Reserve Bank Deputy Governor sees tighter LVR rules for housing investors being introduced before end of year; debt to income ratios 'might also have a role'; banks may be asked to hold more capital

Reserve Bank Deputy Governor sees tighter LVR rules for housing investors being introduced before end of year; debt to income ratios 'might also have a role'; banks may be asked to hold more capital

By David Hargreaves

The Reserve Bank is signalling that it will likely introduce a single nationwide LVR rule for housing investors before the end of the year - replacing the current Auckland-only rule.

And the RBNZ says it is also considering getting banks to hold more capital against their mortgage commitments. Also, it is still working on potential introduction of debt to income ratios.

The current Auckland-centric investor LVR rule requires investors to have a deposit of 30%. There's no suggestion at this stage what the new nationwide limit will be set at.

These measures against the housing market were signposted in a speech by RBNZ Deputy Governor Grant Spencer, who is also the bank's Head of Financial Stability.

He also suggested the Government might want to look at further taxation measures in respect of housing investment - and also to tweak the current migration settings, which are seeing net migration of around 70,000 people per year.

“The longer the [housing] boom continues, the more likely we will see a severe correction that could pose real risks to the financial system and broader economy,” Spencer said.

The full speech can be read here.

Meanwhile ANZ chief economist Cameron Bagrie and senior economist Philip Borkin had this immediate response to the speech.

While the speech doesn't give concrete proposals, it gives broad hints toward policies that will very likely be imposed.

The RBNZ followed a similar strategy with its original introduction of LVR 'speed limits' in 2013, in which Spencer first gave a speech giving a broad 'hint' and then Governor Graeme Wheeler followed up shortly after with firm proposals - but proposals that were very much in line with what his deputy had earlier indicated.

This suggests that the broad 'hints' Spencer has given in this speech will be adopted - particularly in respect of a single LVR rule for investors nationwide, the need for banks to hold more capital against mortgages and the debt-to-income ratios. However, the fact that nothing concrete was announced in the speech saw the already high Kiwi dollar surge by another half an American cent to be close to US72c.

Single LVR investor rule

On the LVR rule, Spencer said: "Given the growing housing market pressures across the country, one approach would be to adopt a single national LVR limit for investors. Given that the banks have much of the relevant systems work in place, we expect that such a measure could potentially be introduced by the end of the year."

Spencer said a new debt-to-income (DTI) speed limit would "complement the LVR requirements by improving the resilience of household balance sheets to income or interest rate shocks".

"A DTI limit would make defaults less likely in a downturn. Furthermore, a DTI and LVR in combination would constrain credit growth and house price pressures on a more sustainable basis than would LVRs alone. A DTI would be a new instrument that would need to be agreed with the Minister of Finance under the Memorandum of Understanding on Macro-prudential Policy. Adoption would require more analysis and systems preparation than an extended LVR. We intend to consult with the banks on the viability of a DTI policy and data issues before making a decision on implementation."

Capital overlay for banks

On the third potential course of action, getting banks to hold more capital, or a so-called "housing capital overlay", Spencer said the RBNZ had already indicated that it will be conducting a full review of bank capital requirements over the coming year.

"We will consider whether macro-prudential overlays have a role to play as part of that process."

Over a year ago now, Spencer gave a speech in which he virtually implored the Government to take some action on the housing market.

Now, in his latest speech, Spencer has picked up on this theme, stressing that the RBNZ and its efforts are just part of a "team".

He cites the various efforts being made at the moment to address housing supply and some of the progress being made in this area.

Hint to the Government on tax and immigration

But then he goes on to say that "two areas for on-going consideration include tax and migration policy".

He said the implementation of the bright line test for housing investors introduced in October last year had helped curb short-term speculative activity in the housing market. 

"Consideration might be given to further reducing the tax advantage of investing in residential housing."

Then this on immigration: "We cannot ignore that the 160,000 net inflow of permanent and long-term migrants over the last three years has generated an unprecedented increase in the population and a significant boost to housing demand.

"Given the strong influence of departing and returning New Zealanders in the total numbers, it will never be possible to fine-tune the overall level of migration or smooth out the migration cycle.

"However, there may be merit in reviewing whether migration policy is securing the number and composition of skills intended.

"While any adjustments would operate at the margin, they could over time help to moderate the housing market imbalance."

This is the media release issued by the Reserve Bank highlighting the speech:

Growing imbalances in the housing market require policy action on a number of fronts, Reserve Bank Deputy Governor Grant Spencer said today.

Speaking to the Wellington Branch of the New Zealand Institute of Valuers, Mr Spencer said that a range of factors had contributed to strong demand for housing, including record low interest rates, rising credit growth, and population increases.

