ASB's latest housing confidence survey finds that limits on high loan-to-value lending have dented confidence in the Auckland housing market

ASB's latest housing confidence survey finds that limits on high loan-to-value lending have dented confidence in the Auckland housing market

Sentiment toward the Auckland housing market went into severe reverse with the onset of the Reserve Bank's high LVR limits, the ASB's latest housing confidence survey has found.

ASB chief economist Nick Tuffley said among those responding to the survey the net number seeing now as a bad time to buy in Auckland leapt from 17% in August to 29% in October.

The net result is achieved by subtracting the numbers of those saying it's a bad time to buy from those saying it is a good time to buy. A year ago a net 8% said it was a good time to buy in Auckland.

Tuffley said the latest result represented "a considerable deterioration in sentiment" and "timed with the introduction of the high-LVR lending restrictions", which was on October 1.

"Given Auckland house prices are considerably higher than the rest of the country (even after adjusting for income), it is a more challenging market for a first home buyer to raise the 20% deposit now required to enter the market," he said.

The ASB puts the survey out every three months, but results are compiled monthly as well - hence the measuring of the sharp deterioration in sentiment in the Auckland market.

Nationally, the picture has also darkened, with more people across the country now saying they think it's a bad time to buy a house than those who say it's a good time.

And that's the first time more people have thought it a "bad time to buy" since the April 2008 survey.

A net 5% of respondents thought now was a bad time to buy compared with a net 0% as of the July survey. As of October last year a net 23% thought it was a good time to buy.

House price expectations remain at elevated levels, with a net 56% of respondents (same as last survey) expecting higher prices in a year.

"Housing demand continues to rise while supply remains well below demand, and the resulting imbalance will continue to place upward pressure on house prices," Tuffley said.

"The RBNZ’s high loan-to-value (LVR) lending restrictions will have a modest impact on demand. However, we do not expect a meaningful reduction in housing market pressures until interest rates and new housing construction increase."

Expectations of interest rate rises have soared, with a net 52% of respondents (up from a net 39%) now seeing higher rates in a year.

Tuffley said there was a slight North/South split on interest rate expectations, with slightly fewer in Auckland expecting higher interest rates ("perhaps wishful thinking on account of their larger mortgages") while those in the South Island are more convinced of imminent rate hikes.

He said that demand for houses continued to gradually increase and become more broad based across the country, supported by low interest rates, increased consumer confidence, increased investor interest and a lift in population growth.

"In Auckland and Canterbury sales have been relatively flat over recent months, although this is likely due to a lack of listings over most of 2013.

Supply 'a key issue'

"Supply remains a key issue in Auckland and Canterbury housing markets. The Auckland market in particular remains very tight with the pace of house price growth accelerating over the past few quarters. New listings, though starting to lift, remain at low levels compared with the previous housing boom," he said.

Despite a "tentative sign of increase", the absolute level of new housing construction was also low and yet to yield any meaningful increase in market supply.

"At the same time, the increase in net migration inflows into Auckland has added to existing pressures. This is evident in the recent acceleration in Auckland rents.

"According to data from the Ministry of Business, Innovation and Employment, over the three months to September rents were up 3% on year-ago levels compared with an annual increase of 1.5% for the three months to June."

Under pressure

The Auckland market would remain under pressure until there was a "meaningful" increase in the construction of new housing.

"In contrast, there is some very tentative evidence that pressures may be stabilising a touch in Canterbury. The rate of house price has slowed (slightly), and the median of days to sell has edged marginally higher which is an indication the market has become slightly less frantic. However, the region’s fundamental supply issues do remain, with rents up 13% on year-ago levels."

The stronger rental growth vs. house price growth may reflect that new arrivals into Canterbury may look to rent initially, Tuffley said.

"This similar dynamic was evident in Auckland in the wake of the Canterbury earthquakes as some Cantabrians relocated, with Auckland rents lifting initially and housing market activity increasing six-12 months later."

Subtle shift

Tuffley said, however, that while housing market pressures remained intense, conditions were starting to subtly shift.

"The RBNZ introduced high loan-to-value lending restrictions on the 1st October. These restrictions were relatively aggressive and will lock a subset of buyers out of the housing market and reduce demand at the margin.

