No need for government action, the market has solved it

All too often people expect the government to solve problems, if there even is a problem.

Generally they are useless at doing anything of the sort, except if it comes to collecting taxes.

People have been clamouring for the government to DO something about foreign buyers of real estate.

Today the market solved the problem for them….if it actually is a problem. I’ve never ever heard of a bank turning away profitable business. I suspect there is not problem at all which means the banks can safely decide not to do it.

Westpac and ANZ will no longer lend to overseas-based buyers of New Zealand property – with other banks expected to follow the move to shut the door on foreign investors.

The restrictions follow moves by Australian banks to stop lending to foreign buyers of property.

Westpac New Zealand has announced that from today it will no longer lend to non-resident borrowers with overseas income.

Borrowers on temporary resident visas will only be accepted if they have both a New Zealand address and a New Zealand-based income.

ANZ has also announced restrictions that will effectively shut out most non-resident, overseas-based borrowers, including restricting lending to owner-occupied properties.

See, we don’t need the government to do anything, the market has solved the problem (that probably never exists) faster than any government could do.

The moves come as the Reserve Bank today left the official cash rate at 2.25 per cent, with Governor Graeme Wheeler flagging rising house prices as a risk to the country’s financial stability.

Wheeler said investors could soon be targeted by new Loan to Value lending rules. He could not give detail on how restrictive any new LVR rules could be.

“We are still doing analysis. We would hope to be in a position by the end of the year to have made a decision on that. It could be earlier,” Wheeler told a Parliamentary select committee today.

The Loan to Value ratio (LVR) is the amount of a loan compared to the value of a property. It is calculated by dividing the amount of the loan by the value of the property.

Market is always more efficient than government.

Of course the foreigners will simply create a company based in NZ…and get around it anyway.

The reality of the situation is no bank ever turns away good business so this must mean that there is actually no problem at all because the banks are giving away business. They have calculated that there is bugger all to lose, and an upside of feel good headlines from drop kick ill educated journalists grandstanding about how it embarrassed the government or Nick Smith.

If any this proves that Nick Smith was right and there actually isn’t a problem from offshore investors buying real estate. No bank ever has turned away profitable business.


– NZ Herald