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The measure they discuss is based on total debt from all sources not exceeding 5x income.
These are measures which will absolutely impact on investors and if you read the consultation paper you will see are targeted at investors (which would make NZ the only country to have imposed DTI limits on investors). Their thinking is based on the Irish experience where a construction boom led to an oversupply and an exit of capital from the market during the GFC. Their fear is this could lead to pressure on banks.
Have read multiple pieces from former RBNZ staffers recently who have made submissions and they agree on a few points:
- The RBNZ don't understand the housing market in depth and have no robust model for housing prices/affordability
- Banks in NZ have been stress tested (by the Reserve Bank
😄) and can withstand significant crashes to the housing market
- There is no evidence that high DTI loans are inherently more risky or that they lead to or can predict crises
- Banks are already capable of assessing risk without blunt tools like this
- These measures if implemented may lead to growth in riskier, less regulated finance companies and private lenders (last seen in the 80s)
- LVRs and DTI limits favour wealthy cashed up buyers over those needing finance
Consultation paper here
Submission 1 - Ian Harrison - Tailrisk Economics
Submission 2 - Michael Reddell
Anyone can make a submission. If you're reading this you're one of the stakeholders they're seeking feedback from - you'd be wise to do so here
These are measures which will absolutely impact on investors and if you read the consultation paper you will see are targeted at investors (which would make NZ the only country to have imposed DTI limits on investors). Their thinking is based on the Irish experience where a construction boom led to an oversupply and an exit of capital from the market during the GFC. Their fear is this could lead to pressure on banks.
Have read multiple pieces from former RBNZ staffers recently who have made submissions and they agree on a few points:
- The RBNZ don't understand the housing market in depth and have no robust model for housing prices/affordability
- Banks in NZ have been stress tested (by the Reserve Bank
😄) and can withstand significant crashes to the housing market- There is no evidence that high DTI loans are inherently more risky or that they lead to or can predict crises
- Banks are already capable of assessing risk without blunt tools like this
- These measures if implemented may lead to growth in riskier, less regulated finance companies and private lenders (last seen in the 80s)
- LVRs and DTI limits favour wealthy cashed up buyers over those needing finance
Consultation paper here
Submission 1 - Ian Harrison - Tailrisk Economics
Submission 2 - Michael Reddell
Anyone can make a submission. If you're reading this you're one of the stakeholders they're seeking feedback from - you'd be wise to do so here
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