Written By:
Anthony R0bins - Date published:
10:26 am, June 10th, 2015 - 84 comments
Categories: class war, economy, housing -
Tags: economy, housing, oecd, report
As widely reported this morning the OECD is sounding the alarm on our “rockstar” economy. The Herald:
OECD’s stark NZ property warning
Dramatic house price growth is burdening Kiwi households with debt and putting the nation’s financial stability at risk, the OECD warns.
…
“Rapid population growth and a low responsiveness of supply have led to housing and urban infrastructure constraints. In particular, house prices have risen sharply in Auckland, the largest city, eroding affordability and raising financial-stability risks,” the report says.Paris-based OECD economist David Carey told the Herald house price growth was a threat to financial stability, especially if New Zealand was rocked by another recession where unemployment spiked and homeowners could no longer maintain mortgage repayments, leading to forced sales. Other threats included a rise in global interest rates, a slowing Chinese economy and falling dairy prices.
In the biennial report the OECD echoes warnings from the Reserve Bank that Auckland’s superheated housing market is a risk to the economy and urges the government to increase housing supply in the region.
…
“Housing poses some risks to the otherwise sound financial sector,” the report said. … “The house prices are higher than they need to be and that’s having a lot of negative effects on people’s wellbeing and on Auckland’s growth.”Inequality
While New Zealand is doing well compared to many other countries, there are inequalities in living standards and wages are low.
The government should do more to stem the rise in poverty and inequality in New Zealand, the report says.Greater focus is needed on improving the lives of the most disadvantaged, particularly children from low income families.
The OECD says the economic reforms in the 1980s and 1990s are still being felt. Lower and middle income families suffering the most, due in part to higher than average unequal employment prospects and shortage of affordable housing for low-income families.
OECD report: NZ needs more housing for poor, less obesity
New Zealand needs more housing for the poor, and less fat on the hips of the average Kiwi, according to a report from the OECD. The country should also look at road tolls in the form of “congestion charging” to help fix traffic jams in the big cities.
…
In its latest report on New Zealand, the OECD’s key recommendations included raising the supply of social housing for low income households. The government should also increase targeted housing subsidies for the poor not in local or central government provided housing.
OECD calls for New Zealand to ease housing burden on poor
The OECD wants the Government to do more to ease the burden of housing costs on low income families in New Zealand.
…
The report’s authors acknowledge that the Government is moving to address the concerns raised. However the OECD specifically recommends that the Government raise the supply of social housing for low income households. In addition it calls for an increase in the number of targeted housing subsidies for low income households that are not in social housing. It also calls for strengthening the focus of social spending on lifting the long term outcomes of the disadvantaged.
Plenty to think about in that report. Freeing up Auckland land for private development and sale at market rates isn’t going to cut it.
The current rise of populism challenges the way we think about people’s relationship to the economy.We seem to be entering an era of populism, in which leadership in a democracy is based on preferences of the population which do not seem entirely rational nor serving their longer interests. ...
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New Zealand house holds are the third most indebted in the world our total debt is over $510 billion dollars in short we are screwed .most of debt is housing debt its unplayable I guess in time new Zealand could be Greece.
New Zealand’s total debt is not $510b. I assume you got that number from John Pemberton’s website or somewhere similar? It’s a grossly over inflated figure because it double-counts substantial portions of borrowing and doesn’t properly account for intermediaries.
If you’re going to compare us to Greece, in the most high level terms only, then the number that matters is $153.9 billion – our net international liability position.
That works out at about 65% of GDP. The equivalent Greek number is north of 120% GDP.
We’re NOTHING like Greece.
But don’t let the facts get in a way of a good leftist meme that is being pushed.
Yeah, what’s needed is plane loads of cashed up investor residents to turn up and save the day, letting over indebt kiwis move off the red hot Auckland housing volcano. Only problem, the right wing meme, of it’ll be fine you can stay put and your house will be worth more. The facts of life dips it is that moneyed elite does not want to spend govt taxes a new city south of Auckland, Auckland housing was always going to cost, being on a isthmus and at the end of the world, I.e. small demand yet little land forcing market behaviors that sit on land and hike prices to compete with mostly Sydney.
No, your basic problem is nz is run by rightwing moneyed dipshits, yet now we are moving into a globalized world that makes most of their memes either irrelevant or down right self destructive.
