By David Hargreaves
The country is continuing to party like it's 2008, with household debt growing at rates last seen just before the Global Financial Crisis.
The RBNZ's monthly sector credit figures show that housing borrowing hit an annual growth rate of 8.8% in June, while total household claims (also including consumer finance) had an annual increase of 8.3%.
Both these rates of annual growth are the fastest recorded since May 2008.
On a seasonally-adjusted basis the household claims rose 0.8% in June. The last time we saw a faster rate of growth than that was in late 2007.
The continued growth and stretching of household balance sheets - with debt to disposable income ratios at record highs - will be concerning the Reserve Bank. At the moment debt servicing is comfortable for households because of the low interest rates. But when interest rates do start to rise again the position could change pretty quickly.
Total household claims hit $236.775 billion in June, up from $234.963 billion in May.
Housing debt alone lifted to $221.42 billion in June from $219.563 billion in May.
The housing debt has mushroomed by nearly $18 billion in the past year. That's an average growth rate of about $1.5 billion a month - though it's actually been running considerably stronger than that in recent months.
The RBNZ's Key Household Financial Statistics series latest figures for the March quarter released last month showed that household debt had now risen to a record high 163% of disposable income. The latest borrowing figures would certainly suggest that this record percentage figure is continuing to climb.
And new monthly data now being released by the RBNZ show that around 40% of new mortgage borrowing is on an interest-only basis, with about 55% of money being borrowed by investors on interest-only.
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Yep and it's not just us in Kiwi land: London's out of control Ponzi booming property sector https://www.youtube.com/watch?v=dINbQGgVEN8
London's market is cooling but certainly not nose diving (If it was nose diving I would go back like a shot).
The reason why it's cooling is mainly due to all the new taxes that have been slapped on Property Investors. Also they closed certain other tax loop holes regarding Non-resident Investors.
I don't think it is "nose diving".
Only London is expected to see prices dip by 5.6 per cent next year, after rising by 6.8 per cent this year, as the capital will be most impacted by Brexit. But even there prices are set to pick up again from 2018 onward, Cebr said.
Reading the above carefully seems to indicate prices have gone up in London in the last year.
Yep it's still very expensive over there, just like here. Though here we don't have quite the same salary levels to justify our out of control property prices. It gets even more revealing if you watch the whole documentary and is very relevant as to what is driving our property market too.
London's out of control Ponzi booming property sector
https://www.youtube.com/watch?v=dINbQGgVEN8
Yes there is that, though Hong Kong and Main land China has had several property crashes in recent years.
What bugs me, Is that we know that we are in a very large property bubble. Plus we're basically subject to the whim of an external county and if it takes any economic hits or gets in to some much debt that it can no longer keep that credit stream flowing in our direction. Then our property market will crash, there's no doubt about that.
The other problem is; if we allow our property market to keep inflating at the rate it is going, then were still headed for disaster and for generations to come. It's far better to follow both Australia's and now Canada's direction and ease back on Non-resident Investor capital to allow our property market to rebalance.
Or if you think about it on a more personal level Zachary; even you will be priced out eventually.
Here's just one of quite a few recent articles warning of China's debt problems.
Goldman Sachs flags report on China's corporate debt reaching the 'Ponzi stage'
http://www.businessinsider.com.au/goldman-sachs-china-debt-ponzi-stage-…
Incorrect. Australia now tax all foreign persons so Non-Residents, Foreign Students and Temp Visa Workers.
Not only Non-Residents as you state above.
http://www.sro.vic.gov.au/foreignpurchaser
and videos
http://www.sro.vic.gov.au/videos/foreign-purchasers-residential-property
http://www.sro.vic.gov.au/videos/fpmandarin
You will be a foreign purchaser if you are a foreign natural person, a foreign corporation or a trustee of a foreign trust.
Foreign natural persons
You are a foreign purchaser if you are not:
A citizen or permanent resident of Australia,
Or a New Zealand citizen with a Special Category Visa (Subclass 444)
Hi Joe, Well it depends on how you define a 'Non-resident' and I have noticed that a most western media outlets tend to use the term "Non-resident Investor" rather than "Foreign Investor" as a more politically correct term and as a catch all to include those who are not on 'resident visa's / permits or citizens'.
So my understanding of a Non-Resident includes those who, 1) For the most part live overseas. 2) Persons on Temporary visas and 3) Persons on Student visas.
So basically anyone who is not a Citizen or on a 'resident visa's or resident permits'.
The problem is as soon as you use the term "Foreign Persons" or "Foreign Investor" most people tend to confuse this with Immigrants which is not the case and can lead to people hurling abuse (Labelling people as racist) and clouding the issues. That's why I stick to the more politically correct term to avoid the BS.
I agree Doctor Zac Quack. This is just the beginning! There is no bubble, this market is the normal. It has been normal for sometime. Auckland house prices will hit a median of 1.5 Million by this time next year and be over two million by the end of 2018. That said, the consequences for NZ will be dire.
from the USA:
doubt if their current political options will help them
Consequence of turning “home” into a financialized “asset class.”
Something happened on the way when the concept of “home” transmogrified to a financialized “asset class” whose price the government, the Fed, and the industry conspire to inflate into the blue sky, no matter what the consequences. And here are the consequences.
The Census Bureau, which has been tracking homeownership rates in its data series going back to 1965 on a non-seasonally adjusted basis, just reported that in the second quarter 2016, the homeownership rate dropped to 62.9%, the lowest point on record.
It matches the low point in Q1 and Q2 of 1965 when the data series began. At no time in between did it ever fall this low. And it was down half a percentage point from 63.4% a year ago.
