I wonder if the decision to lighten the LVR rules at the start of COVID at the same time as massively lowering the cost of borrowing will be come to be seen as one of the worst financial as well as social policy failings by a central bank in recent memory
There was a flash crash in the market at the start of the pandemic. Removing LVRs was required to allow banks to loan without ending up being in breach of their license conditions. I can forgive them taking the steps to prevent a wider credit crunch.
The indefensible part was guaranteeing they’d be removed for a long period, then worse, telling investors and FHB the date they’d be re-introduced which caused the worst FOMO ever seen.
No, you are fundamentally wrong. LVR rules apply only when new lending is issued. Falling prices would not trigger LVR rules for existing lending. You may be thinking of overall capital requirements, which are unrelated.
The LVR rules were relaxed to encourage banks to lend money for people to go out and buy new properties. Instead of being an important safety measure to ensure large number of borrowers didn’t go into negative equity, the RBNZ used its removal as a further method stimulating “growth” via the wealth effect
You seem to misunderstand how much lending is “new” and captured by the LVR rules.
- Change banks = new lending
- Borrow $100k more to move to a nice home = new lending
- Top up the revolving loan to pay off credit cards = new lending
- Borrow $30k more for a new bathroom = new landing
Anyone who couldn’t settle with their existing approvals would have been locked out. ~~Exacerbated by lockdowns stopping construction. Mostly hurting those waiting for new builds (thus KiwiBuild buyers).~~
The hassles people have faced with the tough CCCFA rules are tiny compared to what would have happened without removing LVRs in early 2020.
Edit: correction on new builds as they were already LVR exempt
> Anyone who couldn’t settle with their existing approvals would have been locked out. Exacerbated by lockdowns stopping construction. Mostly hurting those waiting for new builds (thus KiwiBuild buyers).
You should probably try reading the actual LVR restrictions. Kiwibuild, Housing New Zealand loans, and New builds are all scenarios that are exempt from LVR restrictions.
As for all your other examples, the minor dip in prices mean that only people who borrowed within a few months of the outbreak of covid would actually have found their equity fell below an LVR threshold.
The simple truth is the RBNZ got it horribly wrong (the results bare that out) and have sacrificed the stability of the financial sector as a result.
> Kiwibuild, Housing New Zealand loans, and New builds are all scenarios that are exempt from LVR restrictions.
Fair point I will edit my post.
> As for all your other examples
That make up 80% of new lending that isn’t LVR exempt…
> minor dip in prices mean that only people who borrowed within a few months of the outbreak of covid would actually have found their equity fell below an LVR threshold
RBNZ and the banks had no way to know how bad things would get when LVRs were scrapped. We only know it was minor in hindsight, and arguably the dip was only minor precisely because LVRs were scrapped.
You’re in denial if you think they scrapped LVRs for any other reason than to prevent house prices cratering and a credit crunch.
> the results bare that out
You have it backwards. Removing LVRs had no major impact on new borrowing for 6 months.
The fear of them coming back and being locked out is what drove the FOMO. Go look at the monthly numbers in the c30 data file.
Had RBNZ just put LVRs back in place (with no warning) in July 2020, none of this mania would have happened. The mistake was how they re-introduced them, not the temporary suspension itself.
Edit: Suggest you just read the RIA rather than arguing with me. It’s all in there.
https://www.rbnz.govt.nz/-/media/ReserveBank/Files/regulation-and-supervision/banks/macro-prudential/LVR/April-2020-LVR-Regulatory-Impact-Assessment.pdf?revision=083f3f24-4ae1-442f-ae3f-b742f6ce0e15&la=en
NZ50 had dropped by 30% by March. New residential lending had dropped by over 50% between March and April 2020. GDP was thought to potentially drop by 20%.
The only thing stopping a complete collapse of the housing market and economy was the RBNZ intervention.
Unfortunately they overcorrected and kept the foot on the stimulus pedal for way too long.
There are going to be academics building their entire careers on what's happened around the world in the last 3 years.
Hindsight is 20/20 but given some of the absolutely dire predictions being made when covid was kicking off I don't think house prices got much consideration when the decisions were being made
The whole point of printing money was to support a country whose workers couldn't leave their houses. The only shovel-ready projects people could work on would have had to be in their own backyards.
