Story updated by Jenée Tibshraeny
The Government has announced two new schemes to take some of the pressure off mortgage holders and help small-to-medium-sized enterprises (SMEs) get credit.
- Mortgage holiday scheme
Banks have agreed to give mortgage holders whose incomes have been affected by COVID-19, a six-month payment holiday on both the interest and principal of their mortgages.
Finance Minister Grant Robertson said banks will provide their customers with more details, including around the criteria, in coming days. He asked mortgage holders not to swarm banks with inquiries in the meantime.
The Reserve Bank (RBNZ) has agreed to help banks put this in place with appropriate capital rules.
In addition, it is reducing banks' Core Funding Ratio from 75% to 50%. The Core Funding Ratio requires banks to meet a minimum share of their funding from retail deposits, long-term wholesale funding and/or capital.
Robertson couldn’t provide a ballpark figure around how many mortgage holders he expected would take holidays, and what the total value of the payment holiday would be.
- Business Finance Guarantee Scheme
The second scheme announced is a $6.25 billion Business Finance Guarantee Scheme.
The Government will underwrite 80% of individual bank loans to eligible SMEs. Banks will underwrite the remaining 20%. So in the event of a loan default, 80% of the losses will be borne by Government and 20% will be borne by banks.
The scheme sees the Government take a large portion of risk off banks in an attempt to encourage them to keep lending.
Banks will continue using their own lending criteria when lending to SMEs. This won’t be dictated by the Government.
The scheme will include a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum.
The loans will be for a maximum of three years. Robertson expected banks to provide loans at competitive, transparent rates.
RBNZ Governor Adrian Orr said: “Banks remain well capitalised and liquid. They also remain highly connected to New Zealand’s business sector and almost every household in New Zealand.
"Their ability to extend credit to firms to bridge the difficult times created by COVID-19 is critical and made more possible with today’s announcements.
"We will monitor banks’ behaviour over coming months to assess the effectiveness of the risk-sharing scheme.”
'Necessary, appropriate and proportional'
Westpac chief economist Dominick Stephens viewed the measures as "necessary, appropriate and proportional".
"The Government cannot prevent a massive decline in economic activity, but it can limit the ongoing financial damage by preventing unnecessary insolvencies and debt defaults," he said.
"These measures shouldn’t stress the Government’s balance sheet too much."
In terms of the business guarantee scheme, Stephens said: "The Government was always going to have to take some credit risk in order to backstop the economy, but leaving some credit risk with banks allows the Government to leverage off banks’ credit expertise.
"Essentially, Government is co-opting the banks to help it determine which businesses will remain in a strong enough position to get through the COVID-19 disruption...
"So long as COVID-19 eventually passes, most those loans will be repaid."
On the mortgage payment holiday (which Stephens is yet to see detail on), he said it will "prevent disruption and fire sales in the housing market, which is important for financial stability".
As for the RBNZ lowering the Core Funding Ratio to 50%, Stephens said: "This will allow banks to access short-term funding markets if needed, in turn ensuring that banks can continue to provide credit smoothly."
This is the announcement from the Government:
The Government, retail banks and the Reserve Bank are today announcing a major financial support package for home owners and businesses affected by the economic impacts of COVID-19.
The package will include a six month principal and interest payment holiday for mortgage holders and SME customers whose incomes have been affected by the economic disruption from COVID-19.
The Government and the banks will implement a $6.25 billion Business Finance Guarantee Scheme for small and medium-sized businesses, to protect jobs and support the economy through this unprecedented time.
“We are acting quickly to get these schemes in place to cushion the impact on New Zealanders and businesses from this global pandemic,” Finance Minister Grant Robertson said.
“These actions between the Government, banks and the Reserve Bank show how we are all uniting against COVID-19. We will get through this if we all continue to work together.
“A six-month mortgage holiday for people whose incomes have been affected by COVID-19 will mean people won’t lose their homes as a result of the economic disruption caused by this virus,” Grant Robertson said.
The specific details of this initiative are being finalised and agreed urgently and banks will make these public in the coming days.
The Reserve Bank has agreed to help banks put this in place with appropriate capital rules. In addition, it has decided to reduce banks ‘core funding ratios’ from 75 percent to 50 percent, further helping banks to make credit available.
We are announcing this now to give people and businesses the certainty that we are doing what we can to cushion the blow of COVID-19.
The Business Finance Guarantee Scheme will provide short-term credit to cushion the financial distress on solvent small and medium-sized firms affected by the COVID-19 crisis.
This scheme leverages the Crown’s financial strength, allowing banks to lend to ease the financial stress on solvent firms affected by the COVID-19 pandemic.
The scheme will include a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum. The loans will be for a maximum of three years and expected to be provided by the banks at competitive, transparent rates.
The Government will carry 80% of the credit risk, with the other 20% to be carried by the banks.