“While housing demand has been strong, the housing supply response has been constrained by rigid planning and consent processes, community preferences in respect of housing density, inefficiencies in the building industry, and infrastructure development constraints around financing and resource consents.

“House price pressures have re-emerged in Auckland following an easing in late 2015 and have also strengthened across other regions.

“The longer the boom continues, the more likely we will see a severe correction that could pose real risks to the financial system and broader economy.”

Mr Spencer said a broad range of initiatives is necessary to increase the long-term housing supply response, particularly in Auckland, and to help ensure housing demand is kept in line with supply capacity.

“The Reserve Bank has no direct influence over supply, but can influence housing demand through the credit channel.  In this regard, we see the Reserve Bank as part of a team effort.

“A dominant feature of the housing resurgence has been an increase in investor activity, which increases the risk inherent in the current housing cycle.

“The Reserve Bank is considering tightening Loan-to-Value Ratios (LVRs) further to counter the growing influence of investor demand in Auckland and other regions, and to further bolster bank balance sheets against fallout from a housing market downturn.  Such a measure could potentially be introduced by the end of the year.

“Limits on Debt-to-Income ratios (DTIs) might also have a role to play but would be a new instrument that would have to be agreed by the Minister of Finance under the Memorandum of Understanding on Macro-prudential policy.  Further investigation of this option will be undertaken.”


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?

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Just heard RNZ, Nothing tangible or concise YET again from the RBNZ. Just pathetic as predicted. "Damp squid" report.

more "looking", "considering" doing F all to end of year!

To be fair they are just keeping in line with the theme of the JK and the National party (pathetic).

The Prime Minister and the local councils would like everyone to blame the reserve bank, but it's not the reserve banks fault we're in this situation. The reserve bank is only trying to ensure we don't experience a financial meltdown....

Cover up by RBNZ and national party again to talk and do nothing. Talk also as are forced and want to show that they care.

What are they warning of and to whom, to the people who already know and who themdelves are warning ro RBNZ and National govt to act.

Funny situation only becuase JK does not want to act as is in a delima if act rising house price will stop and he said that rising house price in the interest of country.

Si basically RBNZ should warn JK and gang instead to people of NZ as we know and understan.

Next time RBNZ do not lecture but act

Expect to see a surge in prices over the next 6 months due to this Reserve Bank announcement.

I still haven't seen anything being implemented, or planned to be implemented that will slow the house price increases.

Don't be surprised if the average Auckland house price hits $2 million in a few years time.

I've said it before but nobody seems to want to get onboard with it.

It is known that Wheeler is going to sit on his hands and do nothing. He has become like a possum caught in the headlights. His speech yesterday sent the NZD higher again. He is actually damaging the country every time he opens his mouth.

Remove Governor Wheeler from RBNZ

3 words from existing property owners: Thank you RBNZ.

50% LVR in Auckland and 70% everywhere else, or will Hamilton and Tauranga be caught in the Auckland net?

Time for the rest of NZ to thank Auckland, you think ?

I'm not that inclined to thank anyone who just passed on a serious case of the flu to me


Also he may have said: The RB has no influence on the amount of increased immigration, etc

There appears to be only ONE way to force the RBNZ and banks hands into acting. Take out as many deposits as possible from their grasp. It can be done as a collective.

When he said immigrant basically is admitting overseas fund but can not say openly but sending signal to people and jk

What a joke. What are they waiting for. Tits on a bull

Making it bloody clear just who is responsible for this and who has the tools to fix it. I imagine he might have pretty offended at being sicced onto investors the other day as if he was just Key's trained attack dog.

Yep, JK loads the gun, then goads Wheeler into pulling the trigger

Exactly!!! Its all very.... we may...... or we are looking at....

Hopefully new LVRs will apply to all renewals of borrowings as they mature.
That would release product to the market and stop the investor market in its tracks.

I can't see that happening. What do you mean by renewal? Because the interest term coming up for renewal is not really renewal of the mortgage technically.

So you're a lawyer now....

No, just a humble Doctor..
But aren't mortgages taken out on 20, 30 year terms?
It's silly for people to suggest these things be retroactively applied. The powers that be don't want to crash the market, they want people to have mortgages, and for people to pay their mortgages as stress free as possible. They want it to be a win win situation. They don't want to wipe out people's equity. They want people to get capital gains just not so much that it crashes the economy when a downturn comes. A win for them will be house price inflation of 2-4%. They want a milder version of the status quo..

Hang on I thought you said you were a systems engineer. While the powers that be may not want a crash - it may be out of their control. Banks have the right to update their terms and conditions. While a mortgage may be taken out for 20 or 30 years - New Zealanders have a habit of fixing for only two or three years - when it rolls over does it constitute a new loan......with new terms and conditions.

