NZ mulls adding house prices to RBNZ mandate

Via Bloomie:

New Zealand’s government has proposed adding house prices to the central bank’s remit to rein in an overheating property market, prompting investors to reduce bets on lower interest rates. The local dollar jumped.

Finance Minister Grant Robertson said Tuesday he has written to Reserve Bank Governor Adrian Orr, asking him to consider amending the bank’s remit to include stability in house prices as a factor for monetary policy. He said the government wants to make the changes soon, “so I would request that you gave it your earliest possible consideration.”

“With an extended period of low interest rates, and some time before housing supply can catch up with demand, now is the time to consider how the Reserve Bank may contribute to a stable housing market,” Robertson said. “I want to be clear I am not proposing any changes to the mandate or the independence of the Reserve Bank.”

Poor old central banks. Never the bride’s maid and always the bride.

If the NZ government really wanted lower house prices they are easy to deliver. They could lift taxes on capital gains, use Tobin taxes to slow transactions, build more, cut immigration, apply limits to investor purchases, include house prices in the CPI, so on and so forth.

Instead, Arden’s money man is proposing another of those plausible deniability maneuvres that pollies like so much. Palm it to the RBNZ. It replied:

Reserve Bank governor Adrian Orr has responded immediately to a letter from Finance Minister Grant Robertson on galloping house price inflation, saying the central bank’s monetary policy committee already takes into account all asset prices, including housing. Orr also said lower interest rates have been and will continue to be effective in supporting the economy through the coronavirus economic shock.

That said, it could still work and there’s nothing wrong with some pressure being applied. The Kiwi jumped on the news but there is no reason for that. The RBNZ can just tighten the wazoo out of macroprudential and it will stop prices. It has heaps of tools to choose from.

Any chance that this will come to Australia? Only if the mandate is for higher prices.

David Llewellyn-Smith
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  1. Homes are most people’s main expense in life. They should be included into inflation measures.

    Everyone says there is no inflation, but there has be huge asset price inflation in the last 12 years.

    • happy valleyMEMBER

      And who took them out of the CPI calc? The PM most responsible for some of Straya’s greatest inequities/stupidities?

      • Can you show me online when this change took place? I can never seem to find anything confirming it.

        • happy valleyMEMBER

          Off memory, under Howard in the early 2000s. Just another legacy of the wrongly venerated Howard.

  2. “Any chance that this will come to Australia?”
    The better question is “Any chance it will come to New Zealand?” – and the answer is a resounding – No!

    This is all a PR exercise; an attempt to make it look like something is being done, but it won’t be. How can it? New Zealand and its economy is now wholly reliant upon two things : (1) the Property Speculation Market and (2) China. And on that latter, we have a gun to our heads. It’s interesting that over the last couple of days (a) some of ‘our’ beef exports to China have been discovered to have Covid19 on them and (b) an Air NZ cabin crew member, who had repeatedly tested negative for Covid 19 onshore, has been tested positive in China. That – is just a warning for us to be careful, and watch what happens to larger countries who dare to challenge its rise.
    But back to point; Reform in the property ‘industry’ in New Zealand? Don’t make me laugh!

    • TailorTrashMEMBER

      and as in straya housing and China have become inextricably linked …they will be the death of both countries

    • Exactly. The RBNZ reply letter explicitly noted that the Govt had no intention of changing Section 8 of the Reserve Bank Act or over-riding the Bank’s independence. So the response was “we will consider your suggestion and respond with feedback in due time”.
      This is the more likely outcome.
      “Further details about the caring will be determined by a task force, and the State Services Commission has formed a working group to determine the terms of enquiry for the interdepartmental agency that will establish the task force.”


    BNZ joins Westpac, ANZ and ASB to demand 30 per cent deposits from investors … Rob Stock … Stuff New Zealand

    … No mention above of the far more important Debt To Income (DTI) changes underway by some New Zealand banks … as outlined recently …

    OPINION How much debt is too much for Kiwi households to bear? … Damien Dunkleu … Stuff NZ

    • … Following the ’07 crash of the Irish housing market, where the overall median multiples of its metros fell from 4.7 to 2.8 Median Multiple, putting all its banks to the wall and requiring 70 billion euros of bailouts from German institutions ( that stood to lose the most ), subsequent research by the Central Bank of Ireland found distorted DTI’s a far more significant factor than LVR’s … and imposed a general cap of 3.5 DTI.