Reserve Bank Governor Adrian Orr, said: “Banks remain well capitalised and liquid. They also remain highly connected to New Zealand’s business sector and almost every household in New Zealand. Their ability to extend credit to firms to bridge the difficult times created by COVID-19 is critical and made more possible with today’s announcements. We will monitor banks’ behaviour over coming months to assess the effectiveness of the risk-sharing scheme.”
The Government, Reserve Bank and the Treasury continue to work on further tailor-made support for larger, more complex businesses, Grant Robertson said.
227 Comments
Cry me a river...
This was always going to happen, they will do whatever it takes. This is a global pandemic, there is no moral hazard in what they are doing and they will keep going. There is still so much more they can do if required.
As >90% of contributors here seem to be taking delight in the fact people may lose their jobs and homes, the other 10% of us will get our popcorn and watch the mother of all global reflation trades.
Yes they should. I don't disagree. I qualify for zilch. Keeping my job - working from home, mortgage already paid off, savings in the bank.
But you cannot expect 100% of the population, or even 50% of the population to have a fund to cover this sort of emergency. Even more so, when it is the constant greed of corporates and ineptitude of successive Governments that inhibits the people from doing this.
Any thoughts on the greed of the individual as opposed to the corporate? On paper, many property speculators would have made paper profits of hundreds of thousands of dollars the last 10 years. Should we be helping them now given the vast amount of paper money they made (at the cost of new market entrants who will be carrying the debt for their profit?)
So you would let a family who lost their income/s through no fault of their own, and with no prospect of work in the near future, lose their home because they didn't build up a cash buffer for a pandemic? I'm all for the state doing whatever it takes to support them, if it means rescuing a few landlords along the way then so be it. Tax them later.
Fortunately the vast majority of Kiwi's are functioning human's, not bitter incels.
cmat - I tend to agree with your thinking. We appear to have fostered a culture of 'no responsibility' in out society. Not just corporate management, but also in the individual (e.g. property speculators and young FHB's who think its okay to take a $700,000 mortgage on the new house). What would benefit society, from a utilitarian perspective, for the longer term, would be to let the free market be the free market. Using socialist inputs to save a capitalist problem is distorting outcomes and people are receiving carrots when they need to receive sticks.
If you want to look at the market as a whole, here's Robert Shiller's Cyclically Adjusted Price to Earnings (CAPE) ratio.
https://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-earnings_rat…
In terms of prices relative to earnings, we were back at 1929 levels...so in terms of a long term history, what we've just witness it up there with other periods where there has been perhaps quite unjustified pricing.
"I take even less delight in the recovery being centered around corporate welfare."
This is what I am struggling with. Yet again the corporate (Who have no vote) get all the goodies. While the average CITIZEN just gets chucked out.
Although equally angering is this:
All visas will be automatically extended until September, holders will be notified by email. Done and dusted. Every single visa holder is now sure of their position and will get immediate confirmation.
Now lets look at the citizens. Mutter, mutter, blah, blah, details to be released soon, sorry details are not available yet, Sorry we are still working on that.
Basically this is how I view it:
Corporates: Tick, sorted.
Visitors: Tick, sorted.
Voters: Um, oh are you guys still here?
Too cynical about kiwis when the chips are down nocents.
Local vineyard says backpackers leaving, and they are not looking to employ more. Prioritising locals instead, and have had a steady stream of locals contact them without having advertised.
DairyNZ have offered to govt to retrain anyone to work on farms where possible.
I am thinking alot of homes may be listed in spring aka The Great Corona Virus Clearout.
Still picking good discounts as unemployment will 10 plus percent.
It seems governments are treating us like schools kids everyone is a winner.
Australia are already saying 20 percent price crash on mainstream news yet our media keeps pushing no problem???.
https://www.news.com.au/finance/real-estate/buying/coronavirus-australi…
Cmat
Your post at 4.15pm is where this thread goes right off-track with your and later posts. Mortgage holidays ARE NOT A FREE GIFT OF MONEY MISSED - PRINCIPAL AND INTEREST PAYMENTS ARE EVENTUALLY PAID BY THE MORTGAGE HOLDER. Go six months on a mortgage holiday and the total amount of mortgage payments (principal and interest) missed need to be paid which may be arranged through the bank as increased future mortgage payments or extension to the mortgage term. LIKEWISE THE ARRANGEMENTS FOR BUSINESSES ARE NOT A CASH GIFT - the government is underwriting 80% of increased company debt - this is debt which needs to be paid back by the business to the bank and the cost to government is only if the company goes bankrupt (and milking a company is not a reason for getting away with bankruptcy). While this is about enabling businesses to better survive it is also as much about PROTECTING JOBS with the business having to take on more debt to protect itself and it's employees. This debt will require repayment by that business - IT IS NOT A CASH HANDOUT TO BUSINESSES.
If you are looking for winners out of this, look no further than overseas banks. Nothing more than fair weather sailors.