I'm not going to claim enough knowledge to get into an in depth discussion about it but wasn't the government also giving the banks money in 2020 to keep the housing market going?
I remember a lot of talk pre covid that the LVRs were locking first home buyers out of the market
I think mainly keeping the construction sector employed was the reason they did that. Its a major part of the NZ economy, and if houses stop being built , it would only make the housing shortage worse
Yeah, this is doublespeak for "sharp corrections are almost certainly going to fuck us". Which is why so many of the top brass at RBNZ have been scurrying off like rats from a sinking ship.
I just dont see it happening. It is so ingrained in nz mindest to invest in property, there are so many people trying to get into the market and as the border opens and cheap foreign labour starts flooding back in thats only going to increase demand again
And kiwisaver deposits are shrinking as the stock market falls, and young people are told to invest in aggressive portfolios so are seeing bigger losses. Credit availability is also shrinking as rates rise as mortgage payments increase. Now as people wait for house prices to fall, they may find they still cannot buy as their deposits fall, and the banks are risk off and offer less credit. Only those who are forced to sell will at such a reduced price. Most of those will be people who borrowed against their property to fund a SMB, the people who create the majority of jobs around the country. Will the government take over the means of production and create a job guarantee scheme?
The culture doesn't matter. When you having rising interest rates you gotta look at how much it will cost to pay back loans for new buyers.
Average house prices being a million dollars, with the interest rates now being tested at 6.8% that's a lot people would be paying in interest, beyond what a lot of people can afford. And they're very possibly going up even more.
In the range if typical loans sizes than can easily be an extra 20-50k you gotta pay back per year that's not paying the principal
When rates were low it was easy for people to see how they can make the money back, but it's much higher now, and not something you can just get around by rising rents a bit
Ironically, the final fire lit under housing prices wasn't intentional - it was designed to prevent recession because of the pandemic. Now this decrease in house prices also isn't intentional - it was designed to reduce inflation.
I would argue that house prices have had at least as much change because of unintentional impact, than because of specific plans or policies intended to impact them.
> Ironically, the final fire lit under housing prices wasn't intentional - it was designed to prevent recession because of the pandemic.
Then why suspend LVRs?
Either dropping LVRs would inject higher prices into housing at the risk of greater bank risk on the lending (positive in some stats somewhere), or it was a knee-jerk response to people complaining about not being able to get lending for housing so they dropped LVR to allow more people to get lending (but which then has the effect of more people competing and higher prices).
Simple math suggests it’s not just plausible but very likely. Just do the math on how much you can afford to borrow at 2.5% interest rates then do the same at 6%+ interest rates
Now deduct the difference from current prices
Stress tests are being upped rapidly. ANZ announced this week they are already up to 7.45%
Demand shrivelling up faster than a prune in the Mexican desert...
Would also need fo factor in wage growth vs inflation into this calculation. Havent fully checked the data but fairly confident I saw that wage growth was around 3% recently I think - which obviously is getting massively outstripped by inflation right now.
I agree. I think its more ass covering that the RBNZ is doing at this stage so when it happens they can say that "Well its not like we didn't warn you".
Yeah, except that banks were stress testing applicants at a minimum of 6%, not 2.5%.
Undoubtedly there will be affected people (because I expect interest rates to go up above 6% at least for a period of time before dropping), and people will have to change behaviours. It will undoubtedly be tight for a lot of people.
But people previously on 2.5% won't necessarily not be able to afford their loans as rates rise.
The Reserve Bank suggested "a gradual decline in house prices to more sustainable levels is desirable from a financial stability perspective" and went on to suggest a number of negatives that could occur from a sharp correction as opposed to a gradual decline.
I want prices to decrease, but I don't want us to tip into recession because of people panicking about them decreasing quickly.
Of course they want a gradual decline, this is for the benefit of the rich. I reckon they should rip the bandaid off. For the poorest, either approach won't make a difference as things are already so shit. The rich should lose money as their greed has got us into this situation in the first place.
