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RBNZ still thinking about ways to slow the housing market

The Reserve Bank is still very worried about the housing market, particularly in Auckland, but has decided not to impose any further lending restrictions - for now.

Wednesday, May 11th 2016, 9:02AM 4 Comments

In the just-released Financial Stability Report the bank says the country's financial system is resilient and continues to function effectively, but risks "have increased further in the past six months."

It highlights the dairy sector and housing as being two big risks. "Dairy prices remain low with global dairy supply continuing to increase. Many farmers now face a third season of negative cash flow with heavy demand for working capital.

“Imbalances in the housing market are increasing with house price inflation lifting again in Auckland, after cooling in late 2015 and early 2016 following new restrictions in investor loan-to-value ratios and government measures introduced in October.

“House prices have also begun increasing strongly in a number of regions across New Zealand, although house prices outside Auckland are generally much lower relative to incomes.

“The Bank remains concerned that a future sharp slowdown could challenge financial stability given the large exposure of the banking system to the Auckland housing market. Further efforts to reduce the imbalance between housing demand and supply in Auckland remain essential. This includes measures such as decreasing impediments to densification and greenfield development and addressing infrastructure and other constraints to increased housing supply.”

Deputy Governor, Grant Spencer, said: “In the banking system capital and liquidity buffers are strong and profitability is high.

“However, the system faces challenges. Internationally, credit spreads have widened, placing upward pressure on the cost of funds for New Zealand banks.

“While the moderation in house price inflation has been transitory, the LVR restrictions have substantially reduced the proportion of risky housing loans on bank balance sheets. This is providing an ongoing improvement to financial system resilience.

“The Reserve Bank is closely monitoring developments to assess whether further financial policy measures would be appropriate.

Tags: RBNZ

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Comments from our readers

On 12 May 2016 at 2:55 pm Ashley52 said:
As we all already know the house prices are increasing so quickly specially in Auckland and followed by Wellington and other cities. Regular people can not afford to get on the property ladder.
Most of the houses are bought by the property investors which drive the house prices up so rapidly.
I think it would make sense for banks to lend to investors at a higher interest rate. For example, 1.5-2% higher than residential (people who buy house to live in).
This would help first time buyers to get on the property ladder as some of the recovered mortgage interest can from investor rates can be used to help.
Secondly, it would help to stabilise the housing market to a more manageable/reasonable situation so house prices do not go through the roof so fast.
Thirdly, banks do not need to borrow so much from overseas, less pressure for banks, government, and individuals for long term.

Government can also bring a tax/stamp duty for property investors and money raised from these can be used to build more affordable houses in places where there is a high demand.
On 12 May 2016 at 5:09 pm w k said:
regulators prefer to do it their way - the academic way - rather than to listen to effective and proven methods.
On 12 May 2016 at 7:33 pm Ricardo said:
The sooner Keys and co and the reserve Bank accepted that unlimited foreign money (no NZ banks in sight) is what has caused the problem, the sooner they might come up with a real solution that helps Kiwis. The Canadian and Australian governments are only too painfully aware of the destructive force of the yuan. Anyone who believes the governments feeble attempt to roll out the 'Chinese buyers only represent 3 or 4% is seriously deluded. Spend a week at central city auctions and you will see who's money is pushing up Auckland prices.
On 13 May 2016 at 8:49 am AFA Muggins said:
We should invoke a quid pro quo policy - foreigners can only buy property in New Zealand if we can buy property in their country. That would wipe out Chinese investment for starters.

Another option would be significant non resident withholding tax on sale of property. Those who are non resident would be discouraged from purchasing here.

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans ▲6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 4.29 5.09 5.35
Kainga Ora 5.43 4.57 5.58 5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - ▲4.19 - -
The Co-operative Bank - Owner Occ 5.45 ▲4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 ▲4.79 5.69 5.95
TSB Bank 5.59 5.14 ▼5.79 6.15
TSB Special 4.79 4.34 ▼4.99 5.35
Unity 5.65 4.80 5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

Last updated: 19 May 2022 10:42am

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