Who was saying a $5 billion annual profit w good for the economy?
Government has essentially guaranteed their excesses, and the problem I have is the could have capitalised kiwibank to take on the loans, to ensure the additional profits that come from extra lending stay in NZ. And loans defaulted on became the asset of NZ inc, rather than the overseas banksters who created the ponzi scheme in the first place.
Yeah, sure printer8, turn that caps lock on and conveniently remain ignorant to:
1. *$30b* of QE. THIRTY BILLION DOLLARS OF QUANTITATIVE EASING that will immediately start inflating away that debt and inflate over-leveraged morons' assets whilst they're on their payment holiday. And I'm sure much more QE will follow;
2. The fact we're (continuing, still, after a decade) to hold borrowing costs unnaturally low, because God forbid we let the market price the true cost of borrowing for those fools right now. Oh, but that will capitalise into their debt... that super low distorted interest rate. Oh my, fetch me a violin;
3. If their tenants lose their job we'll stump up with assistance (which I'm all in favour of) but most, if not *all*, of which will go to underwriting their weekly rental payments. Why don't we let that just capitalise up as a payable to the landlord? If it's good for the goose, it's surely good enough for the gander?
And then.
EVEN. Then.
We'll give you a cash flow holiday.
This is beyond a joke.
With the Nats owning 3.6 properties per person and Labour MPs 1.4 I presume there will be a few in power pushing for social welfare for themselves and others like them. It's not their job to make sound investment decisions with risk in mind and be responsible for their own choices, after all.
The saddest part is they choose to do this while devaluing the savings of pensioners and young Kiwis.
Seems like all those people buying houses now might actually be the smart ones! This is step one - "cushioning" (i.e. the government/taxpayer paying your mortgage for you). 6 months of your mortgage bailed out by the taxpayer! Free money for everyone! (oh except if you are actually productive, you have to pay for it). This will almost certainly be abused and will almost certainly go for longer than 6 months. I expect the scheme to be extended for... well why not indefinitely?
The insanity of the perverse incentive. Get into massive debt - no problem! NZ Taxpayer to the rescue!
Yet another market distortion ruining price discovery. Well done government!
So no risk in holding mortgages (one asset class), but enormous risk holding another asset class (shares/bonds etc). Government HAS paid your mortgage, because all mortgages have a risk quotient in their calculations. The government just bailed all mortgage holders out by setting this risk equation to zero.
There were around 50k AirBnB properties all over NZ that would have gone a long way to solving the housing crisis. Now, I almost guarantee it, they will all sit empty as risk is taken away from leveraged property purchases.
If something is deferred forever, is it not free? What on earth makes you think it will ever come off? If QE and lowering interest rates has taught us anything, it is that once you start, you can never stop. Almost guarantee this will be extended for another 6 months, then another year as the "pandemic effects are still being felt", then another 3 years...
Exactly. And my guess is where rentals are concerned - there will need to be evidence provided from the tenant with respect to how their income has been affected by the virus/shutdown). Like a document from IRD, or from their previous employer (to confirm their previous income) and a confirmation from WINZ of the timing of their unemployment benefit application. Thus confirming the landlord is unable to collect the full amount of the previous rent - and that the amount the tenant is able to pay is lower than their mortgage costs.
blobbes
Stop there and find out more before you get too carried away - it is most not going to be all "free".
It is not deferred for ever - that is not what the term "holiday"in terms of loan repayments usually and commonly means. Depending on your situation and your bank, it is already possible to arrange a "holiday" with your bank in hardship circumstances. It is certainly not about the bank giving you free money.
This seems to encourage the banks to apply that provision more widely.
While the detail is not in this or other articles that I have read in the last hour; most certainly the principal element of a mortgage payment will remain the same and will need to be paid back eventually. As said there is no detail yet, but what it seems to likely is that you cease payments for "up to six months", and then either your mortgage term is increased by the "up to six months" or your mortgage payments may be increased to cover the lost principal payments - and possibly the lost interest component - of the holiday.
That is clearly not what is stated:
"The package will include a six month principal and interest payment holiday for mortgage holders and SME customers whose incomes have been affected by the economic disruption from COVID-19."
What that means is if you have a 20 year mortgage starting now and have payments of 1000 interest and 500 principal, these will simply be deferred. So your loan term will actually be 20 years and 6 months. On the resumption (which I am doubtful of because this is a market distortion which as we have seen causes asset price inflation), you would then still pay 1000 interest and 500 principal over 20 years. It's just in the intervening 6 months, you can then do anything with your money. You don't seem to be seeing that this means the risk part is now covered by the government. Whenever you take out a mortgage, it has a risk component. That is now set to zero for the foreseeable future.
Meanwhile, you can get free money from the government also if your income is affected by Covid-19. If you are a recipient of the free salary replacement and of the 6 month loan repayment holiday, you may as well go on holiday yourself. Because going back to work is pointless when the government can remove the risk from you taking mortgages out AND pay you for being involved in speculative industries.