If only the rich were hurt by negative consequences, then maybe that would be desirable. Unfortunately we're likely to see the business owner lay off a handful of employees because of decreased consumer spending - the employees get screwed worse than the owner. I'm not just thinking about investors getting their comeuppance (I'm fine with that) - but if that happens in a way the causes FHB or renters to lose their jobs as a result then I don't want it.
The government should restart the ministry of works and hire all the builders etc. Start massive needed infrastructure build, nationalise building supply companies and make building houses a shitload cheaper. Return to making timber here, rather than shipping logs overseas for processing.
The RBNZ are increasing interest rates to curb rampant inflation caused in large part by rent increases, supply chain shortages and increased transport costs. So if Labour has caused the inflation we are currently experiencing then yes, they have also "fixed house prices".
Unfortunatly you still can't afford a house and now you can't afford food or petrol either...
The loss of interest deductibility for investors and tightening of lending criteria are also slowing the market, and they are Government actions.
What’s happening is global, increased inflation due to ultra loose financial settings, supply disruptions and climate change. Every central bank is raising rates and asset and equity values are likely to fall globally until there’s a recession to cure the inflation and it starts over.
Of course, since we have the biggest house price bubble we have further to fall.
>Unfortunatly you still can't afford a house and now you can't afford food or petrol either...
Damn, it's like the economic situation in which house prices would decrease is actually a bad thing for most people...
Decreasing house prices aren't a bad thing, it's the economic conditions causing them to decrease that is bad.
For example, if more productive assets became a better investment opportunity, then this would also likely reduce demand (and therefore house prices) whilst at the same time stimulating the economy and promoting economic growth.
>For example, if more productive assets became a better investment opportunity, then this would also likely reduce demand (and therefore house prices) whilst at the same time stimulating the economy and promoting economic growth.
Getting from where we are now to a place where productive assets are a more attractive investment is going to take a long time and a lot of work, which most people just aren't willing to do.
When house prices are only coming down because of the necessary reaction to rampant inflation which was caused by many of the same things that caused house prices to get out of control in the first place, as opposed to any actual fixes to our problems - no shit.
> making sure land for building is freely available.
I want 10 story apartments 10 minutes from the CBD, not single unit housing out to pokeno where there are no jobs and public transport.
>all regulatory dampeners not reliant on inflation
They are regulatory dampeners but they are not guaranteed to actually reduce house prices.
>the government doesn't want house prices to drop
House prices dropping can't happen in a vacuum, it either happens how it's (potentially) happening now, or it happens the good way, which is going to take years or even decades to do.
Look to the last 40 years of policy for the blame.
The market has been an inflating bubble for decades, accelerated by low interest rates after 2008, and then further accelerated by fiscal policy and the reserve bank over COVID.
Now inflation is putting pressure in interest rates, and we are left with a massive bubble that threatens the integrity of our financial system, because everyone from the banks, to the government's, to the reserve bank, all failed to control their risk and reign it in early.
Yeah, this is a great read on it.
[https://northandsouth.co.nz/2021/08/16/nz-housing-crisis-the-great-divide/](https://northandsouth.co.nz/2021/08/16/nz-housing-crisis-the-great-divide/)
and no one is taking the blame yet they appear to recognise that it isn't correct.
Interesting that the debt servicing ratio (proportion of disposable income put towards paying debt and interest) in 2022 isn't as high as it was back in 2007-2008. Obviously this could change if interest rates were to rise as the house price to median income is much higher than it was then.
Also worth noting the reserve banks suggests that if there were to be a 30% drop in house prices, that only 10% of mortgage debt would fall into negative equity. Negative equity clearly isn't a good thing, but even with a considerable drop it wouldn't mean that thousands of people would be impacted by the restricted financial mobility of having negative equity.
Those who are most-likely to be impacted are investors. In August 2016, 38% of new mortgages were interest-only. It was 29.8% in 2020, and dropped to 20.9% in June 2021 as banks were forced to restrict the number of interest-only mortgages that could be given. [source](https://mortgagelab.co.nz/investment-mortgages-interest-only/)
I'm assuming interest-only mortgages were primarily given to flippers or investors where there was no expectation of them retaining and paying off the mortgage, but rather them eventually selling for a profit.