Yeah, and can't banks call it in at that time too?

I recall the good doctor was a smarmy piece of the proverbial. I am sure you could have picked a better namesake Zachary

No, when a fixed term matures it is NOT a new loan, only when the entire loan term matures, i.e 25, 30 years

Not correct. The contracted term is for 10,15,20,25 or 30 years but the fixed interest rate term is within the loan contract and fixing or going onto floating is not new lending and does not need to be reapproved. Otherwise every time loan comes off fixed you would need to reprove your income. fill out SoP etc.

Based on that logic you will face the new restrictions if you seek to move banks. Banks would then price in the captured market and gouge those owners who could not meet the new LVRs so are stuck with their current bank.

However, it appears that there is an exemption for existing loans assuming the RBNZ applies the same position it has taken previously when introducing LVR restrictions where it stated:

"Refinancing: the refinancing of existing residential mortgage loans for all borrower types can be exempt from high LVR restrictions, subject to certain conditions."


AFAIK every mortgage includes terms which allow the lender to terminate at short notice and may change terms particularly at a time of normal resetting. Hence a RBNZ directive that applied restrictions could easily be implemented at the time suggested.
Of course I have not had a mortgage since the 1980's so maybe things have changed.


I doubt it - more likely things are worse....

Basil wrote: Hopefully new LVRs will apply to all renewals of borrowings as they mature.

The new LVRs mentioned in the speech. They are not going to make banks consider the interest renewals as new mortgages. That would be stupid. Banks want to look after their customers. Their customers are cash cows. Slapping my hand on my forehead right now!

What in the mortgage document and wants in the loan contract is different. Yes things have changed a lot since the 1980's.

Sorry double post .......but I will leave the smiley

Means rollover, or, mortgage reset


Is there a legal reason for this being signaled before being implemented? Because surely it adds fuel to the fire to signal it.

Makes one wonder, truly.

You make a good point indeed. It does just become preemptive scare tactics to fuel an even bigger debt binge for banks to profit off. Which might be the actual intent. Its just ridiculous, you either act or don't act. Look at the US FED for example. They too use this ploy. Almost a decade of trying to convince everyone they will be putting up IR's. Now, no one believes a thing they say.


Is there any word stronger than "pathetic"?
Talk about much ado about nothing.
The boom continues and guarantees there will be tears.


House prices will rocket for the next 6 months in Auckland & elsewhere in anticipation.

Thats what govt wants and knows otherwise instead of talk would have implimented.

Otherwise what is the logic and meaning of warning. Tell us something new.

When asked in psrliment JK said that RBNZ is about to announce some measures to target investors - where are they.

Another delaying and cover up by JK, whose only survival and purpose of being in NZ parliment is to help his asian friends.

This is pretty much what I predicted.
Excellent speech and proposals by the Reserve Bank Deputy Governor.
This calls for a toast.

which part, most likely the parts national as government will NEVER do
Two areas for on-going consideration include tax and migration policy
Consideration might be given to further reducing the tax advantage of investing in residential housing.
there may be merit in reviewing whether migration policy is securing the number and composition of skills intended


The message to Government is pretty clear;

The resulting housing market imbalance has been exacerbated by New Zealanders’ on-going preference for investment in bricks and mortar over financial investments, due in part to the ready availability of credit and a tax system that favours debt funded capital gains.


Two areas for ongoing consideration include tax and migration policy. On the tax front, the implementation of the bright line test for housing investors introduced in October last year has helped curb short-term speculative activity in the housing market. Consideration might be given to further reducing the tax advantage of investing in residential housing.

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Again only talk and no action. What are they waiting for.

National wants to delay as much as possible and next year being election year is only talk now and action for end of the year or next year.

Last time also RBNZ gave warning and today was same only today accepted that it could be stoped by comprehensive measure of lvr, income to debt ratio, immigrant ( non residence, i understand) and rax measures. What sll he sat was correct but WHY no action and only talk.

The RBNZ will talk further with the banks in regards to debt to income measures. Obviously our offshore banks would be happy if they could not create so much debt and the prospect of reduced profits. The RBNZ is simply awaiting an external shock before it is willing to act. I would happily support Big Daddy for Chairman of the Reserve Bank. To be honest Graham Wheeler and his sidekicks have achieved nothing during this term , not only or limited to its worrying use of the current macroprudential tools, interest rate settings, fx intervention . NZD has risen sharply .

Obviously you've never tried filling a bucket with water while your "mate" drills holes in the bottom

So they are not taking up the challenge in Key's dare at this time ?