The government needs to step in and also stop any purchasing or selling of houses for the same intervening time, if they do not want the system to be abused. How likely is that to happen? Didn't think so...
No, I think you'll find that your payments go up at the end of the holiday. 12 months of $1000 per (fortnight/month?) Interest is added to the principal you owe, whether the term is extended or not is yet to be answered.. your outstanding loan balance will be up by $26,000 (assuming fortnightly), and your term will still be 20years.
It's a holiday from paying interest (and principal), not a holiday from being charged interest.
You and I both know that in 6 months time people will not be able to pay more for their mortgages than they did pre crisis. So the scheme will almost certainly be extended. If you are correct, payments will continue to pile up and the scheme will need to continue ad infinitum. That's what happens when you intervene in a market, we have seen that time and again. It starts with noble intentions, but won't stop. If it does, it will be because the taxpayer bails out the mortgage holder.
Fritz
Quite likely - there will not be the rush of mortgagee sales and resulting crash in the market from this as some have posted. This move is to offer assurance to mortgage holders in retaining their homes during these extraordinary times and in doing so will help avoid a property crash for economic stability reasons.
It also seems likely that real estate will all but shut down over this period and only be active again once the pandemic and lock-down have passed . As such much of the fear factor will no longer exist.
Frankly, those who have been predicting "30% or 50%" crash are going to most likely to look pretty embarrassed.
Yeah, we will look embarrassed. But that's because the government is intervening in a free market (free when it's going up, cushioned if there is a hint of a fall) to cause huge distortions by making mortgages risk-free investments.
I wish all my investments were risk free!
If true price discovery was allowed, we wouldn't have over inflated asset prices and hence we wouldn't need to cushion anyone from any risk. Now we have done one, we MUST do the other apparently.
Are you sure?
"The package will include a six month principal and interest payment holiday for mortgage holders and SME customers whose incomes have been affected by the economic disruption from COVID-19."
Sounds to me like the interest and principal payments will essentially all be deferred for (at least) 6 months. 6 months where you can essentially have all the money you would put toward your mortgage going anywhere you want. And zero penalty at the end! Brilliant time to be owning a house...
I know what deferred means, it's to put something off. So no risk to holding a mortgage over the next 6 months and because no interest or principal payments, no need to pay anything and no penalty at the end. Even if they did apply the interest portion, almost certainly the government will allow this to be borrowed at the new low rate of 0.25% OCR rate or will simply take on the interest part by buying mortgage bonds. If you own property, within that 6 months you can do whatever you want with money that would have gone to paying your mortgage, hell, go out and buy a new boat!
Are there risks to shares? Is there risk to holding currency? Is there risk to holding a deposit in a bank? Is there a risk the landlord will put the rent up higher than you can pay? <- Yes to all
Are there risks to holding a mortgage? NO. The NZ government will take all risk away if anything threatens your mortgages.
Sounds totally fair and a perfectly running free market.
Repayment holidays are very common. Banks do them now. The interest on the loan continues to accrue.
Here is the description of a repayment holiday from Kiwibank’s website
“A repayment holiday means you pay nothing at all on your home loan for an agreed amount of time. If you do this, you need to be aware that your loan will continue to be charged interest while you’re not making any repayments.
You should only consider applying for a repayment holiday as a last resort and only for as long as you need to get back on your financial feet.”
Seems like NZ parties / Governments will do whatever it takes to protect this housing bubble from bursting. And they know what will happen if it bursts.So we are on a train that with no returning and no brake. Get in the game or leave, but there will be a time this train gonna be crashed.
This will ease stresses for both home owners and small and medium businesses.
However, while a "holiday" there is always the cost to be paid once one returns from any holiday. It will enable mortgage holders and smaller businesses to weather the storm.
This move makes sense given that wage earners have already been given some assurance.
Yes an ideal opportune opening for the local idle bodies. Voids are now coming out of the bottom drawer, off the shelf, dusted off; all to be filled with ratepayers’ money. COV19 to be knighted for public service to our packages and job security. Vive! Brown Cardigan Brigade rides again!
JC
No problem with a landlord providing a rent holiday in dire situation - I have done it before. BUT make sure you understand what a mortgage holiday and a rent holiday are. THEY ARE NEITHER A GIFT NOR A FREE RIDE. After the holiday payments missed are accrued and a debt owing. Missed mortgage payments on a holiday need to be meet and rent missed is still due to be paid.
Let’s just hope lending doesn’t spiral out of control. That is banks maintain sound practice in terms of collateral. Some may have forgotten that when the Lange/Douglas government unfettered the then trading banks haymaking wasn’t restricted to sunshine. Demise of BNZ followed suit in short order for instance.