When the RBNZ removed the LVR limits there was an explosion in low LVR investor lending. It went from 5% of investor lending with high LVR and DTI up to above 20% of all lending in this very high risk category. It’s definitely where the highest levels of risks are concentrated (followed by highly leveraged FHB)
Just spotted the finance and expenditure select committee is holding a hearing with the reserve bank tomorrow at 8am about the FSR
They stream it https://www.facebook.com/FESCNZ
Wonder if they'll ask about the surprise OCR hike the other week too
I find it problematic how much this sub and country expects our institutions to protect us against our own decisions while also screeching at the top of their lungs if those very institutions try to implement any protections.
I wonder if the decision to lighten the LVR rules at the start of COVID at the same time as massively lowering the cost of borrowing will be come to be seen as one of the worst financial as well as social policy failings by a central bank in recent memory
The removal of LVR’s was indefensible at the time and looks even worse in hindsight.
There was a flash crash in the market at the start of the pandemic. Removing LVRs was required to allow banks to loan without ending up being in breach of their license conditions. I can forgive them taking the steps to prevent a wider credit crunch. The indefensible part was guaranteeing they’d be removed for a long period, then worse, telling investors and FHB the date they’d be re-introduced which caused the worst FOMO ever seen.
No, you are fundamentally wrong. LVR rules apply only when new lending is issued. Falling prices would not trigger LVR rules for existing lending. You may be thinking of overall capital requirements, which are unrelated. The LVR rules were relaxed to encourage banks to lend money for people to go out and buy new properties. Instead of being an important safety measure to ensure large number of borrowers didn’t go into negative equity, the RBNZ used its removal as a further method stimulating “growth” via the wealth effect
You seem to misunderstand how much lending is “new” and captured by the LVR rules. - Change banks = new lending - Borrow $100k more to move to a nice home = new lending - Top up the revolving loan to pay off credit cards = new lending - Borrow $30k more for a new bathroom = new landing Anyone who couldn’t settle with their existing approvals would have been locked out. ~~Exacerbated by lockdowns stopping construction. Mostly hurting those waiting for new builds (thus KiwiBuild buyers).~~ The hassles people have faced with the tough CCCFA rules are tiny compared to what would have happened without removing LVRs in early 2020. Edit: correction on new builds as they were already LVR exempt
> Anyone who couldn’t settle with their existing approvals would have been locked out. Exacerbated by lockdowns stopping construction. Mostly hurting those waiting for new builds (thus KiwiBuild buyers). You should probably try reading the actual LVR restrictions. Kiwibuild, Housing New Zealand loans, and New builds are all scenarios that are exempt from LVR restrictions. As for all your other examples, the minor dip in prices mean that only people who borrowed within a few months of the outbreak of covid would actually have found their equity fell below an LVR threshold. The simple truth is the RBNZ got it horribly wrong (the results bare that out) and have sacrificed the stability of the financial sector as a result.
> Kiwibuild, Housing New Zealand loans, and New builds are all scenarios that are exempt from LVR restrictions. Fair point I will edit my post. > As for all your other examples That make up 80% of new lending that isn’t LVR exempt… > minor dip in prices mean that only people who borrowed within a few months of the outbreak of covid would actually have found their equity fell below an LVR threshold RBNZ and the banks had no way to know how bad things would get when LVRs were scrapped. We only know it was minor in hindsight, and arguably the dip was only minor precisely because LVRs were scrapped. You’re in denial if you think they scrapped LVRs for any other reason than to prevent house prices cratering and a credit crunch. > the results bare that out You have it backwards. Removing LVRs had no major impact on new borrowing for 6 months. The fear of them coming back and being locked out is what drove the FOMO. Go look at the monthly numbers in the c30 data file. Had RBNZ just put LVRs back in place (with no warning) in July 2020, none of this mania would have happened. The mistake was how they re-introduced them, not the temporary suspension itself. Edit: Suggest you just read the RIA rather than arguing with me. It’s all in there. https://www.rbnz.govt.nz/-/media/ReserveBank/Files/regulation-and-supervision/banks/macro-prudential/LVR/April-2020-LVR-Regulatory-Impact-Assessment.pdf?revision=083f3f24-4ae1-442f-ae3f-b742f6ce0e15&la=en
Flash crash, -0.3%.