I don't understand all the criticism against the RBNZ. It's not their job to fix NZs problems but to make sure banks make the most money with the least risk. The govt is shit, that's a different story.

True, but they don't seem to be in any hurry to do their own job.

We risk going down the Japan route, where the BoJ talks about how it doesn't like stuff but then makes absolutely no meaningful change whatsoever and pisses away time and money while acknowledging the problem without solving it.


Too Little Too Late: Things are shaky and feeling very very dangerous

The issue is that NZ does not have an economic plan, only a political plan to keep the Nats in power.

Viz, Pump up property prices with open immigration boarders, everyone feels wealthier, create a boom in the building industry. on the way there is a bit of collateral damage (first time house buyers, renters etc) but these guys most likely voted for the greens or labour.

However this can turn nasty very quickly......

In the UK 5 property trusts have frozen withdrawls,

# the Italian banks are giving depositors their money back, because of negative interest rates.

# The true "elephant in the room", namely Deutsche Bank's $75 trillion Euros in derivatives is 20 times bigger than Germany's GDP, and 5 times bigger than the entire economic output of the Eurozone. (how do you get to do that?)

# in the US the property markets in San Fran and New York are topping out.

# China's debt is 3 times it GDP and is shakey shakey

# gold is moving and people who disliked 10 year 1.5% govt bonds are now in love with them

But what's worse is NZ banks don't offer deposit insurance on your savings.

All NZ needs is interest rates to increase by 1-2% and the market will crash. (heard Bill English say this himself)

So the Reserve Banks actions smack of too little too late.

My bet is that JK will lose the election over this and retire to Hawaii.

If that looks certain look to National implementing policy that is unpopular e.g raising the retirement age.

National will never do that... they know it will drive the senior vote into Winston's willing bosom to suckle on the Gold Card and whatever other goodies he can sprinkle into their greedy old hands.

We still have a budget surplus and a debt to GDP ratio that others dream of so relatively not too bad. Things are a lot worse in the almost every other country in the world.
At this point of time I would prefer to be living here than any other country.

Tool little is also talk ànd no action.


So can we take it that the national masterplan is for those responsible to flap their jaws and do nothing, then duck for cover and run away when this epic fustercluck implodes and takes what's left of the real economy with it? Well done, New Zealand.

How correct kakapao.

Now national is totaly exposed. No amount of cover up and gimmic will work. How come opposition and so called experts silent. Would like to hear everyones view

So, NZ is not TBTF ?

Can see us passing through the TBTF zone and out the other side into the Too FUBARed To Survive zone.

I reckon the banks will be sniffing for more equity on investment lending as rates roll over or charging increased interest rates to cover their extra capital requirement position. Leveraged investors will be stuffed as the banks will know that threats to swap lending providers won't come to anything as they've become untouchable. Restrictions on IO loans in the wind too methinks.


All talk no action government

Reserve bank went from best in the world to worst !!

More analysis ... lol.... how long can they keep looking at the same figures. It's going up lads....
debts growing 8% a year and is at 216bn approx .
... investors buying 46% of properties .....
39% properties bought by foreign persons ( offshore foreigners, foreign students, foreign temp workers)
Auckland prices are up 500k from 2007 when JK stated they were at crisis level . Now approaching 1m
Majority loans interest only by investors
Investors buying 80% of properties in some suburbs
NZ has one the highest priced houses relative to incomes in the world

Reserve bank far too soft on the banks.... grow some balls and act wheeler

Telling Wheeler to act and "grow some balls" shows the little you understand about the issue.
Seriously, what do you want the RBNZ to do? Shut out all the New Zealand based investors and let the foreign capital sustain the market at its current or higher levels? Because that is the only further thing it can realistically do, at this point if they are talking higher LVRs.

The RBNZ is not the root of the issue, so any policy it implements is just going to be an exercise in futility for the long term.

At its core, the issue is one of supply. Arguably, also, demand/immigration. The RBNZ has no control over these factors. These lie solely in the realm of central and local government.
Without addressing these issues directly, the problem will persist ad infinitum. No amount of monetary policy will cure the issue.


"Immigration has generated an unprecedented increase in the population and a significant boost to housing demand" - straight from Grant Spencer - Reserve Bank Deputy Governor.
It is time to shut the door on migrants for at least 2 years and ban foreign students from buying on behalf of the family back in China.


Agree if you have a fire it doesn't make sense to pour petrol onto it and then double the size of the fire brigade.

Just like the housing crisis, it doesn't make sense to pour 200 new people a day into crushing Auckland.

Our new resident immigration is 3 times the rate of the UK on a per capita basis, and look what's happened there.