I think it's important to accept that inevitably whenever you have widespread economic disruption, like a prolonged shutdown, many businesses fail because demand has permanently shifted. We cannot stop the widespread destruction of businesses through subsidisation of lending. Inevitably a high proportion of these loans will sour.
"six month principal and interest payment holiday for mortgage holders"
Did anyone bother to ask about the detail of this?
- Is there any limit for "mortgage holders"?
- Just primary residences?
- Quantum they get assistance for?
The last thing I wanted was for the Government to underwrite credit risk and look where we are.
Yet to see the detail, but I am sure it will just be holiday on the payment of principal and interest, the interest will still grow I bet ya, and if your home is in a family trust....well....thankfully trusts can't lose their jobs so no payment holidays for them.
And in a few months time when you come to refix, the house prices have come down and all the added interest from your holiday means you no longer have 20% equity so you can't access the specials, or perhaps you now even have to pay a low margin premium.....but just stick on the holiday until you are in negative equity.
Have a nice day.
I am torn on that. I wholeheartedly agree with the sentiment, and I don't want to see the banks bailed out - never has a private enterprise deserved a kick to the teeth more.
However savers should not be punished.
I am sick of sacrificing to be financially prudent and responsible, only to be punished when the SHTF.
While all the muppets out there just get a free ride.
I concur. This is step one. We all know where this ends up, we only have to look at the last 10 years of steadily inflating bubble on overpriced assets and weak central banks have gotten us.
Now you don't have to pay at all. Everything is risk free! WHOOP!
If they get this wrong, their won't just be rioting on the streets, there is likely to be a revolution. If they get this wrong, they will entrench inequality by bailing out landlords in a time when inequality and housing stress for the peasants/serfs is at an all time high. All those AirBnB's owned by SME's that could have been released to fix housing issues in NZ will now sit empty. This will prop up property prices to ensure there is no chance of a correction.
They just priced out risk in the housing market. Anytime there is a chance of a drop, the government will step in to prop it up. Why aren't they bailing out the sharemarket? Those holding shares must be pissed off now, asset owners of one class get nothing and wear all the risk... asset owners of another... no risk!
Independent.Observer
"Ordinary people have been losing homes for the last 10 years"
What utter BS. Get over your wild baseless claims.
Mortgagee sales over the past eight years have been at an all time low.
Total bankruptcies in NZ have been about 250 per year compared to 6,000 FHB per year and most of those bankruptcies will be the result of failed businesses and young (of which there is a high incidence of in terms of bankrupt ages) clearing student debts.
However don't let the facts get in the way of your on-going wild claims.
I am a centre left landlord. I have no problem with society supporting those in need. Benefits, super, universal education and health are all consistent with looking out for your fellow kiwis. The 4 week forced isolation is the opposite of a free market. The cost of this sacrifice needs to be recognised and those who are adversely effected supported.
This faux outrage from the DGMs is sour grapes that the great reset you all long for may be at risk if the Government assists businesses and workers to get through these tough times. Stop being vultures and get a little empathy in ya.
4 week isolation, but 26 weeks of mortgage holiday.
You will notice there is a consistent theme in policy these days. The sacrifice always falls on the young, future productivity and a future liveable planet. All so we can avoid the illusion of wealth being stripped from us now. Be it student loans, outrageous house prices, climate change or even decent jobs. All gone in favour of propping up the status quo and ensuring asset prices get higher and higher.
Can you blame the young for being pissed off when they are constantly being pissed on from people who claim wisdom and moral high grounds?
4 week isolation, but 26 weeks of mortgage holiday.
You will notice there is a consistent theme in policy these days. The sacrifice always falls on the young, future productivity and a future liveable planet. All so we can avoid the illusion of wealth being stripped from us now. Be it student loans, outrageous house prices, climate change or even decent jobs. All gone in favour of propping up the status quo and ensuring asset prices get higher and higher.
Can you blame the young for being pissed off when they are constantly being pissed on from people who claim wisdom and moral high grounds?
I am. I own multiple properties and wouldn't expect the government to bail me out - I knew the risks when I got into and I accepted those risks - and managed them accordingly by never getting too stretched and paying off debt when I could.
It's why I'm so pissed off about the central banks and governments propping up the system since 2008.
The big boys in the corporate game like to preach, but can't take their medicine like a big boys.
Yet many residential property "investors" have their portfolios held in companies which are then held in trusts. If the companies income falls due to falling rentals are they able to put their hand out under the The Business Finance Guarantee Scheme placing more risk on the taxpayer?
I don't see why not. Just keep in mind that this only applies to companies with a turnover of $250,000 or higher which equates to roughly 8 Auckland properties. This will therefore only apply to holders of larger portfolios. Also worth noting is that these unsecured business loans of up to $500,000 may have interest rates that are less attractive than mortgage interest rates. Where they will be awesome is that they may enable you to get a line o credit to buy shares or additional property close to the bottom of the market.