"At the same time, the RBNZ’s more hawkish monetary policy outlook has seen market expectations of rate increases lift and some fixed-term mortgage rates have also increased in recent months. The combination of higher interest rates and increased construction of new housing should see some of the pressures gradually come out of the housing market.

"We continue to expect house prices will increase over the next year, but at a slightly slower pace than seen this year. But any delay in the delivery of higher interest rates or new housing construction would risk housing market pressures intensifying, particularly given the recent strength of net migration inflows."

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

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.


There becomes a price so high that the negative cash flow per year becomes large enough, and the prospects of further capital gains low enough, that a risk-reward anaylsis becomes balanced against buying.
At 700k for a property returning 500/week rent: total expenses 47k (assume 6% interest on whole amount, either borrow all or opportunity cost of using own money to buy all), and rates, insurance, maintenance at 5k p.a.
That's a real cash expense of 400/week. 
You pay 400/week in a speculative gamble that prices will become stretched further?
No one with a calculator would take on those numbers....

Agree, but with with a net 56% of respondents (same as last survey) expecting higher prices in a year it's not so clear cut. 
If, for example, you buy a rental property and incur a loss of $100 a week, so long as your capital gain for the year is $5,200 you haven't lost anything (for simplicity I'm not taking into account opportunity cost, tax breaks etc). If this example is for a house in Auckland that you bought at $500k you just need prices to rise by 1% over the year to break even. Any price rises above 1% and you are making money.
So the gamble is do you expect house prices to rise by a greater amount than the top-up you are going to have to make to cover expenses. Most guestimates for price rises in Auckland for the year ahead have been at 6-7%. Look at the price of houses in Sydeny. Some would say house prices in Auckland are a relative bargain still.

like-wise, any price drop of 1% would see the losses incurred double..
The more stretched the prices the less likely the 1% rise over the next 12 months and the more likely the 1% or greater fall.

Yes that's the gamble obviously. Investment is about risk. If you think Auckland prices are going to drop over the next 12 months probably best not to buy. I don't really see price drops in the near future though myself.
I've got to run, I'm just off to count my capital gains from the 10% increase in Auckland prices over the past 10 months.. 

But how many people would buy a 100% mortgaged 700k renter that only generates $500pw? Very few I suspect.  Also the opportunity cost does not equal the prevailing mortgage rate. TD rates are about 25% lower minus 30% tax.

And yet the DJIA has more than doubled since the GFC.
Even the little NZX is up over 25% in last 12 months.
Investor's who choose not to be in property are certainly not going into TD's instead

As an irrelevant selective post hoc argument that would be hard to beat.

I guess it's up to the individual to determine how much they value the use of their funds by others.
I certaintly would not be locking away money at anything like 6% or less; I would use 10% opportunity cost to work out the real cost of investing in property for myself, and thats still a lot less than my average yearly returns from investing in individual shares.

Then you must be a very skilled investor Simon. Since the beginning of the GFC when the DJIA was mid 14k's it has been a rollercoaster, but the resultant capital value increase as of today is less than inflation for the period and dividend yield of about 2.2% would hardly cover brokerage after tax. Some individual components eg AIG and GM lost over 90% and are now gone. 

DJIA was at 14k BEFORE the start of the GFC, at the end of the last bubble 2007.
DJIA was at 6-7k in 2008-2009.
And to see that prices were bubbly in 07 and cheap in 09 is not that skillful.  Warren Buffet says it best when he says to time markets you must be fearful when others are greedy and greedy when others are fearful.
Just as it's not that skillful to know that property prices in auckland are stretched relative to the income generated (rent)

Further to this, not only has the DJIA doubled since mid 2009, but the dividend received since has jumped by more than 50% too. Secondly, I think all of the DJIA constituents engage in share buybacks that are usually higher than the amount they pay out in dividends. Take a look at the uses of cashflow by IBM, Exxon, Coke, etc. As for Auckland houses - would I take out a loan to invest in a loss making business? Very risky. A place round the corner from us was rented out for $800 per week last year, they sold it a month ago for $1.65 million. 

thanks for your contribution...