      The Bank of England followed with a 4.5 times DTI cap.

      New Zealand’s housing affordability is by far and away the worst within the English speaking world at a staggering 7.0 times incomes across the country .. and a lethal expanding ‘affordability gap’ with Australia, which will lead to young Kiwis fleeing there … again.

      What have the Reserve Bank of New Zealand and Finance Minister Grant Robertson learnt from the Bank of England and Central Bank of Ireland ? …

      The above appears necessary because the government has failed to deal effectively to date with the structural issues of affordable new supply … land supply and infrastructure debt financing.

      As Reserve Bank Governor Adrian Orr makes clear, it is well past time central government allowed affordable new housing to be built …

      Record house prices not caused by Reserve Bank – Adrian Orr … TVNZ

      When can we expect $50,000 median North American pricing for serviced lots / sections to be restored in New Zealand ? …

      Get the land price wrong and everything else is wrong …

      Lot Values Hit Record Highs (U.S 50,000 median price per serviced Lot) … Natalia Sineavskaia … U.S National Association of Home Builders


    Finance Minister Grant Robertson’s big step in bid to cool overheated housing market … Jason Walls … NZ Herald

    Finance Minister Grant Robertson has taken a significant step in the Government’s quest to address soaring house prices by lobbying the Reserve Bank to change its mandate.

    He has also asked the Treasury for advice on how current measures – such as the brightline test and the ring fencing of rental losses – are working, with a view to possibly expanding them.

    Robertson announced today that he has written to the Governor of the Reserve Bank, Adrian Orr, asking him if the bank would take a more active role in cooling New Zealand’s overheated housing market. … VIEW AND READ more via hyperlink above …

    • I think the expansion of the Brightline test to 5 years is one reason why house listings are so low. People are hanging on for grim death to beat the 5 year time limit, when in previous years they would have simply put it on the market and sold it. House listings are down by 80% in some areas! If supply halves, and demand remains the same, prices go up (and up, and up). Consider this one of the effects of The Law of Unintended Consequences the Labour Govt is so good at. They don’t need to expand the Brightline Test, they need to get rid of it.
      “Measured as a comparison with the ten-year average stock level for October, we see that nationwide stocks are 43% below average. In Gisborne, Coromandel, Manawatu-Wanganui, and Marlborough they are near 70% below average. In the Wairarapa, currently enjoying a surge in buying from Wellingtonians, stocks are 80% below their ten-year average.”
      (Tony Alexander, Regional Property Insights, Nov 2020)

  5. Hugh PavletichMEMBER


    … How could the Government and the Reserve Bank have got it all so wrong ? …

    Your home probably earns more than you do … Susan Edmunfs … Stuff NZ

    Houses earned more than people in every region but one of New Zealand, on a median price and income basis, over the year to October.

    In all region for which there is data available with the exception of Canterbury, median house prices increased by more in the year to October than a median worker in that area earned in the year.

    In Auckland, the median employed person earned $66,404, according to Stats NZ. The median house price increased by $140,000 in the 12 months.

    Meanwhile in Wellington, the median income was $68,952 and the median house price increase $135,000. … read more via hyperlink above …
    Latest Reserve Bank monthly mortgage figures show $7.8 bln advanced for mortgages last month – beating previous record set only a month earlier; investors on the march … Interest Co NZ

    … extract …

    … This is the detail supplied by the RBNZ:

    • Total monthly new mortgage commitments were $7.8b in October – the highest month on record since the survey began in 2013.

    • This is an increase of $0.5b (6.3%) from September 2020 and 28.1% from October 2019.

    • New mortgage commitments to other owner occupiers were $4.4b in October, up from $4.2b in September while new commitments to investors increased from $1.7b to $1.9b.

    • First home buyers accounted for 17.9% of new mortgage commitments in October, down from 19.1% in September while share of new commitments to investors rose from 22.7% to 24.4%. … read more via hyperlink above …