Investors and speculators be warned – the Government is coming for you.
The Finance Minister today announced the Reserve Bank will now have to consider house prices as part of its decision making. Until now inflation, keeping the economy stable and employment were its key objectives.
“The Committee retains autonomy over whether and how its decisions take account of potential housing consequences, but it will need to explain regularly how it has sought to assess the impacts on housing outcomes,” Grant Robertson said.
But he also wants to advice on debt-to-income ratios and interest only mortgages – particularly when it comes to speculators and investors.
“Following the Bank’s request that the Government allow it to make use of tools such as debt-to-income ratio limits, I’ve asked for further advice on how the Bank might implement such tools. I have made clear that in principle I would want these to apply only to investors. It’s important that any potential restrictions do not disproportionately affect first-home buyers and low-income borrowers.”
While the Reserve Bank had asked for debt-to-income ratios to be part of its toolkit, it had been reluctant for housing to be part of its remit.
The direction (under section 68B of the Reserve Bank Act) requires the Bank to have regard to the impact of its actions on the Government’s policy of supporting more sustainable house prices, including by dampening investor demand for existing housing stock, which would improve affordability for first-home buyers.
Governor Adrian Orr says its consistent with its financial stability objective of promoting continual financial stability.
“We have a long standing commitment to transparency about our policy actions and approaches, and this will continue,” Mr Orr says.
A CoreLogic report out today shows the average property price across New Zealand is now 6.8 times the average annual household income.
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