Wow. What an incoherent rant. New Zealands current policy mix is very mainstream. The countries attempting to follow more radical leftists policies are failing miserably and the ones following moderate left wing economic approaches aren’t doing much better. In short there is no viable practical alternative you can point to which is better.
Yeah maybe, but the conclusion is spot on.
Funny how we depend on a communist country – China, to increase its demand for milk powder to get us out of our economic shit……
China hasn’t been a communist country in any meaningful economic sense since the late 80’s.
I would suggest that any country that treats its workers as disposable and where power is wielded by a select few is by definition not a communist country.
That they’ve branded it as communist (USSR, PRC et al.) doesn’t mean shit if the means of production are not owned and controlled by the local communities.
I am at a loss to find an example of a communist movement that has not been subverted by power hungry sociopaths for their own purposes once it achieved power .
Anyone?
Cuba probably comes closest where the means of production is owned by the dictatorship on behalf of the people.
New Zealand’s current policy mix is barking mad – you’re just a toady for the fools in office. Anything, Anything! would be better than borrowing three hundred million a week for unsustainable tax cuts.
This is an absurdly incompetent government without a shred of financial credibility – Greece? They have the Germans looking over their shoulders on a monthly basis. If the Germans were looking at Bill they’d’ve called for his dismissal in 2008 – he simply cannot improve the economy with these insane policies.
He means instead to profit from wrecking it.
Things are so bad and the financial management is so incompetent that Kiwis around the world are coming home, immigrants want to come here, and few people are leaving.
Even the impossible has happened, and decades of brain drain has stopped.
And now another impossibility – the govt has just unexpectedly hit surplus.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11462241
But don’t let the facts ruin your doomsday cult.
As the OECD just pointed out, FJK’s unsustainable bubble economy is based on lies. NZ is a nice place to live for millionaire immigrants and the already wealthy. The landed gentry don’t give a shit if poor Polynesians die in cheap houses unfit for habitation, or that workers are killed at twice the annual road toll, or that police teachers and nurses cannot afford to live here. Just import a few thousand more cheap Filipinos and put them in tin shacks.
John and his ilk (sir scrooge bob jones) are ignorant of the other side of NZ.
You may not be spot on with that thought Singapore is outwards looking, some might say we are inward looking. Singapore has out performed us since the 1960s. Their focus is not on land speculation. In fact policy for policy they seem to have more things right than we do
Our Senate, one twenty senators, is to lazy and incompetent to keep up with mainstream global self destruction policy making, its caught between copying stupid and benefit by sitting on their hands as we get better as the global economies are more influenced by big distortist money.
Of course you believe there is no viable alternative, its the same opinion as those distorting governments globally to make their daily bread.
in a financial crisis scenario like the OECD warns about, the value and liquidity of the assets that offset our debt to give us that “net international liability position” cannot be relied upon.
It’s equally true that the value of our liabilities will fall in a crisis scenario, as well.
Theoretically in that situation NZ as a country and as individual households could cut liabilities by defaulting on debt repayments, forcing bond holders to suffer ‘haircuts’. That’s an ugly contentious business though.
No, that’s not what I mean.
Most NZ borrowing from the rest of the world falls into two categories:
1) bank borrowing from financial markets
2) direct investment in NZ company equity.
The money that NZ bank’s borrow from overseas is ‘hedged’ using interest rate and exchange rate forward contracts. If a bank borrows 1 USD today that has to be repaid in a year’s time, it knows with certainty what the exchange rate on that $1USD will be, when it comes time to repay. The ‘price’ of the NZD:USD exchange rate is fixed in advance for that trade.
In the event of a crisis, the value of the NZD will fall. If you owed 1USD that was not hedged, it would take more NZD to meet your 1USD obligation when it comes time to repay.
The accounting treatment for hedges and the way interest payments on these transactions are calculated means that, in real terms, a substantial fall in the NZD would lead to a reduction in the liability that NZ banks owed offshore.
On the second point:
Say your a foreign investor in an NZX listed company. There’s a financial crisis of some sort and you decide that you want to pull your investment out of NZ. You can’t just ‘withdraw’ your shares. There needs to be a willing buyer on the other side of the transaction to take over ownership of those shares at an agreed price.
What happens when there are more sellers than buyers? Prices fall. A fall in the NZX has lots of different consequences, but one of those consequences is that the value of what we owe the rest of the world falls.
Look, that’s a nonsense. Please justify your inference that asset price destruction changes what NZ individuals, companies, or the Crown, owes to foreign based holders of those assets.
