Since New Zealand is mostly a client state of the Australian retail banks, it was instructive to hear from their central bank Governor Philip Lowe recently. He’s worth watching because it’s really easy to attribute the softening of New Zealand real estate prices to the policy steps that our government took in October last year to restrict investor activity with the “bright line” test. Whereas in reality, the choke has mostly been applied by Australian retail banks.
Governor Lowe is signalling that the money supply will probably tighten even more. “Too many loans are still made where the borrower has the skinniest of income buffers,” he said in a speech in Melbourne on Tuesday. “In some cases, lenders are assuming that people can live more frugally than they can, leaving little buffer if things go wrong.”
Nice to hear how bank mortgages essentially impoverish many of us.
He was also crystal clear that all layers of government are responsible for doing more: they’ve “failed to release land, encourage residential development, or build transport infrastructure that would have allowed Sydney and Melbourne to absorb their rapidly expanding populations without triggering runaway prices.”
“Nothing increases the supply of well-located land like good transport links. Under-investment in this area is one of the factors that has pushed prices up. Put simply, the supply side simply did not keep pace with the stronger demand side. The result has been higher prices.”
The staggering thing about this pretty obvious statement is how rarely we hear our own Reserve Bank actually make reasonable criticisms of both banks and government. Our own Reserve Bank has failed to publicly make the same links that the Australian one makes. No matter: it’s the Australian one that matters in New Zealand.
In the absence of our central government really partnering with local government (other than in tiny instances like the Tamaki Transformation Project), and both NZTA and AT rigorously avoiding urban development integration, the default control of housing supply lies with Australian regulation of New Zealand’s retail banks and their lending.
And that foreign choke-hold describes much of our housing crisis.