700k property should be getting you conservatively $650/week and no one I know is borrowing above 5% this year or next.  So interest payments of $35k per year, income of $33,800 and rates, insurance and maintenance total of say 5k PA means negative gearing of $6,200 PA. 
You could argue any of the figures above a little up or down but they are small change in comparison to the 20% capital gains being made in the leafy coastal suburbs of Auckland. 
Assuming you used cash for a 70k deposit (purchase made pre LVR) that's a 200% yoy gain, tax free.  My bet is the Auckland price rises will continue above 10% in 2014 and slow to around 5% in 2015 before flattening.  Arguing that property investment is not profitable is a little silly. 

I'm taking a point in time view of auckland property as a value-based investment as at today.  So no you will not get 5% fixed for 2 years today, or be buying at 10% dep. as in your example.
2 year rate is closer to 6% as in my example. If 5 years; average interest rate likely to be 7%.
So you plan to hold onto the property for 2 more years, paying 6% interest.  You are betting 20-odd grand on prices going up further and not down in those 2 years.
If you are wrong, you can hold onto the property, thinking the price will eventually go up, and losing 10k per year due to neg gearing.  20k over 2 years. 50k over 5 years of statgnant prices.
In any case, the easy trade has gone, prices are up, it's time to take some profit not buy more.

As I say, you can argue the small details, the real question is will the capital gains continue.  In a market that already has a shortage, rampant immigration and sluggish building.  Prices are only going one direction. 
Is it time to buy... depends on your strategy
Is it time to sell...  no. 

So you are saying your investment/speculation is based on the expectation of further price rises. Otherwise borrowing large sums makes no sense. Few people love a house so much they will pay $600,000 plus expecting it to fall in value. Not even long term landlords looking for income. Would anyone renovate that Grey Lynn do-up if you didn't expect to even get your money back? Once that capital gain expectation is removed the "crisis" will evaporate. It just needs a trigger.

"So you are saying your investment/speculation is based on the expectation of further price rises" ....  Yes
I've seen comments like yours on this site for years, "the apocolypse is near", followed by double digit growth. 

Come on, Olly.
We need some of your spin to correct these uninformed prospects.

Olly is probably too busy flogging off his propertys at the moment.  He'll keep up the spin until he's cashed out.... then talk the market down while he buys back in.

Chatting with a mate from Brisbane, 2.2 million people there, bought a house in Brisbane recently, suburb simlar to Meadowbank over here, 4 beddie, 600m2 section, about $450K. It's well known that everything over here is SUPER expensive. Me thinks we're quickly turning into Ireland.

Agree Muppet King.....but it is and will be after all captured money in the longest possible  term......the concern returns to OBR and the standing stautes that allow Australian  Banks to sieze N.Z. depositor funds ahead of Australian depositors during any liquidity crisis deemed big enough to warrant such an action, that includes Australian based liquidity difficulties.
 Now given your comment , the amount of leverage here relative to price, income, job security to service loans ongoing, I'd say the Aussies would have an excellent case for directing any fault to the N.Z. Market place as the likely culprit.
People not seeing the big picture, or thinking it can't happen here are reckless in their dismissal or ignorant of the potential outcome.
Joining the dots Wheeler knows just what I'm saying,but deems it irresponsible to panic the Market..and i can understand his dilema.

The downside risk is now so big, no one wants to be the one accused of causing a panic. The safer option for your reputation is to give very weak warnings but allow business as usual. RB governor can later claim "I did warn you" and government can claim "no one saw this coming"
The OBR is worthless as a problem at one bank will go systemic even before it it is acknowledged publicly. A government guarantee will be necessary to halt the panic. All the stress tests are meaningless if Europe and the US are anything to go by. Supposedly the NZ banks are stress tested for a 30% decline in house prices. "Investors" will be running for the exits well before then.

Muppet king, I think your mate is pulling your leg!  I am living in Brisbane and just bought a larger home 6km from CBD, I wish it was 450K.  
If it's similar to Meadowbank (8-10km from CBD) $450k for a 4br 600m2 is a dreamer.  Something like that is likely to be $700K +.  The only suburb I can think of is Stafford but it's nothing like Meadowbank and no way it'll be under 600K.  Unless you mate thinks Meadowbank is like South Brisbane suburbs such as Underwood, Slacks Creek, Acacia Ridge etc.. that's where you can still buy 450K for a 4 beddie 
Brisbane prices are creeping up like Auckland!

"bought a house in Brisbane recently, suburb simlar to Meadowbank over here, 4 beddie, 600m2 section, about $450K."
I call BS. 

