cash to invest into venture capital(REAL businesses). As for the NZ dollar, what a joke. Only thing propping that up is the USD eventual ongoing demise & the chinese and currency traders desperately looking for a place to convert their USD's into something more worthy. Shame they fail to see NZ's own internal dilemma's

Every reserve bank has put themselves into a corner they can't get out of. That being they have very little room now to move with the OCR other than up which they are too scared to do and this will remain the case for a decade or more I suspect. The Japan senario being a classic example.   


Hell Justice I thought you knew something about economics and you blow it on your comments re NZD apprciation.

Its been driven by two key factors (IMO):

1) Offshore re- insurance companies taking positions to either convert or forward position as they need to settle their claims in ZNX, eg increased demand.

2) Commodity demand for our exports, again creating demand for NZD. (same reason their has been a massive appreciation of AUD).  Remember in the 1950 / 60's etc the NZD was higher than USD, at the time NZ was feeding the world.

High NZD also has a deflationary effect meaning RB won't need to move as much / as soon but is no doubt concerned increase in interest rates will drive the NZD higher. I agree than we might be in for a period of lower interest rates for some time (relative to long term avaerage over last 20 years or so)

"There has never been a better time to buy a house" the SST trumpets today. So, equally we could say " There has never been a worse time to sell a house "?! Will it get better for buyers or worse for sellers? The answer to both questions is :Yes.

Bernard , the King of Economic Darkness , would present the SST article as " There has never been a worse time to sell a house " ....... and that'd be true , if you only operate on a short-term memory !

..... Gummy , as SST editor ,  would present the article as " Why are you lot still interested in buying houses ? "

Both headlines would be incorrect. Houses prices have yet to stop falling.

The nay sayers almost had me for awhile... I too began to see the negative in everything economic particularly property. But am now convinced it's total nonsense... prices have hardly budged, 5% down, 3 % up, 1% down 4%up is hardly the 30% fall predicted by so many on this site.

I can see you all  waving your fists at your computer screens, and launch in to tirades about my stupidty and point to all the stats and figures that show exactly how property in the Auckland region has dropped by a wopping 5%... On the North Shore it's gone up from the heady days at the so called peak... go figure, prices up from the peak? Who'd have thunk it?

Alas, I am convinced Chinese and Indian property investors (and immigrants) are keeping the prices up and good on 'em for brining their wealth to Godzown. High commodity prices will also keep pushing prices up. We are truly a blessed country, with farming and water, all the things the rest of the world are struggling with, or will soon be struggling with... Not to mention the good ol' boys waving blue flags, selling everything that is NZ to foreign investors so they can balance their books till they hand in their keys (no pun intended) to the our new Chinese owners.

I hate to admit it, but I think ol' Olly is right.. the future for property is pretty bright and all the whinging and dire predictions here are as useful as a bone reading whitch doctor's... or even a  $6 a minute toll call psychic from across the ditch...

Since Bernard made that appallingly wrong call that house prices would collapse by 30 %  in one year , he's covered his embarrassment by now off-setting the annual CPI rate against house prices ....

... A little Hickeynesian economics trick to massage the figures in his favour  , and conveniently ignoring positive rental returns from investment properties .

And as such , he now claims that we're half-way " down " , towards his original 30 % fall ...

.... yeah I know , but as they say , " a drowning man clutches at straws " ........... hang on there , big guy !

Did he say in just one year? I dont recall the 1 year....I do recall the high % which I stil agree with, and more.


Yes he did , 2008 if mammary serves  ! ..... and a year later he dropped it to a 15 % fall .

Neither proved correct !

...... I think that he was inspired by the USA housing market , which did crash so spectacularly . ......[. Bear in mind , they have alot of non-recourse mortgages there , NZ has none ...]


GBH - in one way, BH will be right, you have to be wrong.

Tenant incomes are totally underwritten by energy - so they'll be reducing (as we speak, but more rapidly to follow). That, though, is atop increasing demand, and shrinking available space and resources.

So it's gonna be a bit like running down the up escalator - your actual direction and velocity depends on both speeds.


I have to wonder just where all these tenants are going to be living in a few short years, just where will be the jobs without energy to run businesses....its looking like a LOT of unemployed.....meanwhile our Govn seems oblivious.....and so does Labour....Im not sure if the Green's see it...they seem to but its like they have a mental rejection on it v an outright block....under all this is we simply have too many ppl....time to close our borders....


As ever , I am indebted to your comprehensive knowledge on the subject , PDK .

..... and more than a little bit in awe of the fact that you know people who have escalators in their own homes ...... Now that is living !

I've also been known to preach the parable of the tenants......   :)

Seriously, the dichotomy between what I see coming, and the Peter Gluckman rave re teenagers, leaves me stunned.

He's the CSA, right?  Science?

Those teenagers will be working, and harder, with less time for anything else. That's what the increasing scarcity of fossil energy will do - global just-in-time systems will stagger, profits will dry up, and it'll all revert to local labour.

They won't know what hit 'em.

Nor will their landlords.....                    :)