RBNZ ends money printing that helped boost net wealth of asset-owning households by $402b to $2.3t in a year of Covid; Survey finds 88% of NZers believe the young are now locked out of home ownership
Bernard, lets be honest, the RBNZ gave a handout to banks so they wold keep lending, banks chose mortgages over business loans and went to war on rates and people in positions to draws this money down on housing do so. Now we have very high prices, rents clearly going up. Rents will be met by real world economic constraints for renters (meaning low wage inflation) so the squeeze will be on all non home owners. Effectively the government has made home ownership the key to success. Given the scale of the prices this will take generations to unwind. Lets see if this govt opens immigration, then we can see more pressure on infrastructure and stage 3 or 4 of the housing boom.
1) AB - Wondering if there will be effects on 'the Property' class, when finally the 'Renters' class won't be able to pay the rents the former want. Wouldn't 'the Market' keep the rents at some level where it can't go up anymore?
Another possibility is high inflation. If the dollar is devalued by it (100K nowadays does not have the purchasing power of the same 100K 5 years ago), then Houses values would be, in a way, 'devalued' too.
Anyway, the article is on the spot.
2) I am not sure what would have been the alternatives to the decisions made by the government.
Yes government and stakeholders probably look for inflation to rebalance house inflation. But I think in NZ’s case RBNZ will struggle to lift rates due to the effect of rate rises, despite the current ambition to lift rates. NZ productive economy is way more vulnerable than labour thinks it is.
Bernard, lets be honest, the RBNZ gave a handout to banks so they wold keep lending, banks chose mortgages over business loans and went to war on rates and people in positions to draws this money down on housing do so. Now we have very high prices, rents clearly going up. Rents will be met by real world economic constraints for renters (meaning low wage inflation) so the squeeze will be on all non home owners. Effectively the government has made home ownership the key to success. Given the scale of the prices this will take generations to unwind. Lets see if this govt opens immigration, then we can see more pressure on infrastructure and stage 3 or 4 of the housing boom.
Magnificent analysis by Bernard.
1) AB - Wondering if there will be effects on 'the Property' class, when finally the 'Renters' class won't be able to pay the rents the former want. Wouldn't 'the Market' keep the rents at some level where it can't go up anymore?
Another possibility is high inflation. If the dollar is devalued by it (100K nowadays does not have the purchasing power of the same 100K 5 years ago), then Houses values would be, in a way, 'devalued' too.
Anyway, the article is on the spot.
2) I am not sure what would have been the alternatives to the decisions made by the government.
Yes government and stakeholders probably look for inflation to rebalance house inflation. But I think in NZ’s case RBNZ will struggle to lift rates due to the effect of rate rises, despite the current ambition to lift rates. NZ productive economy is way more vulnerable than labour thinks it is.