Probably similar to Meadowbank in terms of being filled with rundown Government housing, rather than any of its good attributes...
In a way Otara is similar to Meadowbank (both have state housing streets) as is Glengarry in Invercargill...

Thing about Brisbane is the Govt houisng "Public Housing" are generally very nice, 99% are in apartment style and you don't get those stand-alone NZ housing type.  
Here in Aust, the govt has ongoing deal with property developers where they will allocate a small percentage of the new development to public Housing, so you don't get a mass concentration of public housing areas

Looked at 50 acres on the out skirts of a 100k city in Nth California last week , he was wanting 110k. My mate walked away. Cost of building $100 a sq ft.  
 We are gong to correct, we just need to try and manage the pain, and be careful the Aussie banks don't use it as a strip minning operation.  

Hi Andrewj ....I always keep an eye on your comments, as I have a property in the USA rented out 8 miles from the Whitehouse in Maryland (suburb of DC equivalent to say Ellerslie) cost (in NZD) to buy, renovate etc to get to a very good standard  .... $172,000 with a gross return on capital @ 15.25%
I also have a property in Mt Eden (owned for 20 years)  - 2 bdm B&T unit with a gross return on capital @ 4.25% .... I rest my case.
Auckland property prices are just "out of whack" .... been so tempted to take the capital from the Auckland property and reinvest in the USA, as everything is now set up over there to buy more property....however I had a good think over the weekend and you know what I think .....Auckland prices will keep climbing, as long as wealthy Asian buyers (most won't live here for the moment) keep buying Auckland property,  as a haven away from the extremely polluted  areas of Asia .......So SK, Big Daddy et al may be right and prices will keep climbing .....BUT all that will happen is Auckland (with its pathetic public transport) will just become a city of more renters and less owners ..... and the owners will be foriegn and the renters will be the locals ...GREAT :)
Enjoy the USA !! :)

Been there, looked around at DC prices and talked to Kate on here about it a few years back. Had some fun on Zillow comparing prices.   Liked the area in the 80's but the place is getting over crowded now.
  Wages in the USA are low and look to be staying that way for a while yet. I don't know how you get a lift in house prices in a low wage, high unemployment, economy. Ive got a mate who has houses in the bay area and doing fine, he  was getting out of NZ too but is back buying again.
still a lot of foreclosure in the area,-76.678391,38.713911,-77.350616_rect/10_zm/1_fr/

Banks don't loan to wage earners only high income salary households or companies, unles they're induced to do so as in the case ovf the Community Reinvestment Act. It doesn't matter how high unemployment is as long as there's sufficient numbers of professionals whose incomes are protected by high licensing standard needed to practice. California and Austin Texas where many high income earners are congregated are even now in the early stages of a new house price bubble. The places with low house prices are the regions with insuficient economic growth to induce high income earners to stay there with te exception perhaps of the booming oi towns, but once the wells run dry, those who can wil leave and property prices will fall

AJ - what do you propose people should do when it comes to investing?
Personally I think negative gearing is a terrible waste of the good money that goes into propping up the shortfall. If people took that prop-up money and invested it in the Australian sharemarket using convered calls that money would be providing them with monthly income.

OBR is occupying a lot of my thoughts at the moment.  I've been sitting on the sidelines a long time. If OBR even looks remote, I will be out of here.

 Wish we had a government with some vision, all this short term, staring at the speedo stuff is pissing me off.

AJ - I agree on the OBR and now having money in the bank is a fools game. Government and bureaucrats have a long history of foolish behaviour so I prefer to not spend too much time thinking about their stupidity and more time on how it is best to manoevre around them.
Got to nail your loose cash down.........its poker time - without the cards........

Having money in anything that can turn illiquid is a fools game right now IMHO.
The saving grace of the OBR is 3 fold IMHO.  1) People now can see before hand their money really is and always was at risk. 2)  If the OBR activates is a huge event then we can still eat.  3) Moral hazard, tax payers dont have to bail anyone out, ppl with skin in the game take responsibility for their own $s.