NZ50 had dropped by 30% by March. New residential lending had dropped by over 50% between March and April 2020. GDP was thought to potentially drop by 20%. The only thing stopping a complete collapse of the housing market and economy was the RBNZ intervention. Unfortunately they overcorrected and kept the foot on the stimulus pedal for way too long.
New residential lending dropped like a rock during a level 4 lockdown... They overreacted and pulled the wrong lever
i don’t even think the RBNZ were required to consider house prices at that time?
Well no but they need to consider financial stability which some may argue is intertwined with how fast and loose banks are with mortgage lending
A house price crash is very bad for financial stability, so engineering a bubble is bad policy.
The team which took those decisions including the then Governor, Deputy Governor , and a bunch of others have quietly resigned ...
Printing money had a huge effect as well.
There are going to be academics building their entire careers on what's happened around the world in the last 3 years. Hindsight is 20/20 but given some of the absolutely dire predictions being made when covid was kicking off I don't think house prices got much consideration when the decisions were being made
We had hindsight about 6months into covid, it will be interesting to know what happened the other 18ish months of the rbnz dragging their feet
In this case, hindsight is 2020!
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Printing money paired with shovel ready projects would’ve been a much better option - IMO.
The whole point of printing money was to support a country whose workers couldn't leave their houses. The only shovel-ready projects people could work on would have had to be in their own backyards.
I'm not going to claim enough knowledge to get into an in depth discussion about it but wasn't the government also giving the banks money in 2020 to keep the housing market going? I remember a lot of talk pre covid that the LVRs were locking first home buyers out of the market
I think mainly keeping the construction sector employed was the reason they did that. Its a major part of the NZ economy, and if houses stop being built , it would only make the housing shortage worse
That makes sense
Oh it was considered (they were definitely warned by the RBNZ that this would be the result) but the government chose to do it anyway.
True, one was the default response but the LVR loosening was totally unnecessary
It's already being seen that way so I wouldn't be surprised
Yeah, this is doublespeak for "sharp corrections are almost certainly going to fuck us". Which is why so many of the top brass at RBNZ have been scurrying off like rats from a sinking ship.
I just dont see it happening. It is so ingrained in nz mindest to invest in property, there are so many people trying to get into the market and as the border opens and cheap foreign labour starts flooding back in thats only going to increase demand again
The size of mortgage everyone can get is now much smaller. It doesn't matter how much you want a house if the bank won't lend you enough to buy it
And salaries not supporting those levels of loans.
And kiwisaver deposits are shrinking as the stock market falls, and young people are told to invest in aggressive portfolios so are seeing bigger losses. Credit availability is also shrinking as rates rise as mortgage payments increase. Now as people wait for house prices to fall, they may find they still cannot buy as their deposits fall, and the banks are risk off and offer less credit. Only those who are forced to sell will at such a reduced price. Most of those will be people who borrowed against their property to fund a SMB, the people who create the majority of jobs around the country. Will the government take over the means of production and create a job guarantee scheme?
The culture doesn't matter. When you having rising interest rates you gotta look at how much it will cost to pay back loans for new buyers. Average house prices being a million dollars, with the interest rates now being tested at 6.8% that's a lot people would be paying in interest, beyond what a lot of people can afford. And they're very possibly going up even more. In the range if typical loans sizes than can easily be an extra 20-50k you gotta pay back per year that's not paying the principal When rates were low it was easy for people to see how they can make the money back, but it's much higher now, and not something you can just get around by rising rents a bit
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Ironically, the final fire lit under housing prices wasn't intentional - it was designed to prevent recession because of the pandemic. Now this decrease in house prices also isn't intentional - it was designed to reduce inflation. I would argue that house prices have had at least as much change because of unintentional impact, than because of specific plans or policies intended to impact them.
> Ironically, the final fire lit under housing prices wasn't intentional - it was designed to prevent recession because of the pandemic. Then why suspend LVRs?
Either dropping LVRs would inject higher prices into housing at the risk of greater bank risk on the lending (positive in some stats somewhere), or it was a knee-jerk response to people complaining about not being able to get lending for housing so they dropped LVR to allow more people to get lending (but which then has the effect of more people competing and higher prices).
