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  • Debt to income just Property Investors

    Reserve Bank Mr Orr says property investors may be debt to income tested as another mechanism to stop property price growth. (was on One News 6pm).

    Would this be for existing loans that come off fixed terms as well as all new loans? Maybe interesting times ahead .

    cheers

    Donna







    SEARCH PropertyTalk, About PropertyTalk

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  • #2
    Originally posted by donna View Post
    Reserve Bank Mr Orr says property investors may be debt to income tested as another mechanism to stop property price growth. (was on One News 6pm).Would this be for existing loans that come off fixed terms as well as all new loans? Maybe interesting times ahead .cheersDonna



    Yes, Interesting times.

    I saw Mr Orr's interview, well, some of it.

    The interviewer asked some very pertinent questions, so top marks to her.

    Personally,
    I like to break down interviewee's responses into categories.
    Things like, 1: direct answers, 2: evasion, 3;distraction 4: reclassification, etc etc.
    There was a fair bit of all of the above going on.
    (Watching the face of the interviewer, you could see she was a bit frustrated by this, but was being rather good about it).

    All we can really take away from that interview was that they are working on something, and it's mid process.
    They seem to be slowly coming round to some vague realization that they have stuffed things up.
    (Although they will never admit that to anyone else).

    The exact details of the thing, I expect they are still hammering out.
    I do get a feeling that Mr Orr (and his small team of bureaucrats) are really wanting DTI's.
    (and other measures).
    I'm guessing they have run the numbers through their models and seen it as an effective tool to curb house price inflation*,


    Well to be honest. I think that what they really want, is for no one to figure out, that while it may be easier to cool down something than restart it from cold,
    they've actually gone one step better, they've set the thing on fire, and even after putting it out, you're still left with a burnt out building. That's not cheap to fix.



    Did the interviewer ever ask Mr Orr if removing the LVR's was a good idea?
    And in hindsight, was lowering the interest rates enough?
    And if him telegraphing his intention to do so for a limited time, thus causing a FOMO surge, was downright reckless?
    I missed the first part of the interview.
    Did anyone see that question get put to a Mr Orr?



    *Homage to Perry here, it's not growth.
    Trees grow, companies grow, populations grow.
    but money supply vs house price, that's just hollow inflation.

    * See the faces of the RBNZ crew here, >>>> https://www.rbnz.govt.nz/about-us/senior-management
    Last edited by McDuck; 15-03-2021, 07:52 AM.

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    • #3
      Wright Orr Wrong, he's wasting his time. Everyone with more than half a brain knows that it's a shortage of housing supply that's the main issue, so it's just window dressing. (Orr sabre-rattling. Or both.)
      Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

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      • #4
        Originally posted by Perry View Post
        Wright Orr Wrong, he's wasting his time. Everyone with more than half a brain knows that it's a shortage of housing supply that's the main issue, so it's just window dressing. (Orr sabre-rattling. Or both.)
        Well, I don't know that, and I've got at least two hemispheres in there..

        So let's test your theory.
        Let's put some numbers on it.

        How many houses would have to magically appear out of nowhere to arrest housing prices tomorrow?
        To bring them to a total dead stop?
        Just approximately.

        Comment


        • #5
          https://www.oneroof.co.nz/news/was-i...shortage-37652

          my guess is we need 20,000
          Last edited by donna; 15-03-2021, 09:34 PM.
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          • #6
            Originally posted by donna View Post


            HI Donna.
            20,000! That's one of the lowest estimates I have ever seen!

            * STEP 1 Collect data from a wide variety of reliable sources.

            (I note that the author of the article you sited, has had an "interesting" past.
            Many consider his writing to be thinly shrouded propaganda).
            But thank you for at least putting a number to it.

            I was rather hoping that Perry would show how he came to his conclusion that " a shortage of housing supply that's the main issue".
            (He may be totally correct, but how will we know without checking his numbers).
            Last edited by McDuck; 16-03-2021, 08:03 AM.

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            • #7
              What about the tens of thousands of homes for sale, rent, even advertising for flatmates. And that's just Trademe.

              OK maybe shortages in some locations and some price ranges, but that could be a mismatch of cash v expectations.

              With over 22,000 on the social housing waiting list and 4,000 in motels and similar (probably an overlap there but still) there clearly is a shortage of landlords no longer willing to take a risk. Reason - government policies mainly.