I don’t have the time to explain basic accounting principles to you.
OK my question is simple – you say it is a liability on NZ’s books, but where is the obligation to repay these foreign share holders?
Following up from Linda’s comments – she is right in that NZ household debt is sky-high.
According to the RBNZ it is at 160% of disposable household income: almost 3x what it was in the early 1990s.
http://www.rbnz.govt.nz/statistics/key_graphs/household_debt/
Greece recklessly looked the other way, as even the middle classes dodged taxes.
NZ difference, is kiwis are too nice that they expect poorer and poorer outcomes, and let the top half pay even less tax, as this will stimulate growth like there was a cheap oil tsunami washing the global economy. Trust in the right to ignore the basics, Thaterism did not grow the economy, cheap high density liquid middle eastern oil did. The idea that we get richer by lowering taxes on the wealthiest is farfetched at best (i.e one off middle eastern oil) and down right feckless stupidity the rest of time. we should be paying to keep govt in balance, re-raising taxes progressively back to some fairer balance. Its just absurd that the right say there are very few foreigner buying homes yet that we need to lower top taxes to attract them here, which is it?
What level of tax burden is “fair” in your mind? What percentage of the economy should the State take up?
It’s not about the percentage of the pie, it’s about the size of the pie. And if state spending into the economy puts money into our pockets and into company profits, why not?
Nice irony.
One could also reasonably say that the state needs to take up 90% of the economy, because that is what the 1% steal if the state allows them to.
Commonsense would dictate that all adults available in case of natural emergencies, war, should be healthy, fed, housed, that they have something to defend and not take up with isil or whatever. Commonsense would dictate that every child could read, could access education needed for our businesses, be able to learn as their families aren’t holding them back from school as they have no shoes… etc.
Every year that there is a short all taxes should be raised progressively, taking from those who have everything and would not notice the drop in their portfolios of finance wealth.
Work should mean getting ahead, not living in a damp house and your kids getting sick while the local supermarket sells you a roasting chicken that instead of roasts boils and steams in the water that comes off because some national party voted liked the bonuses he gets from selling a 1.4 chicken as a 1.6.
National party thinking of take no prisoners has a tipping point, Karl Marx knew that, so yeah capitalism works to match supply and demand, all good until the minions of stupid think it will solve all ills even their stupidity.
Evidence based govt, leaky homes, high house prices, kids starving, mold, etc, all indicate higher taxation is required from the top down. They have the money to bid up on homes, geez would the housing market notice… …no.
Well in 1982 it was 66% for the the top 40% of earners according to the National Party at the time ,no GST of course but huge sales taxes on luxuries like beer wine cometics ,Tv’s cameras etc etc .Gst is a massive fraud perpetuated on the low paid by a right wing fruit loop by the name of Roger Douglas .There is a special hot place in hell waiting for the old fraud
That debt hasn’t just magic’ed up out of nowhere and been wasted on hookers and coke. At the same time household financial assets have grown as well.
http://www.rbnz.govt.nz/statistics/tables/c22/
NZ household balance sheet:
Dec 1998 -> Dec 2014
Financial Assets: 217.7b -> 614.2b
Financial Liabilities: 45.0b -> 152.8b
Net Financial Wealth: 172.7b -> 461.4b
Note that ‘financial assets’ does not include residential property, but financial liabilities does include residential mortgages.
The take-away point to this is that there are ample assets held by NZ households to back up our NZ household debt. This is well understood by ‘the market’ and is one of the main reasons we’re paying around about 4% interest on long-term NZD debt in global markets and not the mid-teens rates that the Greeks are paying.
The vast majority of household assets are held by less than 20% of households; the vast majority of household debt is held by the bottom 80% of households. In other words, the distribution of that debt is critical to the wellbeing of NZers overall.
And when GFC2 comes, those magical Auckland property prices may will disappear, along with those bubblicious fictitious asset valuations which mark to market is currently helping the balance sheets look good – so far.
Citation needed? Like, you know, actual data on breakdowns of household asset composition? I honestly don’t know if that information exists for NZ – i haven’t looked.
But, without wanting to be glib about it, banks don’t lend money to people that can’t pay it back.
Greece.
Greece has not (yet!) defaulted.
Also, the structure and nature of bank lending to individuals is substantially different to bank lending to governments.
Ireland, America (sup-prime)?
