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Housing market not a good look for Govt

Real Estate Institute president Murray Cleland says it is not a good look for the government to be going into an election year with falling house prices and rising mortgage rates.

Thursday, March 13th 2008, 9:29AM

by The Landlord

“Treasury has already begun to talk about the impact of falling property prices while at the same time the Reserve Bank is talking about maintaining the current 8.25% official cash rate until 2009,” says REINZ president Murray Cleland.

“It might be testimony to the independence of the central bank, but for a government to be going into an election year with potentially falling property prices and rising mortgage interest rates, is not a good look.”

Cleland says the wisdom of the Reserve Bank having increased the OCR four times in a row last year, having left it unchanged for the 12 months prior, had to be called into question.


“The overwhelming goal of controlling inflation is recognised, but the cost to the average New Zealander during 2008 could be considerable, with reduced household spending as mortgage costs squeeze disposable incomes, while falling prices will leave some with negative equity and the prospect of unhappy conversations with their bank.”

ANZ chief economist Cameron Bagrie agrees the Reserve Bank is “aggressively driving a slowdown,” saying, “Bollard has hit the property hard – he was always going to win.”

Bagrie says the rising cost of credit is “one last twist of the knife” in an “already very weak” property market.

He doesn’t think house prices will fall more than 5-10% because the Reserve Bank will cut interest rates to prevent a full-scale recession.

“Bollard will have to cut rates aggressively in late 2008 because the economy is weaker than we realise,” says Bagrie. “He will need to offset the impact of the credit repricing.”

However he says if we see further distressing credit markets, “all bets are off”.

« Property investors refocus on cash flowIs it a buyers' market for property at the moment or not? Opinion piece. »

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Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 5.50 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 3.85 3.95 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.55 2.65 2.79
Kainga Ora 4.43 ▼2.93 ▼3.07 ▼3.24
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 ▼3.35 2.99 3.35
SBS Bank 4.54 3.05 3.19 3.25
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.55 2.69 2.75
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 3.29
TSB Bank 5.34 3.35 3.49 3.79
TSB Special 4.54 2.55 2.69 2.99
Wairarapa Building Society 4.99 ▼3.55 ▼3.49 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 3.05 3.13 3.12

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