Economists have urged the government to take emergency measures to address the housing supply shortage across New Zealand, including creating new policy settings and cooling Kiwis’ thirst for real estate.
The latest CoreLogic house price index (HPI) revealed a 2.6% increase in house prices last month, with the average property price hitting nearly $789,000. Banks are offering low mortgage rates, with Westpac recently launching a new “special” one-year fixed-term rate of 2.29% per annum – one of the lowest one-year terms in the market.
Economists believe low mortgage rates and insufficient supply are forcing the government to make some bold moves.
Cameron Bagrie, the chief economist and managing director of Bagrie Economics, said the Reserve Bank of New Zealand (RBNZ) should consider house price stability when developing a policy for the economy.
“I’d probably put house prices back into the Reserve Bank’s remit – house prices were removed the last time around – I think that was a mistake. I’d be moving pretty quickly if they can to get that back into the remit sooner rather than later,” Bagrie said, as reported by RNZ.
The RNZ also plans to reintroduce loan-to-value ratio (LVR) restrictions, with limits on new lending for people buying a home and investors needing a 30% deposit.
Infometrics economist Brad Olsen said the percentage should be set even higher.
“Something like a 40% LVR rate could well bring things back into line with just taking a bit of the heat out of those investors who are currently bidding up the prices across the market,” he told RNZ, adding that interest in real estate must be reduced.
“The longer we leave it, the longer we’ll have this crisis persist for, but at the same time we do also have housing demand as an issue,” Olsen said.