The relentless slide has lasted for 12 years, from its peak of 69.2% in Q4 2004, which was when the Greenspan Fed’s low interest rates were boosting speculation in the housing sector, and prices were going haywire. At the time, the concept of “home” had already become an asset class that can never lose money, financialized and later shorted by Wall Street, subsidized by government agencies, and backstopped by the Fed.
And this is what happened to homeownership rates afterwards:
US-homeownership-rate-1965-2016-Q2
The 1.9 percentage point drop from Q3 2014 (65.3%) to Q2 2015 (63.4%) was the largest two-year drop in the history of the data series. It also coincided with steep increase in home prices.
On a seasonally adjusted basis, the homeownership rate dropped to 63.1% in Q2, the lowest in the non-seasonally-adjusted data series going back to 1985.
Who controls & makes "credit" cheaper or more expensive? Government or the RBNZ?
They ARE still part of the problem, and... solution. Sure, our government/s have much to answer for, but PLEASE can we not forget how ALL of this came about? Global Reserve and Federal Banks have much to answer for also, along with credit rating agencies, Wall St, Main St global Banks, insurers.......etc etc.
Obviously you don't know that the RBNZ is LEGALLY required to keep inflation between 1 and 3%...Stop commenting until you know the facts.
This is National's fault.
Australia is looking better every day for someone young and educated for me. And they can take my almost 100k in savings.
Yeah correct, we are in a global situation but govvernment can atleast try to control it also along with rbnz by introducing measures like land tax, etc as is now known globally that this problem is worsen by chinese money that is freely moving out of China.
For the same reason Australia and now Canada has introduced tax on non resident buyer. It may or may not have the desired result but atleast their government is trying. What has and is National party doing. Infact they are totaly silence on demand side and talking only of supply - which though is important but not the solution by itself.
Unitary plan may or may not help but as of now will give more fuel to fire as may spark another round of house rise as a result of rezoning. This all is more for rich speculators and developers in cover of solution.
Any new solution that is now possible is and will be by change of government as this gocernment has become too arogant and have closed all doors.
have been reading comment and am national supporter but it is hard for me to argue against the comment that are being raised against the government.
I am sure (hopeful) that national will act soon to control the overseas buyer menace. Just wait for the next overseas buyer data that has to be released and am sure government will react to it as it too need a reason or data to act.
Citizens have a right to question the action or in national case inaction of the government and this website is doing a good job in providing the platform.
SG95, many wonder that why most of the comments on this website or for that matter on any website that offers people to comment are anti government, it is because that reflects the sentiment of the people and may say it is only few but are not all surveys done by taking a sample of few (An agency called selectively to about 885 people and declare that national is more popular by 10%- what a joke and that was the headline in NZ) and also another main reason that any where in the world, when you see a revolt or people protesting or venting out their feeling it is always those who are not happy and people who are rich and benefiting out of government policy will never come out on street.
No Society can survive for long by ignoring disparity and unjust policy.
In NZ it is just a start and if this government attitude does not change, inequality and policy to please one section of the society and ignoring the voice of the common people will not be good for the nation. This government is playing a dangerous game , as in todays time, things have changed with internet and social media, result is events that are happening all over the world.
Australia is not just taxing NON RESIDENT .... so much miss information out there.
Someone at Interest.co.nz please put up your hand and write an article outlining the STAMP DUTY in AUSTRALIA and how it applies to all of the below: If you like I can write it.
1. NON Resident
2. Foreign Students
3. Temp Visa Workers (Non-permanent Residents)
4. a foreign corporation
5. trustee of a foreign trust.
If numbers of overseas investors are paying cash for our NZ properties and there is a housing crash here, they must lose money if they sell and it is possible they may have to. How big a percentage of such investors pay cash or have sufficient equity that they must lose financially? And how much of that money would remain in NZ because I expect most will go to Australian banks?
The US did it well. The Chinese renminbi was pegged to the US dollar and over time Chinese reserves became the largest owner of residential property in the US. During the GFC there were heated discussions between Washington and Beijing principally around this. The US response was to start quantitative easing. This has likely wiped $billions off this debt. Nz and other western nations are now the recipients of these capital flows which is creating these imbalances, along with other factors. Inflation targeting is clearly not working. Nz should take a leaf out of the American book and do similar, by devaluing our dollar. And taking some of the heat out of the market, whilst also assisting our exporters.
Australia now tax stamp duty to all foreign person buyers so Non-Residents, Foreign Students and Temp Visa Workers.
NZ media focus on NON-Residents only for some reason.
http://www.sro.vic.gov.au/foreignpurchaser
and videos
http://www.sro.vic.gov.au/videos/foreign-purchasers-residential-property
http://www.sro.vic.gov.au/videos/fpmandarin
You will be a foreign purchaser if you are a foreign natural person, a foreign corporation or a trustee of a foreign trust.
Foreign natural persons
"You are a foreign purchaser if you are not:
A citizen or permanent resident of Australia,
Or a New Zealand citizen with a Special Category Visa (Subclass 444)"
Note they mention Permanent Residents & Citizens so Temp Visa workers and foreign Students would both have to pay. This group accounts for 35% of purchases per the LINZ report.
http://www.huffingtonpost.ca/2016/07/25/bc-property-transfer-tax_n_1118…
15% Stamp Duty in Vancouver on Foreign Buyers... well done
Large enough % to make an impact.
I encourage the opposition parties to bring in a similar tax in NZ (to foreign purchasers & all other Investors) as I am sure there are plenty of fed up National voters seeing their children's futures deteriorate with sky-high property prices and little wage growth.
Just The way government shy away from saying housing crisis similarly afraid of releasing correct data about all non resident/ foreigner for the fear that it might than be forced to act which they do not want to or will upset their asian masters.
Government themselves are responsible for putting themsilves in a situation to allow them to be bullied.
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