Is Auckland’s Housing Market a Warning to Come?



By Balarama Lauder

Is the New Zealand Reserve Bank’s action to late to cool Auckland’s housing market, today Graeme Wheeler has announced new restrictions on Auckland’s booming housing market, these restrictions are targeted at investors meaning from  October 1 the new loan-to-value ratio (LVR) will take effect meaning all residential property investors in Auckland Council area using banks loans will need at least 30 percent deposit.

Other policies taking effect on 1 October:

  • The Reserve Bank will  Increase the existing speed limit for high LVR borrowing outside of Auckland from 10 to 15 percent, to reflect the more subdued housing market conditions outside of Auckland.
  • The Reserve Bank will Retain the existing 10 percent speed limit for loans to owner-occupiers in Auckland at LVRs of greater than 80 percent.

So what does this mean and can the Reserve Bank’s cool Auckland Housing market, well simply put no, normally it’s the role of Central Government that deals with housing policy and the Reserve Banks simply does not have the tools to cool the housing market, and these restrictions can be easily bypassed by investors. on The same day Graeme Wheeler announced these restrictions he agreed with MPs on Parliament’s Finance and Expenditure Committee that these new restrictions on property investors could make it easier for foreigners to buy in Auckland.

These restrictions would not affect cash buyers and most current and future investors will simply pass the cost on the already expensive Auckland rental market, driving up the cost of rents on good hard working kiwis family. So in my opinion these restrictions will end up doing more harm then good for first home buyers and renters this is why.


First of all most investors are not bad infarct right now they are on of the few groups building houses right now in Auckland, it’s the property speculation that needs to be targeted maybe a Property Speculation Tax  looking at capital gains. but this needs to be enforced by Central Government not the Reserve Bank.

Most investors and Speculators will simply pass the extra cost of these restrictions on to renters or their asking price hurting kiwi family trying to save for their first home and driving up prices these restrictions have the real impact of increasing your rent and driving up house prices,

Secondly today announcements does not take into count Auckland housing supply and until Central Government not the Reserve Bank takes this into account there will be no chance of cooling the housing market. We need real action from Central Government the facts are that Auckland needs 30,000 new homes built yesterday and every year the number of homes that need to be built increases by over 10,000 homes just to keep up. Now I know the Central Government will say they are doing this right with their new housing accords and it’s Auckland Council’s fault for putting a halt to this plan over transport funding issues, and anyone living in Auckland will tell you that transport needs funding and this cannot be done by rates increases alone explicitly when you take into account how much Auckland is spreading out.

But you only have to look at the fact that the average house in Auckland increased in price by $47,000 from January 2015 That’s nearly $900 per Day and house prices are up 60% from 2008 to know it’s their actions are not working, and right now Central Government and Auckland Council are not  effectually dealing with the housing market just playing politics.

So what can be done in the area of housing supply first of all Central Government need to set up a commission looking in to the cost of building supplies this makes up around 50 percent of a build if we could bring down the cost of building supplies this will make a real impact of bring down the cost of buying and increase the effeteness of our building industry, meaning kiwi companies can take on bigger projects.

Secondly the Central Government needs to look at a mass building projects like what was done in  the 50’s  yes I know it is a massive investment on the Government’s part and will mean overseas borrowing but this needs to be done, and Central Government will be able to reclaim some of the cost by selling of some of these houses rent income, and capital gained. I am not saying that Central Government should give these houses away or even do these housing projects by them self. Central Government could even look at Private Public Partnerships (PPP) to help with the cost of building.

Other steps that need to be taken are around the loosening of red tape around RAM and the cutting of the Council Development tax this combined with Speculation Tax looking at capital gained is the only way we can hope to cool Auckland’s housing market and make it more affordable for kiwi families.

But until Central Government starts taking this issue seriously not only will this many kiwi families won’t be able to afford to buy their first home, they will continue to put New Zealand’s economic future at risk we just need to look back  as recently as 2008 to see all the hallmarks of our so rock star  economy turn from boom to the biggest bust we have ever seen. “12 Reasons Why New Zealand’s Economic Bubble Will End In Disaster” – Forbes -.

The blowback of  Central Government not tackling this issue, is putting us all at risk because when the housing market bust and it will in the next three years. The first thing we will see is house prices collapse the building industry taking a big hit with unemployment in the sector and skilled labour heading overseas, Banks will increase their interest rates and some Banks may need to be bailed out if they are over invested in risk mortgagees at a great cost to the taxpayer. Affecting many in industry’s outside the building and Banking sectors and increasing public debt, which may result in Central Government cutbacks, unemployment, greater cost of living and  long term recession.As you can see the cost of doing nothing is almost unthinkable, the Government needs to take ownership of this issue simply put the Reserve Bank is not designed  and does not have the tools write and enforce our housing policy. this is the role or Central Government.


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