Yeah, fair point. I should have said “banks tend not to lend money…” rather than “bank’s don’t lend money…”
And when GFC2 comes, those magical Auckland property prices may will disappear, along with those bubblicious fictitious asset valuations which mark to market is currently helping the balance sheets look good – so far.
Bubblicious ….. Now there is a word.
I’m sorry but a fair chunk of what the markets imagine are ‘assets’ are really nothing more than bits of wood and concrete plonked on a chunk of land.
Did you ever stop to think that a typical Auckland villa in say Birkenhead with a sea view – nowadays selling for something north of $1m – was probably built about 50 -70 years ago for a few hundred quid?
And yet somehow over those decades it may have changed hands 10 – 20 times and the banks have probably made something in the order of a million dollars of mortgage interest on it?
That’s why the bank considers it an asset. It’s the certainty of all the money they know they can make on it over time.
Ah yes of course.
And ten to twenty times changing hands, don’t forget real estate agent fees of 3% to 4% each time.
Did you miss the bit where I said “Note that ‘financial assets’ does not include residential property”?
Money spent on hookers and coke is never wasted.
Money spent on hookers just like money given to “beneficiaries” always goes back into the economy. Since we don’t grow coca in New Zealand money spent on coke is a loss to the economy.
It depends on if her name is Sharon, or Svetlana…
Debt can only be serviced by screwing savers with low interest rates extend and pretend will only get you so far.
NZ total debt is fuckin high it ridiculously high those irresponsible wanks who borrowed have to pay it back i think debtor prisons will be needed and no strategic defaults in new Zealand hahahaha!
“We’re NOTHING like Greece.”
Yet.
But Key is working on it.
You want austerity economics ?
Have a look at this ..
http://us6.campaign-archive1.com/?u=ffdc278104b5964bb04b4251e&id=7747c1e46c&e=f36be083ee
Since its takeover of a smaller rival manufacturer last year, workers of three major unions– the FIM (Italian Confederation of Workers’ Trade Unions), UILM (Italian Labour Union) and FIOM (Italian General Confederation of Labour) have fought Whirlpool to retain their jobs across Italy. While the company announced in April that it would cut 1,350 jobs, UILM leader Gianluca Ficco says the total losses may amount to 2,000 jobs. The Caserta plant in southeast Italy that employs 850 workers will be shut down entirely and, for the first time, researchers and office workers will be let go in mass as well. Whirlpool’s job cuts will contribute even more economic hardship to Italy, where the unemployment rate stands at 12.7 percent and 42.6 percent among young people. The Italian Industry Minister Federica Guidi called the company’s actions “disgraceful” and the Labor Minister Giuliano Poletti said the plan was “unacceptable”. Italian workers agree. In April and May, workers blocked
major highways between Rome and Naples protesting the policies of Whirlpool. This Friday, June 12th, another general strike will be held in Italy over the plans of the Whirlpool Corporation to cut nearly one-third of workers at its plants across Italy.
Benton Harbor, Michigan presents a case study for the results of Whirlpool’s austerity economics. The city was once the company’s corporate headquarters and industrial base, providing jobs and economic security for residents of the town. But when Whirlpool decided to shutter its Benton Harbor factories and moved to Mexico (where it paid workers $70 a week), the community declined and its majority black population was thrown into economic despair. [.. see link above for more ]
Relying on corporate employers who are headquartered out of London or New York and only interested in their own profits, and pay no attention to the costs foisted on to local communities that they don’t give a shit about, is a capitalist hiding to nothing.
+100 CR
I always find it bizarre that leftists think a company should continue employing people even when they have conditions imposed on them that make it unattractive to do so. Whirlpool doesn’t have to employ anyone in Italy and going on Strike to force them to do so is unlikely to make them want to stay.
Yep. Always best to remember that corporate responsibility to the community is zero.
How about the corporate responsibility to the unemployed workers in another country that they can’t afford to employ because a bunch of Italians are jamming the local motorway?
How about the corporate responsibility to the family in a developing nation that cannot afford a heater because the costs of manufacturing and shipping from Italy are so much higher than if the same company was manufacturing locally.
We can play this game all night, if you want…
The corporates have zero responsibility to any of those things, you know it, and their track record over decades proves it. Major investors first, other 1% shareholders second, everyone else can wait in line.
The corporates have zero responsibility to any of those things,
You’re right, they don’t.
In the last 30 years, the rapid rise of living standards in developing nations, in large part a result of foreign direct investment in manufacturing and technology, is a huge positive to massive portions of the worlds population.