The OBR has been with us for a long time under a different name. The missing factor which the OBR fixes is the alignment of the trading banks computer systems with the RB's so they can do an overnight takeover. Except for the "emergency" guarantee (now expired) of the GFC meltdown, there has never been an explicit deposit guarantee here for retail depositors. Covered bonds have muddied the waters even further.
RB and govt say they can isolate problems in a single bank. Don Brash and others think systemic contagion, pull your money out first, ask questions later, would affect all the other banks and make a blanket guarantee essential. Its also nuts to expect people to do due diligence on their bank's balance sheet even assuming its completely accurate.
I can't remember. Is there some fine print you sign when you open a new savings account acknowledging you are an unsecured creditor and not guaranteed to recover all your money in the rare event of receivorship?

"Don Brash and others think systemic contagion"
"Its also nuts"
but isnt that a case of self-responsibility?
Otherwise you sail along expecting a 3rd party to cough up out of their wallet for your gain/position but now loss
I fail to see how thats right.

If you have the accumen and understanding to read all the financial disclosure documents and balance sheets of all the banks and make an informed decison on which one is the safest (assuming they are truthful and not fudged) I suggest you are in a tiny minority. Many people, and businesses, just want a current account for their day to day expenses and a rainy day fund, hardly a case of moral hazard.

I agree about the OBR.....    The unintended consequence will be that it turns depositholders into "skittish Wilderbeast crossing a lion infested plain".....
ie. it actually destabilizes the banking system ...rather than create stability ...which is what the Reserve Bank is supposed to do in regards to prudential policy....
I'll race u to the door AJ... if the time comes        :)

So you are fine with the tax payer paying you out? isnt that a moral hazard?
I'd suggest they will be no more skittish than they should be anyway....
Oh and without the OBR, and the banks doors being closed, how do you plan to eat?  Get power? petrol?
Rabbits might get a bit scarce, until the 22LR is gone....go to bed early and wear out your shoes I guess.

Whos talking about a taxpayer bailout..???   
The Banking system fact...  a public/private enterprise.
Without a Reserve Bank... the Banking system would FAIL..... because.
1/  Leverage.... Banks have more than 20 times debt to equity..
2/ They Borrow short term and lend long term 
3/ They can be like Lemmings ...  they have a history of excess in the good times ... falling over themselves to "lend"..
It is the Reserve Banks job to make sure we have a STABLE Banking system..
Rather coming up with shit ( OBR ) ... to dictate what kind of haircut we should take....  they would be far better off focusing on prudential policy that mitigates ANY possible Bank failure.
The worst nightmare for a Bank ( apart from Bad loans ) a Bank run...
just my view...

"Taxpayer bailout", isnt this just what the RB says the OBR now means doesnt have to happen? So Mr/Dr? Wheeler? ie an intrinsic guarantee that teh Govn will step in.
Are you saying its OK for someone else to pay for your loss? while you take the gains?  Doesnt that make you a bankster but in a smaller way? 
What change before the OBR and after the OBR on a haircut?  There is still a haircut for someone, just with functional seperation the cheque account side stays open and society carries on, if not somewhat staggering. It also means the shareholders and depositors as those making a profit also take the loss and not the faultless.
Bank run, I agree here, is it more or less likely? with the OBR?  If someone panics I'd suggest the difference isnt a huge amount.

People with deposits don't see themselves as investors.  They don't get interest rates that reflect risk like in the finance sector, they get interest rates in theory just above inflation,they don't invest in the banks. Banks are privilaged businesses, if they abuse that privilage then its a major sin. The RB is there to protect banks so depositors and borrowers can sleep in peace, if its fails in its job, then the government has to step in.
  An OBR event would destroy this countries reputation and that of the RB. Capital would pour out, it would be a disaster for us all.
Lets not go there,or have we already suped with the devil?

How do you eat these days without a working bank system?
Other points,
But investors they are. 
Why is it my cost as a tax payer to take someone elses loss because they have blindly ignored the risk?
"they abuse that privilage then its a major sin" totally agree, but they are the ones who should go to (and presently be in) jail for fraud and incompetance.
The RB cant ultimatley protect the banks and depositors the Great Depression should make that obvious.  All the RB can do is make it as resiliant as it can be for likely  situation.
The event itself would destroy the country, not the OBR. 
"suped with the devil"? no idea what you mean here.

then I want more 'Interest' , Or Im taking my money and going else where. You can try a zero deposit banking system for stability.

Then take your money....I have no issue with that.
No where else is safe[r] of course, is there.
Hence why so many people are panicking now they find they cant hide.

