Westpac led the charge last week by refusing to recognise the overseas income of foreign home-buyers wanting a loan. The ASB, ANZ and BNZ quickly followed suit. In broad terms, the change means people without New Zealand citizenship or permanent residency can’t rely on their foreign income when making a mortgage application.
Make no mistake, banks are answerable to their shareholders, need to make a profit, and will not be turning business away on a whim.
In reality the amount of business lost is negligible, and many foreign buyers pay with cash, but it’s great PR. Nevertheless, the Government’s banker may have scored a brownie point for being first off the rank.
In my view the banks have plenty to answer for when it comes to house price inflation.
End Rubicon Project Tag
Had the banks opted to lend a bit less, and restricted loans to four or five times a borrower’s annual income then we wouldn’t have such inflated house prices today.
According to the Real Estate Institute, the median Auckland house price has dropped 0.9 per cent from $812,000 to $805,000 in the past month, but is up 7.9 per cent on a year ago.
If Prime Minister John Key is to be believed, Kiwis now prefer renting a home to owning one. I haven’t met a tenant who wouldn’t prefer to own a home, living as they do under the cloud of being given notice to leave and being unable to hang a picture on the wall without written permission.
I’m not sure where Mr Key got this idea from (perhaps he googled it) but, in an interview with RNZ, he claimed that reduced home ownership is a reflection of “societal changes” that include people getting married later and having children later. Or it could be that this change is a result of people spending longer saving their 20 per cent home deposit, and preferring to get settled before having children.
Reserve Bank Governor Graeme Wheeler woke from his slumber last week to announce no change to the OCR — which sits at 2.25 per cent. He’s now hibernating until August 11.
Meanwhile, the economy stumbles along with economists such as ASB’s Kim Mundy saying the “benign inflation outlook warrants further monetary easing”. In layman’s terms: the OCR should be cut.
Mundy is among those who expect Wheeler to cut the OCR to 2 per cent in August.