The Reserve Bank has exempted high LVR loans to build new homes, but its decision not to exempt loans for new homes already built on 'spec' has highlighted the weaknesses within New Zealand's house building sector.
For the convenience of email subscribers, here's my Sunday column republished here. It wasn't published in the Herald on Sunday for space reasons.
Economists have started shifting their forecasts of the first Official Cash Rate hike out towards June next year from March next year after the Reserve Bank signalled on Thursday the high New Zealand dollar was helping to keep inflation down.
The drums are beating for the Reserve Bank of New Zealand to delay the start of its next cycle of rate hikes because the strong New Zealand dollar is keeping a lid on inflation pressures. Three of the big four bank economists have said Thursday morning's monetary policy decision could see the central bank signal a later start to its expected hikes in interest rates than the current market consensus of March next year.
Briefing papers released on Thursday showed Treasury warned the Government against expansion of first home buyer subsidies and suggested the Government look at introducing limits on foreign ownership. Also, Housing Minister Nick Smith has signalled the Government is now looking to form housing accords with Wellington and Christchurch Councils.
It's early days, but the first official data showed the Reserve Bank's high LVR speed limit substantially reduced mortgage approvals in its first full week of operation.
Reserve Bank Governor Graeme Wheeler may have accidentally created a trading opportunity on Thursday morning for eagle-eyed foreign exchange speculators with a penchant for reading editorials in the New Zealand Herald.
Here's my Herald on Sunday column for this week where I criticise the Greens and Labour for joining National in calling for the Reserve Bank to exempt first home buyers from its impending 'speed limit' on high loan to value mortgage lending growth. It's called: "Who will help the grown-up?"