The Banking system as it stands is a private enterprise, not a public one.
Privately owned and private manipulated.  

The public have public interest in a monetary system, perhaps even in a banking system.  But outside of places like Iceland it's a war of attrition between the bank owners and the government (that's Government, not the The People).

Thus it's as much "the Reserves Banks job to make sure we have a Stable Banking System" as it is true to say the government are our elected representatives who work for us on our behalf.
  It's really the RB job to do as the government dictates so to keep their own employment cheques, just as it's Governments job to keep the power players happy to keep the government in power.

That's why we see games of brinksmanship rather than solutions to OBR/haircuts.

Risk and return. Supply and demand. They're the real rules.
So(1) isn't an issue as long as they appear to do as they're told the government will write the banks their cheques.
(2) It's about cashflow.
(3) money costs,  they've got to get sales (interest bearing contracts) just like any other revenue seeker.   Small fish are safer, but seldom worth the time/overhead.

Problem is it's so much more profitable for shareholders in a capital focussed economy to Sell Asset and Cash Up than it is to defend market share and have to supply quality goods or services.   This is because the price offered always includes a goodwill projection that the buyers thinks the asset is worth more than the buyer does.  

   Thus the public/consumer at the end always gets the short end of the stick if open-competition is encouraged.   This you will notice is the exact opposite that the government has told us for years about competition being good for the end consumer.  The fundamental is that a buyer will pay more than the seller's valuation, and then seek to recoup the higher cost - often through market dominance.  If the seller refuses then the buyer could build the same structure for same or less than the seller has spent.   A seller who turnsdown a low-ball offer is self-buying (c.f. self insuring)

So you are fine with the tax payer paying you out? isnt that a moral hazard?
Yes indeed, so long as the central banks of Japan and USA continue to debase their currencies at a monthly rate of USD 160 billion. Such indiscriminate printing provides our banks with cheap foreign wholesale finance to overwhelm the risk demands of the local deposit base. At the margin banks lend without due respect to risk because the money available to them is on supply at zero bound cost and the government offers little in the way of restriction - Yes, the taxpayers should pay for electing negligent governments.

The tax payer will indeed be paying, as will future tax payers. 
However I fail to see why the tax payer should bail out the bank's shareholders or depositors. and I also wonder just why there are not a lot of bankers and finance ppl in jail, when there apears to be zero.

Steven....   Think ..."Banking System"...    It is a Public /private institution ..
The System as a whole is a " Pubic Sector" entity... and is the life blood of our economy.
In that context....  the Govt will always step in...
It is the job of the Reserve Bank to make sure it all hangs together.
There is nothing fair or just about the idea of....  "privatizing profits and socializing losses".
It would be unlikely , in todays world, that only an isolated bank would get into trouble..
( eg. compared to the 1980s' BNZ debacle )
My guess is that all the banks would get in the shit....  because they are all doing the same stuff.

"always step in" and so we have that moral hazard.  It also means that the more scuriolous amongst us who may well have done actions that make the system more unstable for their profit have a safe place to hide when their actions cause the event.
Now the OBR steps that also means we get to eat and yes I agree on "all the banks" monolithic structure/sector/ risk profile.  So a seperation of Public v private.

The government has Kiwi Bank to turn into a guaranteed savings depository if it were so inclined. But zero risk would equal zero interest. Anything deposited/invested at a bank (like anywhere else) expecting a return would have to expect some risk and be subject to the OBR. Otherwise you are right, it destabilises the system

but isnt knowing someone else guarantees your money no matter what also de-stabilises?
Really the Q comes around to there are no real consquences for bank CEOs/baords staff to act in anyones best interests but their own.  Which comes back to shareholders and depositors continuing to deal with them.

The RB should be protecting our deposits, banks shouldn't be running ponzi schemes. Someone let the banks run amock they should be responsible, who? the RB and the government.

Thats like saying the Govn and police is responsible for the crimes people commit. So no I dont agree.  Amok? well thats a shareholder and depositor [in-]action, they choose to leave their money with the Bank, if they dont like the Bank's actions they should withdraw.

No its not !

Of course it is as much as any criminal action. The RB wil be held accountable if tehy have not acted sufficiently. The Govn will be held accountable if they have in-adequate legislation. But simply trying to pass through the costs to the tax payer for someone elses gambling is wrong and a moral hazard.