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              • #8
                Less investors. Less rental properties. Higher rents.
                Yeah that'll work just fine.
                The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.

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                • #9
                  Originally posted by PC View Post
                  Less investors. Less rental properties. Higher rents.
                  Yeah that'll work just fine.
                  I know of two young families, both with an income of over 100K each, who have been constantly outbid by investors at auctions.
                  And convincingly outbid too.
                  They don't expect much. maybe a unit .. just to get out of the rent trap, to get stability for their children.
                  They do need to be close to their work places..

                  I say the truth of these actual situations, shows up your theoretical ideas.

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                  • #10
                    Originally posted by McDuck View Post

                    I know of two young families, both with an income of over 100K each, who have been constantly outbid by investors at auctions.
                    And convincingly outbid too.
                    They don't expect much. maybe a unit .. just to get out of the rent trap, to get stability for their children.
                    They do need to be close to their work places..

                    I say the truth of these actual situations, shows up your theoretical ideas.
                    It is a myth that investors pay more for properties than other buyers.
                    The numbers don't work.

                    Developers might because they can add more value.
                    It was probably HNZ blowing everyone away with that Government cheque book.
                    The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.

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                    • #11
                      Originally posted by PC View Post

                      It is a myth that investors pay more for properties than other buyers.
                      The numbers don't work.

                      Developers might because they can add more value.
                      It was probably HNZ blowing everyone away with that Government cheque book.
                      I like my information fresh.
                      So I attend the auctions personally, chat to the people there, and know the agents well enough that I get straight answers from them.

                      I know who's buying the houses at the auctions I attend.
                      Lets just call it a hobby.

                      Speaking of that, some of them are worried about this new IRD "underreporting of income" focus on them.

                      Comment


                      • #12
                        Originally posted by donna View Post
                        Reserve Bank Mr Orr says property investors may be debt to income tested as another mechanism to stop property price growth. (was on One News 6pm).

                        Would this be for existing loans that come off fixed terms as well as all new loans? Maybe interesting times ahead .

                        cheers

                        Donna


                        Only the policy makers can answer that question at this time Donna.

                        We know that Orr is keen on DTI, but he is also aware that differentiating between “speculators” (the media’s favourite term it seems for anyone other than owner occupiers) and first home buyers or new loan arrangements for owner occupiers is challenging. Trusts can buy properties, so can companies, so can others with “undisclosed material connections” to “speculators”. Therefore, bringing in DTI just for investors is problematic. DTI hurts FHB’s so DTI can’t be applied universally.

                        If the Government tramps down the DTI path I think it’s highly likely that existing investor loans that come off fixed term will be subject to the new regime. Investors may have a tonne of equity and fly through LVR tests – but fail the DTI hurdle – which is what the Government wants. This could force some investors to reduce debt by selling rental asset(s) or at least apply the handbrake to accumulation.

                        Of course, just as the case has been for every other property market intervention by Labour the consequences of the action will lead to unconsidered and possibly unintended outcomes.

                        There are also rumours circulating that the Government may be considering other actions such as inflation linked rent control and reducing ability to deduct interest expenses. These fit the Government’s aim of making housing investment less attractive by reducing returns, increasing tax take and slowing the rate of increase in rents.

                        Interesting times indeed.


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                        • #13
                          Heard somewhere that equity may not be allowed to be used for deposits Just another way to target investors though that too would be almost impossible to track when there are many different entities in the mix aye.

                          cheers
                          Donna
                          SEARCH PropertyTalk, About PropertyTalk

                          BusinessBlogs - the best business articles are found here

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                          • #14
                            The stupid idiots in Wellington are spending $1M a day on motels.
                            But investors using equity is the problem?
                            Yeah, right.
                            The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.

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                            • #15
                              Originally posted by donna View Post
                              Heard somewhere that equity may not be allowed to be used for deposits Just another way to target investors though that too would be almost impossible to track when there are many different entities in the mix aye.

                              cheers
                              Donna
                              use the main 4

                              What do you mean by "there are many different entities in the mix"?
                              Most people I know use the main 4 banks.
                              Those banks have very right and traceable money flows.
                              So incredibly tight due to money laundering upgrades.
                              Only one more tick box needs to be added to remove equity in existing property used as deposits.


                              PG * Bad language , parental guidance recommended.
                              Last edited by McDuck; 19-03-2021, 08:39 AM.

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