Saw an article that Chinesse Bank have decided to give finance to foriegn investor in NZ, which other bank have decided to stop and guess who is the chairman in that china bank - Don Brash.

What other proof that we need that how sold out nationsl is to chinesse and is also giving away nz.


So again, all this highlights the quite obvious intended disconnect between general inflation and house price inflation. And the result? 100% Pure flawed economics. Just imagine if we set the OCR on the sole basis of house price inflation. Pretty quick popping of the bubble. Of course ... in conjunction with closing our migrant gates or access to foreign investors. Not hard to do, if one has no conflicts of interest eh

I can't agree more re housing inflation excluded from CPI.I have been saying it for a decade. It just became a western world standard.

all a bunch of crooks lining their own pockets

We really need 100 thousand + to hit the streets of Auckland or Wellington in a display of civil disobedience. Last time I recall that many people was during the Employment Contracts Act (1991)era. I believed National ignored that also. Better make it 500 thou and a few mayday tactics

So Ntional is plaining their future by helping their friends. Do not expect anything from givt as will try everything to do nothing.

this article below from a few months back at NBR argued for:
- planning reform
- GST discounts on new housing
- reconsideration of immigration and foreign investment
- new approaches to infrastructure funding

Seems that gradually each approach is being taken onboard or mentioned by those in power, although no political mention on GST?.

Even someone as ignorant as Donkey must realise that if all income is being sent to the property market (rents and mortgages) that peoples discretionary income will fall and all other industries will suffer as a result. Surely someone in the National party must be able to comprehend this basic economic concept?

Why the retail and other industry lobbyists are so determined to eliminate their own customer base by driving down wages I'll never know.

Diverting more and more of the country's collective income into interest payments and rent must be gutting the GST take.

Why do you think a currency trader for one of the most corrupt US banks cares about that?

Sooner they bring in the restrictions the better. Prices are likely to remain elevated for the next 2/3 years due to the severe shortage so the more restrictions that come in to protect people going into negative equity the better. They still need to halt the banks issuing interest only mortgages as that is an additional risk.

Just remember, the tools being suggested are to protect the economy from ruin, not to help first home buyers.
They know we may well be on the precipice of a disaster..

Place your for the Bears .

"Just remember, the tools being suggested are to protect the economy from ruin"

Ahh, no they are to protect the 'banks' from ruin. Remember the US etc in 2008? Banks got saved, profited even more, and the economy and people had their lives, pensions, and futures "ruined".

As for Lehman and Bears...they were mere scapegoats

“The longer the boom continues, the more likely we will see a severe correction that could pose real risks to the financial system and broader economy.
RBNZ has stated their position.

Never bet against the house.

The RBNZ's job is not to crush the housing market so you whiners can get a bargain. It is to protect us all from a crisis. The RB wants to strengthen the bank's balance sheets and that is good and sound. It needs to be done in a proper and informed manner, not abruptly (the whiners on this site will be the 1st to complain if a bad policy is introduced because it has been rushed) .
I say well done to the RBNZ.

yep, not many property investors commenting on this site...which is ironic considering that this is a property website?!

They are too busy buying up large

They will be looking to buy properties next to ones they currently own, so can potentially create a total of more sections when the unitary plan comes into being - assuming the nimby's don't win....

Too little, too late.........

Any idea when interest rates may rise again?

If it is not a speculator for fast money, mum and dad who have bought house for themselves to live wll always be in positive for even when the house price correct, it will move up again after couple of years.

It is speculators who will be hard hit.

They may rise in 7 years time. Unlikely to be above 5% any time soon - more likely to head closer to 3% fixed for 5 years

One of the issues with low interest rates is that the lower they go, and the longer they stay low, the harder it is for them to be raised. i.e. if indebted people are servicing their debt at 8% rates, and they go up to 10%, then that is a 2% rise in rates, but it makes interest payment roughly 20% higher, which most/many would survive.. if interest rates are 2%, and they go up to 4%, it is again only a 2% rise in rates, but it is a 100% increase in interest cost, rather than a 20% increase. If the indebted are just managing to service their debt at 2%, a 100% increase in servicing costs would likely mean many many defaults. In the current circumstances, even a small raise in rates would have a devastating effect. Central banks are going to find it very hard to raise rates for a long time without crashing the whole game.

"banks may be asked to hold more capital"

Well, here's a way to simply encourage that! Force them to put up... INTEREST RATES!

And the government might encourage more real savings and bank deposits by removing the RWT from all bank accounts.

The solutions are and can be many and varied...but our powers that be are all bought and sold.

Not sure how forcing up interest rates will result in more capital (shareholder funds) in Banks.