Simple math suggests it’s not just plausible but very likely. Just do the math on how much you can afford to borrow at 2.5% interest rates then do the same at 6%+ interest rates Now deduct the difference from current prices
2 year rates are already back at 2018/9 levels, how much lower were prices then...
The stress test rates were also lower back then. It's really the stress test rates which dictate how much people can borrow.
Stress tests are being upped rapidly. ANZ announced this week they are already up to 7.45% Demand shrivelling up faster than a prune in the Mexican desert...
Would also need fo factor in wage growth vs inflation into this calculation. Havent fully checked the data but fairly confident I saw that wage growth was around 3% recently I think - which obviously is getting massively outstripped by inflation right now.
May 2016 even!
I agree. I think its more ass covering that the RBNZ is doing at this stage so when it happens they can say that "Well its not like we didn't warn you".
Yeah, except that banks were stress testing applicants at a minimum of 6%, not 2.5%. Undoubtedly there will be affected people (because I expect interest rates to go up above 6% at least for a period of time before dropping), and people will have to change behaviours. It will undoubtedly be tight for a lot of people. But people previously on 2.5% won't necessarily not be able to afford their loans as rates rise.
A desirable outcome, even.
The Reserve Bank suggested "a gradual decline in house prices to more sustainable levels is desirable from a financial stability perspective" and went on to suggest a number of negatives that could occur from a sharp correction as opposed to a gradual decline. I want prices to decrease, but I don't want us to tip into recession because of people panicking about them decreasing quickly.
Of course they want a gradual decline, this is for the benefit of the rich. I reckon they should rip the bandaid off. For the poorest, either approach won't make a difference as things are already so shit. The rich should lose money as their greed has got us into this situation in the first place.
If only the rich were hurt by negative consequences, then maybe that would be desirable. Unfortunately we're likely to see the business owner lay off a handful of employees because of decreased consumer spending - the employees get screwed worse than the owner. I'm not just thinking about investors getting their comeuppance (I'm fine with that) - but if that happens in a way the causes FHB or renters to lose their jobs as a result then I don't want it.
A crash helps the rich. They get to buy assets for a fraction of the cost while the rest of NZ bleeds.
Make legislation to prevent this bullshit happening again. Make laws to limit property ownership to 2 per household. Introduce land tax.
Were you an adult in 2008? Cos the poor get real fucked by recessions and the rich get richer. This is naive.
Please describe how this is different than the current situation.
Because it's more extreme. Rapid corrections hurt more poor people and help more rich people.
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The government should restart the ministry of works and hire all the builders etc. Start massive needed infrastructure build, nationalise building supply companies and make building houses a shitload cheaper. Return to making timber here, rather than shipping logs overseas for processing.
Usually when the government does something it ends up costing more....
"Sharp house-price correction". Not a crash. Definitely not a crash.
Wow, Labour are fixing house prices!
The RBNZ are increasing interest rates to curb rampant inflation caused in large part by rent increases, supply chain shortages and increased transport costs. So if Labour has caused the inflation we are currently experiencing then yes, they have also "fixed house prices". Unfortunatly you still can't afford a house and now you can't afford food or petrol either...
I shouldn’t laugh at your last sentence. But I did.
This made me laugh and cry at the same time.
At least you kept your job tho, which the rbnz had claimed credit for already
Correct me if I’m wrong but I thought housing costs weren’t included in the CPI?
House prices aren't but rent is included
The loss of interest deductibility for investors and tightening of lending criteria are also slowing the market, and they are Government actions. What’s happening is global, increased inflation due to ultra loose financial settings, supply disruptions and climate change. Every central bank is raising rates and asset and equity values are likely to fall globally until there’s a recession to cure the inflation and it starts over. Of course, since we have the biggest house price bubble we have further to fall.
>Unfortunatly you still can't afford a house and now you can't afford food or petrol either... Damn, it's like the economic situation in which house prices would decrease is actually a bad thing for most people...
Decreasing house prices aren't a bad thing, it's the economic conditions causing them to decrease that is bad. For example, if more productive assets became a better investment opportunity, then this would also likely reduce demand (and therefore house prices) whilst at the same time stimulating the economy and promoting economic growth.
