New Zealand’s Central Bank Is Adding Housing Affordability To Its Mandate

New Zealand’s central bank will consider the impact of monetary policy on housing. Not just to preserve home prices either, but to consider affordability. The New Zealand Government‘s latest remit goes live on March 1. After which, the Reserve Bank of New Zealand (RBNZ) needs to explain regularly how it seeks to assist with affordability. The Government and the RBNZ have stated the measures will primarily address investors.

Monetary Policy To Consider The Impact On Housing  

The Government’s latest economic objective focuses on the well-being and living standards of residents. The brief schedule lays out at a high level the country’s goal of reducing “inequality and poverty.” At the top of this list is a point not often seen – stable home prices. 

The government seeks to create an “effective housing market.” They believe housing is a “critical component of a sustainable and inclusive economy, and promotes the maintenance of a sound and efficient financial system.” To accomplish this, the Government and RBNZ will target investor demand.

New Zealand To Target Speculators To Slow Price Growth

The Central Bank seems keen on executing on this plan too. RBNZ requested the ability to use tools like the debt-to-income ratio limits. The obvious use of such a tool would be to limit the amount of leverage that can be used for property. Ideally limiting over investment in a specific area of the economy.

Deputy Prime Minister Grant Robertson left little room to misinterpret the targeted demographic – investors. He stated, “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.”

For those worried, no this will not result in the state micromanaging monetary policy.“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,” Robertson said. The Government plans on announcing further measures to address housing affordability concerns in the coming weeks. 

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  • Patrick 3 years ago

    Okay, at this point you’re just trolling us by publishing this on the same day Bank of Canada said the economy was more important than people.

    • FD 3 years ago

      Seriously! This is just to troll us when the BOC says they don’t care about rising real estate prices! 🙁

  • Ed Kolop 3 years ago

    I know their home prices increased even more, but from the looks of it, you can still buy a cheap-ish house. The cheap option doesn’t exist in Canada anymore.

  • Doomcouver 3 years ago

    I’ll believe it when I see it. As most people on this forum are already aware, usually any measures governments implement to make housing more “affordable” actually makes it less affordable. CMHC insurance is a prime example in Canada.

    • SH 3 years ago

      Unlike Canada’s leader, New Zealand’s PM actually truly seems to care about her nation’s citizens more than she does about foreign speculators. You’re correct that one should remain skeptical, but at least New Zealanders can realistically believe that their own government is on their side. That is certainly not the case in Canada.

  • Jon Silver 3 years ago

    It’s good if they want to protect their middle class and native population/culture from rabid greed, but they need to be very careful not to undermine themselves by rewarding or favoring people at the bottom. There is a fine line here. It’s hard to know if this is motivated by the former desire or by political correctness or socialist drives.

    • Average Man 3 years ago

      God forbid people at the bottom be favoured for once, eh?

    • SH 3 years ago

      I would like everyone who is whining about socialism in housing to answer three questions:
      – do you support abolishing the CMHC and forcing banks to take full responsibilities for their mortgage originations?
      – do you believe the government-enforced mortgage deferrals were wrong and anti-free market?
      – do you agree that the tax system should NOT favour one investment strategy (buy a house) over another (rent and invest in financial markets)?

      Unless you answered YES to all of the above, you have no grounds to whine about socialism because you are clearly a supporter of it.

      • Sam 3 years ago

        I hate the term “socialism”. Free markets are like Hockey…good rules……strategically implemented and enforced….allow for a free-flowing, hard-hitting, sometimes-violent, sometimes-poetry-in-motion, fair and competitive game.

        Markets need regulation, enforcement and, at times, government intervention. The argument is really about the what, when, where and how much…? To answer your questions;

        CMHC’s mandate is unique. Lenders should not be able to rely on Government backed insurance…not without more strings attached.

        Some measure of deferral and government assistance were required. The degree to which our easter bunny government has managed this is beyond appalling.

        Our tax system allows home ownership of principal abode to be tax-free. Monies made from rental properties are, in my experience, accounted as income and taxed accordingly.

        • SH 3 years ago

          On mortgage deferrals. Why were they necessary but somehow rent deferral wasn’t necessary? No, the eviction moratorium doesn’t count; telling renters that they can break the law because it isn’t currently enforced is ridiculous and not an equitable measure when compared with the easy-peezy mortgage deferrals.

          Why it was it necessary to extend mortgage deferrals to LANDLORDS without requiring those landlords to pass on those deferrals to their tenants?

          Multi-unit landlords (including absentee/offshore) received deferrals on 5 or 6 units – easily obtained from the big banks with the click of a mouse. Vast majority of landlords still received rent cheques in full. Landlords used the extra 6 months of cash flow to buy ANOTHER property or 3. All mandated and backstopped by the government. This occurred over and over and over in 2020.

          Renters, meanwhile, got zilch.

          Sound fair to you?

          I want the government OUT of the housing market entirely. and let the chips fall where they may. If this results in the market going parabolic for 10 years, I’m fine with that. I doubt that would happen without the taxpayer backstop, but who knows.

          • Sam 3 years ago

            Good point about renters. I hadn’t considered that. Deferrals for Rental Housing should definitely have come regulated with deferrals to the renters. Another case of mismanagement by this government.

            As I understand it, CERB and other government assistance is actually more than the total of wages lost due to the pandemic. This is either crass liberal mis-management or there’s a conspiracy afoot.

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