The RBNZ can apply capital requirement changes (via risk weighting of its assets, i.e. loans out to clients) totally independent of interest rate issues.

Raise interest rates for buying houses up to 8 percent, which is what the rate was a decade ago, and then restrict immigration. Require overseas buyers to only buy leasehold properties, or require that they build. That will do something. The government seems to think that the lower interest rate make houses more affordable, but all it does is allows people to borrow more, thus increasing house prices. They also seem to think they were the reason why interest rates are low, but that isn't the reason, the reason is global, and NZs rates are still higher than the rest of the world, which is why the NZ dollar is still so strong. The house prices have increased up to the limit people can afford to borrow, due to there being a housing shortage. It is a total mess, and the government have been sitting on their hands, when they knew they needed to do something. I feel sort of sorry for people who have purchased houses in Auckland to live in at highly inflated prices, and could be burnt by this if it bursts. But they maybe able to ride it out if they stay in the area for the next 10-20 years.But they had been warned that it was a bubble, as have the banks. Banks don't have to lend as much as they have been.
I also see that credit ratings of Australian banks have gone to negative today which is a major concern, but this was almost missed in the news.

Major banks' credit rating outlook cut to 'negative'
I will be interested to see how quickly they have to raise interest rates

Think everyone should avoid trying to being cute with rates. Way out of NZ's ability to control.
Purhaps should follow lead from big brother across the ditch.
1) A stamp duty on all house sales. First home buyers can apply for exemption.
2) Foreign buyers cannot buy existing houses. But can apply to buy land for build new house within 2yr.
3) Captial gains tax on all sales except the one house which you live in. (will stop all sorts of problems)
Sadly until these types of measures implemented. Then Kiwis are selling out genuine young familes hopes of basic home of their own. Start protecting and helping them, stop selling them out.

Correct Mathew but remember that it is national government - for the rich! By the rich, to the rich.

Fine, so are Labour advocating your list? If they were I and many others would vote them in

Matthew spot on most sensible post this year !!!!

Forget interest rates as increasing those will hurt business and exporters especially as the rest of the developed world have low rates.

Stamp duty on investors... capital gains on all investment properties and second homes etc

No difference between speculators and investors... stupid term only kiwis use in regards to BTL investing. All investors are speculators.... they carry risk.and chase yield either rental or capital gains...

Follow our neighbour Australia

The problem is that the market is so precarious and so reliant on crazy levels of debt that one prod and it will come tumbling down. The government and RBNZ know that and are chucking responsibility back and forth between them like a hot potato. My prediction is that it will be John Keys downfall when it inevitably comes down as he never did anything about it.

You're bang on

Immigration and foreign investment are still the elephant in the room. RBNZ identify them, but National refuse to acknowledge that these are the grass roots of our crisis let alone that our economy is on the cliff face.
Meanwhile Labor and Greens are on honeymoon and talk about buying houses for the homeless which will just change who is homeless.
Welcome to NZ everybody, the more the merrier. Free healthcare, free infrastructure, cheap electricity, free education, get a benefit, bring your oldies and have a great lifestyle compared to where you've come from.
You can even buy a business with high cash flow like a dairy or $2 shop and dodge tax or just buy some houses and we will rent them off you. We will even top the rent up if the tenant can't afford to live in your house.

that's the problem, national, labour and the greens will not touch immigration in any meaningful way.
national and labour will only pay lip service to it, and if either raise as an issue the other would scream racism
the greens would open the door wider.
NZ first would cut but all other parties will shout them down as racist helped along by MSM
in saying that the topic has raised its head thanks to the RBNZ and I will be interested to see if NZ first benefit in the polls

Tony Alsxander made an interesting point earlier in the week that while there is a lot of anti government talk there are a lot of people who are happy with thier house price increases who are keeping quiet. Wonder if he had this site in mind. We will know the truth come the election.

the polls and the commentators got brexit wrong
the polls and the commentators got the aussie election wrong
waiting for the US
I suggest the opposite the silent are peeded off with those in charge not doing anything to solve problems

mate, the government cant solve your problems, that's up to you...

I don't have problems, I am one of the haves, don't owe anyone money never have, came from a low wage family and made my own way to freehold and income to live off without a bean from the government.
but I put a lot of that down to being born at the right time to take advantage of what was happening.
I feel very sorry for todays young that come from the same back round that will not have my opportunities

Humbly declaring their financial success is because of ‘greater opportunity’ earlier in their lives is becoming the default apology position of BBrs, in response to the angry voice of some XYrs. Two thirds of retirees depend on subsistence level govt super for almost all of their income, with a house their only asset. The mythical fat cat boomer is a minority species. Most BBrs had the opportunity to take advantage of the same opportunities to some extent but couldn’t be bothered, were too distracted by life or were risk averse. Good on you for doing so. You will have likely helped to build a better economic future for NZ by investing prudently. An apologist attitude is not required. Some XYr’s believe we BBrs should renounce our greedy avarice, don sackcloth and piteously wail for their forgiveness. But their adult lives are just beginning and there is every likelihood they will be presented with similar opportunities as we BBrs expire and they inherit the earth.