I'm very much in favour of no government support, not just now but always. But I don't pretend to be better than others by preaching what is right or wrong, what should be and what should not. I deal with what is, it's extremely liberating and it's so much easier to get ahead in life.
PS, so you are not benefitting from the government help huh?
Erm.
I didn't *because* I'm a proponent of capitalism and free markets.
and so that would be completely counter to the very thing that I'm a proponent of.
It's called being internally consistent.
Otherwise I would suffer from extreme cognitive dissonance and be, you may have heard the term, a *hypocrite*.
Does that answer your question?
Anyway, gold had a good day.
Lucky I got into that in November.
How's your portfolio looking? Illiquid?
It is a good plan. People being dislocated from their houses in a depression creates a massive chain of social problems. This support is for those people who are losing their jobs and it should includes measures to support both home-owners and renters that are affected.
I have said previously, that for renters, the landlord must accept a reduced rent.
Just wait for the landlords who start turfing out tenants because they can not afford the cost of bringing the house up to healthy homes standards or can not bring the house up to standard because heat pump installers are not an essential service. Once the houses hit the market they may be empty for 60 days whilst waiting to be sold & settled. Every 6 houses that get listed for sale remove the equivalent of 1 house worth of accommodation from the available pool of accommodation for a year (reducing supply).
Add the landlords who wait an extra 2 weeks to select tenants because they want quality tenants now that they can no longer evict them with 90 days notice. 200,000 rented houses changing tenants * 2 weeks = 400,000 weeks of accommodation removed per year or roughly 7,692 (400,000 / 52 weeks in a year) fewer houses available for rent for the year.
The government is doing it's part to support rental demand and by extension prices.
I understand your concerns. But there will be people with no income and unable to pay rent/mortgage. If you are a landlord, and a tenant is unable to pay rent, you would rather have the house empty. If no support is provided, then you are absolutely right, many landlords will need to compete for a shrinking pool of tenants who can pay any rent at all. But this would also result in many people being homeless. A right balance must be reached. So a drop in rents, but not as much as would have happened with no support, but significant enough to justify the notion of sharing some of the economic pain.
not according to landlords, someone asked that question about being asked for a rent holiday and they are thinking about it and got climbed in by the rest telling them to kick him out.
they are in a different world than the rest of us.
if you think this is over in a month i have a bridge to sell, we are looking three months to get on top of this and even then they will be reluctant to open things up to quick so as to undo any work done
No support for hardcore selfish landlords. Good luck kicking out someone in lock down situation. Some people rightly argue that even if they accept lower rents, this kind of measures will benefit them. So shortsighted if they do not see that, and they will not benefit from it. If (and when) they manage to "kick out" the said tenant, the tenant will have the luxury of renting one of the Air BnB houses who has all of a sudden increased the rental stock while they will struggle to find anyone better than those who they have kicked out.
It should be more specific. But I think the obvious intention is for those who have had their economic prospects changed (e.g. lost jobs, business significantly affected).
Anyway, i thought best way to support people would have been to use their income as per their IRD returns over the year ended 31 Dec 2019. And to provide a support for a level of that. Full support for minimum wage earners with no income now and a reducing scale for higher earners with a reasonable cap on total amount that can be paid.
A back of the envelope calculation I've just done. Money supply growth at 5% over the next 12 months would be approx $16B. Any more money than this handed out as aid risks this money showing up elsewhere in the economy, such as food prices. Residential mortgages are the primary method of money expansion, government money creation should be viewed in relation to that.
Um - Air New Zealand has stopped paying me dividends, is the government going to step up and pay those to me please? I want some benefit for their decisions that are impacting my financial well being...(80% sarcasm but if anyone who owns multiple properties benefits from this policy, there is 0% sarcasm).
The government is stepping in and saving the company you have invested in. If they didn't your shares would be worth $0 because they would go under.
The government is NOT stepping in and saving landlords or other small businesses. Apart from mortgage holidays that is.
I'm happy for it go under and lose my investment - I purchased the shares and were aware of the risks. I would have purchased bonds or preference shares if I wanted less risk. Equally, landlords, who should have been aware of the risks of losing income/property value (history has many examples, and recency shouldn't be an excuse) should be treated the same - no double standards. Investing is investing isn't - or isn't it? Risk/return?
This whole situation reminds me of having an old dog that you love a lot. Its been a great companion, you have many great memories together, its been your best friend for many, many years. Its blind now, doesn't eat much, and no longer takes any joy in life. Its time to take it to the vet and say farewell, but you don't have the moral strength to do so. Your to weak to do the right thing and are causing your companion to suffer greatly.
Its time for the current version of neoliberal economic thought to be put down by those that have loved it so much. Its an old dog that is blind and is biting the children.
These measures don't look as effective to me.
As a bank shareholder however I think banks should milk the system. Refinance any risky existing loans and get taxpayers to mitigate that risk. Use this opportunity because it'll be a decade before you vet government assistance again.