Companies haven’t invested in developing nations because of corporate responsibility. They’ve done so because it’s good for their bottom line and it just so happens to have been really good for developing nation living standards too.
“Companies haven’t invested in developing nations because of corporate responsibility. They’ve done so because it’s good for their bottom line and it just so happens to have been really good for developing nation living standards too.”
Really ?
Spent a bit of time in these factories have we ?
http://en.wikipedia.org/wiki/Foxconn_suicides
http://www.theguardian.com/commentisfree/2013/aug/05/woman-nearly-died-making-ipad
Yeah, I have Chinese river water full of arsenic, cadmium and lead that I want you to take a drink of.
And, of course, none of the blame for environmental degradation or non-existent workplace standards can be laid at the door of hopelessly corrupt governments that have a long history of failure to protect their citizens from even the most menial of hazards?
I’m not going to defend the appalling practices that some companies have a history of. They’re scum and deserve to be punished.
But, at the same time, I’m also not going to ignore that, on balance, the lives of about 3 billion people are demonstrably better than their parents could have ever imagined in their wildest dreams. A large part of the reason is that western companies have heavily invested in their nations.
Holy sheet Fool ,how is the American middle class travelling ,right now .The statistics I am reading tell me they have reverted severely .
By the way tell us how the USA is going to pay back the $16 trillion or so it is in the hole. ( mainly to the incompetent Commie Chinese huh? ) How is Nz going to pay back the $ 100 billion Dill English has borrowed .If you cannot or will not go and join the far queue you idiot
How about we do the corporate ‘play workers off against each other to see who’ll do the job for next to nothing’ game?
Everywhere in the world over the last few decades, wages share of GDP has been declining while the capitalist share increases.
And righties – who typically imagine themselves as little masters of the universe – all think this is a good thing.
Its not a game
Any case its above your understanding given your comments here
Then the plant workers should seize the means of production them selves by force if necessary !
The OECD report also recommended a congestion charge for Auckland.
This has worked in London. The technology is there. It is a no-brainer.
It also recommended greater spending on public transport in Auckland.
Given this Government doesn’t want to back the Rail loop and associated public transport needs AND doesn’t think the housing price situation is a problem we have to assume this is the other OECD. The one they don’t agree with (see my post below for the other OECD)
The technology has been around for one or two decades…
A congestion charge is worthwhile, but London’s congestion charge mechanism is flawed.
It charges a set amount per year, irrespective of the number of times you go in and out of London, so people just figure that into their overall outgoings.
A better approach is to charge on a per-visit basis, so people actually start thinking about whether or not to be in London in a car.
Yep, Singapore runs an automated system like that.
Not quite, London has only a pay once per day charge no matter how many times
You have to pay an £11.50 daily charge if you drive between 07:00 and 18:00, Monday to Friday in the Congestion Charge zone.
From their website
http://www.tfl.gov.uk/modes/driving/congestion-charge/congestion-charge-zone
There are discounts for a auto pay
For people who live within the zone or next to it there are 90% discounts
Bill English is now in a conundrum given he believes wholeheartedly in OECD research and observations
For example
“New Zealand was one of only six developed economies in which both income inequality and disposable income inequality was flat or slightly better between 2007 and 2011, according to the Organisation for Economic Cooperation and Development.
In its latest report, which looks at the impact of the global financial crisis on inequality across 33 developed economies, the OECD confirms New Zealand performed relatively well through the GFC and its aftermath, Finance Minister Bill English says…
“However, this Government ran large deficits and borrowed through that period to continue its significant support programmes. At the same time, we also set a track back to surplus and supported an economic recovery that is now delivering more jobs and higher incomes.
“This latest OECD research confirms that while inequality increased in many OECD countries during the global financial crisis, this was not the case in New Zealand.”
https://www.national.org.nz/news/news/media-releases/detail/2014/06/24/nz-among-better-performers-on-inequality—oecd
and Parata
“In New Zealand, we see the work of the OECD on international education indicators, and Education-at-a- Glance, to be of significant value.
It provides one of the few ways we are able to view the performance of our system in an international context.
In particular, we recognise and support the value and importance of investment in people, skills and education, in the current global economic context, that has been a theme of recent Education-at-a-Glance publications.
These publications show us that New Zealand is doing well in a number of areas”
http://www.hekiaparata.co.nz/index.php?/archives/495-Speech-to-the-NZ-OECD-Conference-on-ECE.html
Your point being what? The OECD provides a lot of data on a lot of different topics. It is not unusual that a government will select the data it deems favourable and ignore recommendations it disagrees with. It is hardly going to outsource the role of policy development to the OECD.