Totaly agree middleman. Babyboomers built and paid for most of this countries infrastructure. The XYrs inherit that infrastructure just by being born here. Hydro dams, roads, bridges, hospitals etc etc are not the natural landscape although we take these structures totally for granted. Don't begrudge the BBers their day in the sun, they earned it and paid taxes that paid for the countries infrastructure and were promised paid retirement. Superannuation. Thanks for a great country BBers.

Even the bookies got Brexit so wrong. I'm still licking my wounds after paying them heed. Ruinous.

I think we will see a strong 18 to 30 year old voter turnout at the next election and they sure ain't gonna be voting for Shonkey.

they are starting to become active on social media, will be interesting to see if they get out to vote

I certainly hope so. I wish more of them had turned up for the Brexit vote.

So is JK just playing the game? Let things continue to boil away with talk of "we may do this" or "we are looking at this" then come election year we suddenly see some action like cutting immigration numbers, restrictions on lending/investing etc and whamo, it appears JK does have this under control and things will be ok, lets vote for him! Of course it will be to late by a long shot and no one will save the day. I don't know, either the govt is incredibly stupid, just doesn't give a s@#$t or I am missing something. It's to late for the RBNZ, this needs govt intervention.

Let us all remember that the PM does not want house prices to drop - "Crazy". Therefore, nothing will change until the voters want change. Perhaps those with houses will realize that their children and grandchildren will be locked out of any future while their retire comfortably. I wouldn't hold my breath on baby-boomers thinking about anyone but themselves. It looks like if you don't have a house time to get out of Auckland and probably out of NZ.

I would have thought one very effective thing that the reserve bank could do would be to heavily raise the capital requirements for the NZ banks. This would:
1 Raise the bank margins substantially. Thus increasing mortgage rates without raising deposit interest rates and thereby our currency. (it may even lower deposit rates and thereby the currency.
2 Force the banks to accumulate a fund to buffer the effects of a bubble crash and put the cost of that where it belongs, i.e. out of the pockets of the over exuberant borrowers instead of the poor old savers in the event of an OBR event.
3 Stop the flow of funds pouring out of NZ to Australia. In the event of a crash it this money will be used to prop up the Australian banks while their NZ subsidiaries and depositors will never see a penny of it.

Interesting comment. Not sure I understand the mechanisms you talk about. Can you explain why raising the Bank Capital requirements would improve their margins? I do understand that they will need to have more capital in reserve to back up their loan portfolio, I assume that this is decided on a percentage basis as opposed to a straight sum, else the banks will just increase their lending? #2 why wouldn't the banks put the cost onto depositor?
Totally agree with #3

2 is to keep the profit level at the same amount, because they would lend less (leverage)
those bloody shareholders get looked after first when it comes to banks, the old story banks always win
Disclaimer hold in all the big 4

It would force them to raise their margins to generate the cash required to fund the increased capital, which would then have to stay in the company and not be passed onto the parent owner and or shareholders.
Whether they lower deposit or increase loan interest rates is their choice as they do now, but the important thing is that it gives the Reserve Bank a tool to apply pressure to the housing market without necessarily putting upward pressure on the dollar, farmers and exporters (with reasonable levels of equity in their businesses).

Makes sense, but in increasing their margins they can raise loan interest rates, which many argue for, but they could also reduce their deposit rates, which is in effect putting the cost on the depositor, couldn't they? It would tend to have the effect of motivating the depositor to move to another bank, which would be negative for a bunch of reasons?

you may have noticed that all the banks have already put much of the cost on depositors by decreasing their savings interest rates considerably within the last year - hence helping the banks fuel the housing bubble. Depositors are getting 2 or 3% return, which is taxed at source. And depositors take risk of massive haircuts if banks get into financial trouble, thanks to the RBNZ's unique OBR scheme. Overseas lenders get protected by covered bonds - and the parent Australian banks are able to milk their NZ subsidiaries in the meanwhile with RBNZ light handed regulations.

Depositors are the mugs in this game with growing risks and diminishing returns.

Re lowering deposit rates and shifting banks. That is just competition and the market working. No different to what they do now. I am sure that presently they are giving depositors as little as possible. But they still have to compete to get them.

