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Philip Macalister
Philip Macalister
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Should the rules around property change?

Friday 8th of August 2008
The housing market tends to go into a boom and bust cycle. While it’s looking a bit sad at the moment, expect it to come back again. If you believe the Reserve Bank governor then it’s all the fault of politicians.

Reserve Bank governor Alan Bollard did a lengthy (18 mins) interview on radio this week where he discussed a number of things including the state of the housing market and his ability to influence it.

He maintains there are still fundamental distortions in the economy which favour investment in housing and there is little he can do about it.

Commentators often point to monetary policy as being the tool the bank can use to influence the market. Bollard made the point that he has been pushing up interest rates to get the market to come off. It has done that with a “thump” he says.

However he also points out that monetary policy is not, and I love this, “perfect technology”.

It appears he is a tad frustrated that politicians haven’t done anything to stop the Kiwi love affair with property.

His frustration is that the bank has proposed ideas such as mortgage levies and ringfencing, but he says nothing proposed has “been taken up in a serious policy way”.

Reading between the lines it seems that Bollard is saying there will be another housing boom because politicians are too scared to change the rules.

I’d be interested in hearing readers’ thoughts on whether the politicians should do anything, or whether they think property investment will be much of an election issue. Leave a comment below.
Comments (6)
Alan Pitts
In the 70's when you went to a bank in the UK to get a mortgage you had to have !0% deposit and the banks would lend you 3 1/2 times the main earner's salary and 1/2 the second earner. Go back to that and it will automatically control house prices. For rentals the income is the rent so just make the banks use the 3 1/2 times formula. Its the greedy banks that have changed the lending criteria. In the UK the banks have been lending 125% of value, those responsible should be banned from banking.
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16 years ago
Hamish Patel
The tax benefits of investing in property are too good. <br /> <br />If we had an economy that encouraged enterprise and businesses than maybe we would have other things to invest in. Maybe tax benefits for these sorts of activities would be a positive way to encourage change.
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16 years ago
Jeremy Jones
I find people are so negative about inflation. Personally I like it. It diminishes my debt and increases my wage.
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16 years ago
Melanie Weidmann
I agree with Jeremy's comments. I don't think think house prices should be a political issue &amp; I don't think that responsible property investors are the problem with excessive debt/inflation. It is the people who keep racking up their mortgages to the limit to buy toys such as boats, motorhomes, cars &amp; plasma TVs that should suffer the consequences (&amp; I think a lot are!) If the government wants to interfere, then imposing rules/limits on banks lending on property is the only effective answer. Stop the toy buyers but still enable responsible property investment - after all someone has to be a landlord to the sector of society who will never be able to own their own homes.
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16 years ago
Jeremy Jones
I think Bollard should not overly concern himself with the housing market or house prices. It is a relatively small factor in 'inflation' (which he is employed to control). After all, he is NOT the Minister of Housing Prices. I can't see any problem with letting market forces determine house prices. The notion 'but some people cant afford houses if they get too expensive' is silly. There will always be property owners and tennants. Its true - people with low savings, low wages or a single household income probably wont be able to afford a big home near the city centre. That is reality.
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16 years ago
Jeremy Jones
Also, I cant see why the Govt (apparently) wants us to dabble in the sharemarket. Isn't that a particularly hazardous thing to do with your hard earned cash? I guess quite a few quite rational and careful people invested in the likes of Enron. If the Govt wants us all to play on the sharemarket, why is 'How to invest wisely in the sharemarket' not a strand in the school curiculum?
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16 years ago
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