Think of it as digital safe deposit boxes where you can deposit money and pay bills etc from but earn no interest. The government/RB guarantees those accounts and the payment system. If a bank or banks go down that money that individuals and businesses have for their daily transactions is 100% available because it was separated from the banks balance sheet and forms no part of the OBR receivorship. Term deposits etc that earn interest are subject to risk and the OBR and are paid out as the receivors liquidate the banks assets. Yes shareholders would be wiped out. Yes executives and directors should be held to account including possible criminal charges and salary/bonus clawbacks.
The OBR can only work as intended if everyone fully understands their current risk as an unsecured creditor and is realistically placed to make an informed decision on a banks financial position. I contend even experienced accountants would struggle to read and make a informed decision based on what information banks supply to the public. How is Joe Blow supposed to do it?

I think there is a known legal position, unawarness of the law is no defence.  If joe blow cant quantify the risk wtf is he gambling for? and why should  a tax payer cover his gambling when the tax payer has no option?  I mean unlike a depositor or shareholder a tax payer cant exit can it.
I dont agree with your opinion on the OBR can only work if. It simply works, if you odnt understand fully that matters not to the OBR effectiveness in keeping checking accounts open and food still being bought.

It's like Andrew said above. Most people and businesses aren't gambling or investing. They just don't want to keep their money under their mattress and need a transaction account. What are they to do if they can't understand or quantify the "risk" profile of any of the banks? Can you make an objective judgement based on their financial statements?
The payment system and cheque or current accounts can stand outside the rest of the banking system that can be subject to the OBR

Zero risk would equal zero interest. Ah if only that were true. In a world of easy access to bank accounts through internet portals......I'd only need to transfer all my savings from interest/risk bearing accounts to current/cheque/cash accounts that are zero interest bearing in a couple of clicks, and my $ would be safe. I kind of doubt it though.

I think you would at least need to pay the 'rate of inflation', or like you i'd be gone.

I could no longer bear the unrewarded risk of bank term deposits and now invest directly with the government in the form of Treasury Bills

Savings accounts would all be some form of term deposit, preferably with transparent delineation so you knew what your money was being loaned for. Then you could make a more objective assessment of the risk/reward. At the moment it's all in one big pool at the banks discretion. Just the way they like it.

AJ...Is there any chance of posting a link to that 50 acre property..??   curious to see what it looks like

cannot find it on Zillow, its a hill covered in oak trees and pretty poor volcanic soils, had sign of Deer and Bear on it.  My friend is still thinking about buying it. 5 years for planning permission to subdivide around here, keeps the lid on things a bit.

Hugh - we are fooling ourselves if we believe we have freedom in NZ. I have read your "suffocating Bureaucracy and Failed institutions" link information before. It is a shame these issues are not debated in the NZ media more broadly.  Socialsim is like a spider web and we are all flies stuck in it.  Education does not neccesarliy have intelligence built in.
Too many people fear change and that is the only reason they are clinging on to the status quo. The comfort they feel from having the suffocating bureaucracy and institutions in control of everything is like a blanket protecting them. Some of us know the blanket needs laundering and shrunk back to size.
Interestingly enough I have been reading a book on Boston, Portland and Maine areas where I came across the housing value to income ratio of 2.5.
Maybe some very basic calculations showing people the difference in house value to income should be put out there. You know the tell it like your explaining it to a 5 year old scenario.

"Bad time"?
no no no.......never a bad time to build the world biggest PYRAMID! Go Dorkland! 

Absolutely maaaaate!
You can't go wrong with property.
It never ever loses value.

One thing is for certain, it is a good time to write about buying houses in Auckland. Look at the state of it!

Fever sure is hot....

How can it be a bad time when interest rates are so low, stock very low and construction apparently stalled, migration turning high, unemployment about the lowest in the world.
Prices are gradually increasing at a sustainable rate - although there is no shock horror headline in that.

You want Shock Horror?

Housing costs high, pay low
"New Zealanders spend more of their income on housing than any other developed country in the OECD apart from heavily indebted Greece, a report reveals.
And although income disparities have decreased slightly, household disposable incomes in New Zealand remain below the Organisation for Economic Co-operation and Development average.
The findings are part of the OECD's wellbeing report - titled How's Life? - which ranks the group's 34 countries across 11 indicators.
The report, released yesterday, shows the cost of housing as a proportion of income in New Zealand is the second-highest in the OECD, with 26 per cent of the average household's income going towards housing.
Housing costs include rent, mortgage payments, power, water, gas and maintenance costs."
There is nothing remotely sustainable in 10%+ price rises from an historic high base, historic low interest rates and with ROI of sub 4%. 

