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'You'll Own Nothing And Be Happy' - RBNZ

'You'll Own Nothing And Be Happy' - RBNZ

New Zealand house prices are up 20% in 2020, and the Reserve Bank of New Zealand (RBNZ) are increasing the LVR to slow the climb.

There's more to this story though...

Let's start with the announcement from the RBNZ

The Reserve Bank of New Zealand are putting in place more stringent loan-to-value ratio (LVR) restrictions to reduce the risks to financial stability caused by high-risk mortgage lending

Wow, great work guys.

These central banks always look out for our interests you know... but why are they doing it now?

The REINZ report that median house prices increased across New Zealand by 19.3% from NZ$628,000 in December 2019... to a new record median price of NZ$749,000 in December 2020...

(Pffttt- only 20% in one year? Should have bought Bitcoin instead)

Even though New Zealand's property market couldn't keep pace with dem gains in Bitcoin, 20% is a very healthy annual return if you were hodling a property or two.

Especially in Covid year.

House prices are a BIG problem in New Zealand...

Let's travel back to July 2018 - the New Zealand government banned sales of homes to foreigners due to fears that overseas buyers were putting too much pressure on house prices.

Home ownership was out of reach for many even back then...

"This government believes that New Zealanders should not be outbid by wealthier foreign buyers,"

Bloody foreigners, coming over here...

When the ban was announced, the median price for residential property was NZ$550,000.

Remember, by the end of 2020 that had increased to NZ$749,000...

An average increase of NZ$7,960 per month!

At least people aren't being priced out of the market by those bloody foreigners any more.

How did this happen?

As with every good detective story, we circle back to where it all began...

In November 2018, the RBNZ eased LVR restrictions on new mortgages

Back in April 2020, (due to Covid) the RBNZ removed restrictions on the mortgage loan-to-value ratio (LVR)

"This move will help banks to keep lending to support customers, including with mortgage deferrals" - RBNZ Deputy Governor Bascand

Bloomberg

Property prices have skyrocketed since and home ownership is even further out of reach for many New Zealanders now...

One year later, the architects of this shitshow are patting themselves on the backs for reintroducing the LVR ratio...

RBNZ: Financial stability strengthened by firmer LVR restrictions

Deputy Governor Bascand has some more deep insights for us...

“There is evidence of a speculative dynamic emerging with many buyers becoming highly leveraged.”

“A growing number of highly indebted borrowers, especially investors, are now financially vulnerable to house price corrections and disruptions to their ability to service the debt,”

“Highly leveraged property owners, in particular investors, are more prone to rapid ‘fire sales’ that potentially amplify any downturn.”

“We are now concerned about the risk a sharp correction in the housing market poses for financial stability,”

The risks to financial stability that you created by lifting the LVR ratio you absolute cretin?

Now that property prices have increased by 20% in a year, the return of these lending restrictions mean that most owner-occupiers will need a 20% deposit to get a mortgage, while investors will need 30%.

From May 1, the required down-payment for investors will rise to 40%.

Got to feel for those first time buyers who nearly had a deposit saved up before this.

Investors came in & pushed house prices up by 20% while they were out of a job and couldn't compete.

Back to saving it is...

The house price to income ratio is already at 7.86...