Hah! Rich coming from you. For weeks you have been claiming the measures in place to slow the spread of the virus are over the top and unnecesary. Why? You want to protect your motel business, even if that comes at the cost of peoples lives.
And then you have the audacity to point at others and claim they are just looking out for themselves to the deteriment of others?
Unbelievable.
No he's going to be fine, thanks to his diverse portfolio of mortgaged but very profitable Air Bnb's.
by Yvil | 28th Feb 20, 9:23am
My Airbnb's are still going very well, where do you get your data from? Is it just assumption?
https://www.interest.co.nz/news/103822/pandemic-declarations-closer-equ…
I think you need to look at it more objectively.
The Government appear to be trying to save a system. A system that does not benefit the average citizen. A system where inequality is rampant, homelessness, suicide, mental health, educational results are all decreasing.
They are doing this by trying to save companies.
Bearing in mind, these are Companies who don't pay the majority of tax (https://www.interest.co.nz/news/99949/budget-2019-summary-all-tax-colle….) and Companies who don't vote.
It is very much about right and wrong. We are doing it all wrong.
A government must be accountable to its CITIZENS.
How about splitting the $30b between ever person in NZ over 18 instead of using it to keep the banks liquid. About $7,600 per person. It would more or less have a similar effect and go a longer way to achieving their inflation target. Less inequality would be caused and if needed, the money could be removed from the economy by tax if things were getting too hot at a later time period. Food for thought?
From Westpac Australia website
We have a special assistance package in place for home loans.
This package defers your home loan repayments for 3 months. The deferred interest will be capitalised. This means that your repayments will increase for the remainder of your loan term.
no free lunch
Seriously, if you don’t know what you are talking about, I suggest you read up on what the policy is!
If you are a property investor you can apply for a mortgage holiday up to 6 months!
You have to apply and prove that you are affected significantly!
If you are getting rents in then you won’t get the mortgage holiday and you would be dumb to be even applying for it!
The government has nothing to do with the granting of the holiday and it is not free money whatsoever, and the borrower will be worse off if they take one.
All our tenants will either have savings that they will call upon, get government assistance or still be receiving sufficient income to pay the contracted rent.
Banks have often looked at property investors as more of a risk than people in salaried jobs however I have always told them that an investor is far safer risk than a salaried worker, and The Man is correct!
A salaried worker can lose their job but an investor will always be able to receive rent for their property or sell it at a very last resort so the Bank is never a loser!!
What the hell are you on about boy? Getting nervous? I would be if I were you, your screwed. Here is the opening sentence from the Honourable Mr Robertson in the press release you buffoon:
The Government, retail banks and the Reserve Bank are today announcing a major financial support package for home owners and businesses affected by the economic impacts of COVID-19.
https://www.beehive.govt.nz/release/mortgage-holiday-and-business-finan…
You getting nervous also Yvil? In denial still? Losing your sense also and making illogical comments? Yes I've said the same thing, when you resort to fallacies (only) then you've lost the argument already, but in this case the I posted the evidence supporting my position. The admonishment of TM2 was appropriate, I've followed his nonsense for years.
You are not correct The Boy. If an investor has several rental investments and they are heavily mortgaged and they go into negative equity it can end up with the family home going and possible bankruptcy. I actually saw this happen in my 30 year career. None of us have experienced the situation we now find ourselves in. There is no precedent. It will be worse than the GFC and this time the Reserve Bank has virtually no room left with the OCR. For some time I have been telling people to reduce their investments and put some cash away. Not because I knew there would be a pandemic. But because assets of all classes got too expensive. People got too confident. Personally I cashed up considerably in November 2019. If you look all over the country a lot of property is coming on the market daily. Residential and commercial landlords are being asked for reduced rents. Everyone in New Zealand is going to take a haircut in some form or fashion. Let's hope that this horrible virus is eradicated from our country as quickly as possible as generally the poorer people in our society are hit the hardest. Batten down the hatches. At least we will not have huge weekly expenses. Food ,utilities, rates and insurances.
"Banks have often looked at property investors as more of a risk than people in salaried jobs "
Maybe, that's about to change for the worse if early movers across The Tasman are a warning?
“Tourism, hospitality, entertainment and retail workers are being banned from borrowing and having limits placed on credit by Bluestone, a specialist residential home loan bank, triggering fears other banks will follow in a bid to lower any risk of loan defaults and protect margins.
The bank is increasing interest rates across all products, lifting loan-to-value ratios by 35 basis points, imposing a 50 basis point loading on investment loans, and withdrawing a 10 basis point discount on fixed-rate loans.
Mortgage brokers expect other lenders to follow as unemployment soars, economic growth falls and prospects for recovery remain uncertain because of the coronavirus pandemic.”
https://outline.com/2kpX9B (In part .The rest is behind an AFR paywall)
TM2's post pretty well sums up the issue (and drag) we have with/on our economy. Its called landlording - the process of taking other peoples money off them for doing productive work.
