Death to the property industry predictable

Government and Reserve Bank talk about capping mortgages to salaries will be a death knell to the property industry.

So whoever came up with the idea to salary cap mortgages should be shot at dawn.

I’m totally surprised this idea has an traction at all. Firstly it’s more desperate than a dateless prom queen but secondly  it’s more dangerous than rising house prices.

A typical household would be blocked from getting a mortgage of more than $405,000 under income-related lending restrictions being considered by the Reserve Bank.

As house prices begin to rise again, the Government is refusing to rule out debt-to-income limits as a potential response to cool the housing market and prevent “a bubble emerging”.

If adopted, the policy would stop people from borrowing too much relative to their income. It is already used in the United Kingdom, where most buyers cannot get a mortgage higher than 4.5 times their annual earnings. But opponents say any such policy would hit first-home buyers hardest, making it even harder for them to attain home ownership.

Debt-to-income limits were raised by the Reserve Bank yesterday after it warned the Government that resurgent house prices were a risk to the economy. Governor Graeme Wheeler said the average house price in Auckland was nine times larger than the average income, making it one of the least affordable metropolitan markets in the developed world.

The bank has raised the idea before, but said yesterday that it was now “seriously considering” the measure.

The fact is that house buyers in NZ predominantly buy with low equity. That’s been a feature for a long time.

That’s not just first home buyers – everyone is stretched.

Property Industry and bank peeps will tell you for free that a salary cap will have a massive effect on house and apartment sales. Do the maths.

A cap will kill sales overnight. No buyers means no sales – and that’s across the board.

It will also place massive risk on housing projects that have been pre sold off the plans.

I can just see the turmoil now – thousands of buyers who have bought off the plans won’t be able to settle apartments and houses at completion…. because they won’t be able to get a loan.

And home owners will be stuck in houses they can’t sell. Too bad if you’ve lost your job and you need to sell the house. You’re gonna take a bath.

The thing is supply has been the issue. There is very little to own and rent. Hence demand causes competition which causes prices to rise. So fix supply.

I’m bewildered. What muppet thinks that making it impossible to get a mortgage will solve the housing issues in Auckland?

Killing off buyers doesn’t reduce the demand. It makes for much bigger problems.

You increase supply stupid!

 

– NZHerald


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As much at home writing editorials as being the subject of them, Cam has won awards, including the Canon Media Award for his work on the Len Brown/Bevan Chuang story. When he’s not creating the news, he tends to be in it, with protagonists using the courts, media and social media to deliver financial as well as death threats.

They say that news is something that someone, somewhere, wants kept quiet. Cam Slater doesn’t do quiet and, as a result, he is a polarising, controversial but highly effective journalist who takes no prisoners.

He is fearless in his pursuit of a story.

Love him or loathe him, you can’t ignore him.

To read Cam’s previous articles click on his name in blue.

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