Controlling our immigration is such an obvious thing that every one can see (even the Reserve Bank governor). It is interesting that Labour are not saying anything on the subject so one suspects that they would be just as bad as the lot in power. After all they started it anyway. I am beginning to wonder if the government has signed away our ability to control immigration as part of some international agreement, the same way it has signed away our right to prevent foreign purchasers and or charge them differential taxes to discourage them. (despite having been lied to by Key claiming that we could) Maybe the reason that the opposition are so quite is because they know the fine print to these deals and were a party to them.

the labour leader did say he would cap immigration and come down on low skill jobs but got shouted down as racist by all even within his own party

That happened because Little dumbly picked a specific group as an example. And a sensitive one for hordes of NZrs who like to dine out on ethnic food. Sad really, because the selection process for immigration is a debate that urgently needs to happen.

How can that be racist. Those provisions would apply to people of every colour, creed and from all countries equally. A pretty immature knee jerk reaction from people who are supposed to be wiser and more considered than average.
However if that is the calibre and mind set of Labour, Winston Peters is the only logical choice left to voters. But will he follow through or is he just full of vote catching rhetoric.

I can't believe how out of touch with the mood of the people (that matter) Labour and Greens rank and file are. They are sort of paralyzed.

Add the Nats to the list Zach.

Winston has always been true to controlling immigration. When he gets to be king maker I think even John Key will embrace controlling immigration because then he can do it without losing face and I am sure he can now recognize the damage done. Just doesn't want to own it.
Labor also wants to control immigration but can't quite say it.
The next government has a huge liability of infrastructure to build. The legacy of 160,000 population growth in 3 years is the equivalent of 3 Whangarei cities. Spread around the country evenly, the country could have absorbed these people, but as most growth went to Auckland the city is now gridlocked and needing tens of billions of $$ to supply sewerage, stormwater, roading etc and hey thats not even to mention that this many people need a hospital and schools.

Barry Soper is completely clueless

Wanting a limit on immigration is not racism. The US have had a quota system for years. NZ problem is they bring in too many low skilled migrants and not enough skilled.

Three times the immigration rate of the UK ...when housing is tight and infrastructure is creaking doesn't sound like a smart move.

The government LOVES immigration as it means higher GDP and therefore SHONKEY gets to tick off his banker type metrics... forgetting/ignoring that GDP per capita has barely moved...

A economy driven off Immigration, Housing and a city rebuild..... doesn't sound sustainable...

correct as you increase the population you have to increase government spending on infastructure to keep pace. if GDP does not rise then the level of income to expenses for the government stagnates
so you end up like the mouse on the wheel going faster and faster but getting nowwhere

You're spot on. So is it the advisers to the Government are not smart enough to figure it out, or the decision makers who can implement new policy to stop it from getting worse are deaf to the advice?

I listened to Stephen Joyce on morning report about his 'tertiary education industry' and about immigration. He talks well on the hoof but really misses the point about the rorts in education and that while providers are making a buck, including government owned ones, it's screwing up everything else
On immigration he talked of skill sets. He doesn't know what everybody else does, that the categories are wrong, with the end result that we importing low skilled people at a great rate.
The man is an economic millstone.

I have close at hand evidence of a government funded tertiary institution where foreign students have been lured to move to NZ (some with families), to enrol in a course that would lead to residency. These claims are completely false and have lead to a great deal of angst among the students with negligible meaningful pastoral care from the institution.
Re Stephen Joyce. I sometimes wonder if he isn't the real source of many of our problems. Is he the real decision maker and power behind the scenes in National?

The advisors want immigration. Higher immigration more gdp. Higher gdp growth the country looks like it's performing well. the gdp per capita hasn't moved. Low skilled workers won't add to that.

Govt needs to stop blaming others such as the reserve bank. For 8 years they have done zilch and now they want to blame wheeler for being too slow.

How about key owns up to the fact he hasn't done anything either. Stamp duty on investors like uk and Australia is required. Only the government can bring that in. Not the reserve bank.

There should be no bright line test, just an intent test. If you bought property with the intention of selling for a gain, you pay tax. Guilty until proven innocent. An interest only loan is a pretty good indicator of intent, not to hard to pick.
At the end of it all - is this country that greedy that after a two year period and say making 200k in capital gains, people feel they shouldn't pay tax on this profit ?
And after this we want free medical care, free education and all the other social benefits, if not for yourself for future generations - it erks me that people don't look beyond their own little sphere of life. Lack of moral fibre and intestinal fortitude in my book.

I have an interest free loan on a property that I am preparing to live in when I retire but renting out currently.

please explain interest free? or that a typo and should be interest only

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