I think I'd rather have an intimate relationship with death and taxes than find myself landlording.
Wait, didn't it used to be if someone was in financial difficulty the banks would just refinance at interest only effectively classing it as non-performing for the duration? Oh wait, LOL, silly me that sort of lifeline has been used and abused to prop up every day residential property investors further propelling property values and mortgages to new heights.
wow some of the comments here are outrageous.
The govt are not trying to avoid the collapse of markets they are trying to avoid the collapse of society!!!
All these measure are handouts and lifelines but companies and individuals are still going to suffer, there will still be heaps of job losses and the housing market will take a huge dip to more realistic values, paper wealth will get smashed (easy come easy go) and the share market will take a long slow recovery. Some businesses will still fail some will survive, some home owners will go into negative equity. But we will still have a society.
The govt cant just sit back and watch everything go down the gurgler!
Its all going to be socialised anyway !!!!
Everyone is waaaayy underestimating the impact of this, even if we snuff out CV after this 4 week shutdown, we wont be able to reopen our border for maybe years.
All travel and tourism related industries are toast
service industry will recover slowly but as soon as we get another cluster of cases bang they are hammered again
No international sport ..... and all the related catering, merchandise, transport, bars affected
A lot of jobs disappear!!!
These handouts even to the most irresponsible are necessary to avoid a total collapse where we would socialise everything at the bottom of the cliff through unemployment benefits, business starter funds, tax rebates etc etc etc... Do I like it ?? No! Does it need to happen?? Im saying Yes!!!
Yep, if they fall, banks willl be closed. People will lose their savings. So when governments started to push the housing price, it's a one way trip, no returning, no brake. And day by day,as it grows, housing market will suck most of the resources from this country. Other ensential industries will dry out. No one will invest into health care, transport etc
You are all missing the point here. There is no such thing as a free lunch someone has to pick up the tab for this in the future. This government is giving away billions and the crisis had barely started in New Zealand. All of this will have to be paid back by everyone which really sucks if you have got yourself into a financially independent position. There will be riots if the savers get penalized for the lavish lifestyles of others that borrowed everything to live the dream at their expense. I went out to a dinner once with assholes like this. They drank bottles of Champagne while i had one beer knowing full well if they left the party early the bill would be split evenly.
Exactly, it is the hardworking savers - pensioners and young Kiwis - who will be penalised to prop up those who have claimed that they are prudent and wise risk-taking investors. Because when push comes to shove those investors will not stand on their own two feet and will demand the taxpayer protect them from the risks they took.
Exactly, no one is going to rescue me if my fixed income bond from a reputable NZ company fails, or, the stocks I bought 3 years ago have list all those gains , but property investors think they should get government help if their investment doesn’t give them a workable return. Tough, suck it up, you take the good times with the bad. Problem is most have been totally brainwashed to believe that you can’t fail with property, basically because it’s been good to us for 40 years. But sadly, very sadly I think many are going to find that it can go horribly wrong.
It looks to me like you'll have to be significantly affected to be eligible for this.
I'm expecting this lockdown to last a lot longer than 4 weeks... probably 8 weeks or more. Unfortunately my job requires me to be there in person so my income has been affected. It looks like I'll be okay for 3 months, then I'll eat into my annual leave and then savings. If it lasts longer than 6 months I'll be sweating. I purchased my first home 8 months ago so it's a little unsettling.
Hi Emma, I am in the same boat, purchasing a first home within the last year having thrown most of my life's savings into that. If it makes you feel any better, I'm terrified by this as well. I don't have anywhere near enough to get by for months on end with zero income. Not super thrilled about still having to repay a student loan on whatever reduced pay I do get either.
I feel the assistance for owner occupiers should have been orders of magnitude higher than it is for investors. If renters need assistance then giving to them directly would have been far more equitable.
I am also in the same boat. I still think it has to be across the board (landlords and owner occupiers) to protect values and stop fire sales. Fire sales will turn into a vicious cycle, which may affect even deposit holders who are looking at snapping up something cheap. This will limit the loss to your equity through this period so it is assisting us in an indirect way. Chin up and batten down the hatches. Lets hope we start to see the infection curve flaten early in this 4 week isolation and that people only leave their homes when necessary. I will however only consider a property investor "savvy" if they dont take up this offer, other investors leveraging for shares and the like wont have this luxury. Mind you given the prevalence of property investing in the NZ economy it is no surprise to see the govt pulling out all stops to assist, you could call an investor savvy for foreseeing this as a possible intervention.
Thankfully I paid off my student loan already.
I'm feeling frustrated as I hadn't yet reached my 3 months worth of savings plan. And I'm really mad I have no money to throw in all my index funds right now. This caught me 6 months too soon. Best wishes to you. This is a tough time for many.
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