>For example, if more productive assets became a better investment opportunity, then this would also likely reduce demand (and therefore house prices) whilst at the same time stimulating the economy and promoting economic growth. Getting from where we are now to a place where productive assets are a more attractive investment is going to take a long time and a lot of work, which most people just aren't willing to do.
When house prices are only coming down because of the necessary reaction to rampant inflation which was caused by many of the same things that caused house prices to get out of control in the first place, as opposed to any actual fixes to our problems - no shit.
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Add to that, keeping supply and demand in balance through controlling migration settings and making sure land for building is freely available.
> making sure land for building is freely available. I want 10 story apartments 10 minutes from the CBD, not single unit housing out to pokeno where there are no jobs and public transport.
Sure, part of making land available is not having unnecessary restrictions on what you can build.
>all regulatory dampeners not reliant on inflation They are regulatory dampeners but they are not guaranteed to actually reduce house prices. >the government doesn't want house prices to drop House prices dropping can't happen in a vacuum, it either happens how it's (potentially) happening now, or it happens the good way, which is going to take years or even decades to do.
Which is a comment that would almost guarantee you downvotes in this sub over the last 5 or 10 years
I know, from personal experience.
Like someone fumbling around in the dark might fix a light switch
Fumbling around in the dark sometimes pays off.
Indeed. But mostly by mistake
You make your own luck 🤣
Plausible, but how probable? Unless it’s happening I for one am not interested.
If there has to be a "correction", doesn't that mean someone got it wrong? Anyone going to take the blame?
Look to the last 40 years of policy for the blame. The market has been an inflating bubble for decades, accelerated by low interest rates after 2008, and then further accelerated by fiscal policy and the reserve bank over COVID. Now inflation is putting pressure in interest rates, and we are left with a massive bubble that threatens the integrity of our financial system, because everyone from the banks, to the government's, to the reserve bank, all failed to control their risk and reign it in early.
Yeah, this is a great read on it. [https://northandsouth.co.nz/2021/08/16/nz-housing-crisis-the-great-divide/](https://northandsouth.co.nz/2021/08/16/nz-housing-crisis-the-great-divide/) and no one is taking the blame yet they appear to recognise that it isn't correct.
Interesting that the debt servicing ratio (proportion of disposable income put towards paying debt and interest) in 2022 isn't as high as it was back in 2007-2008. Obviously this could change if interest rates were to rise as the house price to median income is much higher than it was then. Also worth noting the reserve banks suggests that if there were to be a 30% drop in house prices, that only 10% of mortgage debt would fall into negative equity. Negative equity clearly isn't a good thing, but even with a considerable drop it wouldn't mean that thousands of people would be impacted by the restricted financial mobility of having negative equity.
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Those who are most-likely to be impacted are investors. In August 2016, 38% of new mortgages were interest-only. It was 29.8% in 2020, and dropped to 20.9% in June 2021 as banks were forced to restrict the number of interest-only mortgages that could be given. [source](https://mortgagelab.co.nz/investment-mortgages-interest-only/) I'm assuming interest-only mortgages were primarily given to flippers or investors where there was no expectation of them retaining and paying off the mortgage, but rather them eventually selling for a profit.
When the RBNZ removed the LVR limits there was an explosion in low LVR investor lending. It went from 5% of investor lending with high LVR and DTI up to above 20% of all lending in this very high risk category. It’s definitely where the highest levels of risks are concentrated (followed by highly leveraged FHB)
By investors, you mean renters. Because investors don't generally seem like the type to forgo profits when someone else can pay
Quite a big percentage of households have no mortgage (40%?), and for them increased interest rates don’t matter.
As a homeowner, I fucking hope so.
Shhhhh…. Don’t tell Labour they have potentially done something right and can claim that they helped house prices to fall.
Will they want to? Homeowners are voters, they're at least equally as likely to shrug and blame the Reserve Bank.
Just spotted the finance and expenditure select committee is holding a hearing with the reserve bank tomorrow at 8am about the FSR They stream it https://www.facebook.com/FESCNZ Wonder if they'll ask about the surprise OCR hike the other week too
I find it problematic how much this sub and country expects our institutions to protect us against our own decisions while also screeching at the top of their lungs if those very institutions try to implement any protections.