Does every other OECD country include apartments, flats and terraced houses in their average price statistics, yes.  NZ does not. 
Does every other OECD country have a mixed range of apartments, flats, terraced houses, semi-detached houses and detached house, yes.  NZ does not. 
What would the affordability calculations of every other OECD country look like if they excluded every other property type other than detached houses.....   much, much higher than NZ. 
Your not comparing apples with apples.
When NZ finally increases the supply of these more affordable housing types the average prices will go down.  Not because the cost of a detached house has gone down but because there are more cheap options. 

Kiwidave - SK is only pointing out why there will be price increases in housing.
The causes are not being dealt with........SK knows this.
The OECD can write as many reports as it likes but it won't make any difference.
I am sure SK would be writing something very different if the signals being provided were changed to the downside. It is all in the fundamentals.

Your "blast furnace" comment  is funny....really...
but you cant see what you advocate is just what you complain about.

You have to admit that houses are still relatively cheap in NZ.
Compared to Sydney, Melbourne, London, HongKong etc.
There is no bubble.
The value is priced by the market relating to NZ being a prosperous, 1st world, democratic, with good government, English-speaking, good heritage of Judeo-Christian values/ethics, sparsely populated, good roading, good infrastructure, great tertiary education, good schools, great outdoor spaces, beaches, temperate climate, safe neighbourhoods, etc etc   -  this is what you are paying for on a global stage.
Are immigrants lining up to live in Vietnam, Russia, Cuba, Zimababwe,  etc?  They are not nice places to live (as a longterm native on a local income & local accommodation)
Why would millions of people give anything to come & live in NZ?   For our living conditions in all aspects.  That is part of your house price.

NZ average house price = $452,535
UK average house price = GBP167,063 = $322,364

Please don't confuse cities with a whole country. The UK as whole is 8.2% flats and 27.1% terraced houses (although not all of these are sausage units) . NZ as a whole is 81.3% standalone houses.

After some further digging, I have found that the REINZ price includes all dwelling types and gives an average house price of $400,000 which is still way above the UK average.
Sorry to burst your bubble (pun intended!).

Kiwimm, your changing stats to suit your argument. 
QV "Scope of output: freehold open market sales – detached houses only" which is the figure you linked to. 
REINZ includes apartment but they still make up a tiny fraction of the Auckland market.  In other cities they make up the majority of dwellings. 
You've got to compare apples with apples.  You go away and find me the price of a 4 bed villa on a quarter acre in zone 1 in London (if that's even possible).  I'll find the same in Auckland then we can compare. 

Precisely MB. And to add to your list of pros, Auckland is now an international city. It wasn't just ten or 20 years ago. Back then it was a big country town. Now it is a thriving, almost bustling, little city. Imagine what it will be like in 10 more years! In a globalised world there is going to be a price to pay to live in such a great place. 

Regression to the mean says that house prices will fall (and probably overshoot) to the real mean value. Feel free to gamble on the date of this occurrence but you should recognise that it is a gamble. Caveat emptor.

So where will the Auckland Property Market be in a Years time?
Still immigration and low interest rates and a lack of building getting done and internal NZ shift to the Big Smoke...
Auckland Council still stifling growth, foreign money getting stashed here out of harms way
Very little development finance around........

So where will the Auckland Property Market be in a Years time?
Still immigration and low interest rates and a lack of building getting done and internal NZ shift to the Big Smoke...
Auckland Council still stifling growth, foreign money getting stashed here out of harms way
Very little development finance around........

So where will the Auckland Property Market be in a Years time?
Still immigration and low interest rates and a lack of building getting done and internal NZ shift to the Big Smoke...
Auckland Council still stifling growth, foreign money getting stashed here out of harms way
Very little development finance around........

So where will the Auckland Property Market be in a Years time?
Still immigration and low interest rates and a lack of building getting done and internal NZ shift to the Big Smoke...
Auckland Council still stifling growth, foreign money getting stashed here out of harms way
Very little development finance around........