It speaks volumes that your two comments on this thread do not address anything in the actual OECD report.
FOG thinking
OECD’s stark NZ property warning
“Rapid population growth and a low responsiveness of supply have led to housing and urban infrastructure constraints. In particular, house prices have risen sharply in Auckland, the largest city, eroding affordability and raising financial-stability risks,” the report says.
So the OECD doesn’t think property investors are a problem? The problem is purely increased demand with a supply that isn’t keeping up. Isn’t that why the Government just freed up 500ha of land in the latest budget? To give supply a chance outstrip demand, which, based on the excerpt above, will solve the nations financial stability issues. Well glad that is sorted then…
This report seems as flawed as the Governments response to Auckland housing!
Relax, folks, it turns out the “alarm” is over too much red tape and other hindrances to unfettered growth and exploitation and all we actually needed to do was ask Phil O’Reilly and the other uber-Tory sycophants. The problem, it seems, is easily solved if we simply got rid of the Auckland metropolitan limit, and any labour and consenting laws, then houses would suddenly become affordable and plentiful.
clever…
But it will help to make a few of National’s mates richer through capital gain rather than working/producing value.
“Freeing up Auckland land for private development and sale at market rates isn’t going to cut it.”
1) The Housing NZ being tendered is below market value. ref. HNZ tender for McLennans block in Takanini.
2) Regardless, it wont cut it alone. No Silver bullet. Need to do more such as, including limiting non-residents to buying only new houses. Lower LVR for NZ residents for new build.
3) Watercare (Akl City Owned) needs to pull finger, they are holding back development on thousands of houses due to inability to keep up with infrastructure demand.
It not a simple matter to extend infurstructure. Case in point is city intercipter project would t start to 2017 and completed in to 2020s and only one pipe to take the growth from out west these special housing areas that were rejected were reject because there to far away from town supply serwage infurstructure and roaring link. Smith is blowing hot air there do nothing government has left it way to late
It not a simple matter to extend infurstructure. Case in point is city intercipter project would t start to 2017 and completed in to 2020s and only one pipe to take the growth from out west these special housing areas that were rejected were reject because there to far away from town supply serwage infurstructure and roaring link. Smith is blowing hot air there do nothing government has left it way to late
What a bugger we’ve had such a good economy that heaps of Kiwis are coming home from Australia and elsewhere, and those here are deciding not to leave.
Which past Labour Party leader was it that said Nationals policies would never stop the brain drain in a million years?
It’s not National bringing them back it’s that idiot Hockey munting the Ozzie economy. They should’ve stuck with Rudd – everyone liked him except the Labour party insiders.
Tell it to Fonterra.
I think that if you want to see what’s wrong with the NZ economy you need to go here
http://www.rbnz.govt.nz/statistics/key_graphs/current_account/
and you will discover that as a country we have been buying more than we sell for 40 odd years.
That is why we need a government that will build our economy so that we produce more of what we need, import less and export more.
More importantly we need to concentrate on our own people to ensure that the opportunity to participate in society is ensured by investment in healthy families, free education (including tertiary & trades) and genuine full employment. In other words we need to organise the economy to work for the people – not solely for “investors”.
We need a LEFT government !!!
And the Govts response is to cut interest rates which will not only push up prices but reward further those already basking in their handsome profits .
There’s a simple way to slow down growth in house prices and that’s to cut back the terms banks are giving on mortgages.
Mortgages used to be for 20 years, then the banks stretched them out to 25 yrs, and now they’re 30 years. That unquestionably pushes up house prices, the price of houses is determined largely by how much people can pay on the mortgage.
It’s basic maths…..
a $500k mortgage at 5.5% over 30yrs is $654 per week
a $500k mortgage at 5.5% over 20yrs is $792 per week
If $654 week is the maximum a person can afford to pay then they’d only be able to borrow $413,000 if the term was cut to 20yrs.
Preventing property investors from taking out interest-only loans would also slow down growth in house prices.
I think there’s a need for people to start assuming that this house price growth is deliberate Government policy. There is absolutely no question that the Govt and the RBNZ have the tools to stop it. That they don’t stop it is pretty overwhelming proof they’re behind it.
But our glorious leader says there is no housing crisis.
we need madame guillotine and a revolution