Reserve Bank Governor Adrian Orr has made a plea to Kiwi households to diversify their investments away from a total focus on housing.
Orr used a speech to the Property Council of New Zealand Retail Conference 2021 to urge Kiwis not to put all their eggs in one basket, or 'kete'. And he again made that point that the RBNZ sees current house prices as unsustainable.
He also clearly stated that the RBNZ would not be using interest rates to target house prices.
"...This is not in our mandate - nor does it make sense. Monetary policy is best used to manage overall consumer price inflation stability i.e., an aggregate consumption price index, rather than being used to target a specific asset price. Likewise, trying to target both consumer prices and house prices with monetary policy will quickly lead to confusion and suboptimal outcomes."
His speech, titled 'Housing Matters', was a change in subject matter from the earlier signalled title of his speech to the conference, which was: 'The Retail Economy; where have we been and where are we going?'.
And the speech came just one day before the RBNZ was to give its latest six-monthly Financial Stability Report - which would undoubtedly largely feature housing issues and New Zealand's runaway market.
Indeed, Orr began his speech by referring to the imminent FSR and said: "Spoiler alert – today I will provide the gist of our analysis."
In launching effectively a plea for diversity of investments, Orr said an investment portfolio is an aggregation of assets that can provide an expected return with certain risk, over a specific time horizon. Expected return, risk, and time horizon are the basic components of any single asset, and an aggregation of assets i.e., a diversified portfolio.
"When investing in an asset (a nest egg), or building an investment portfolio (a basket of nest eggs), having a view on your investment horizon, and your ability to identify and manage the risks that come with each investment, is necessary.
"Investors need to be asking themselves the right questions to manage the risks. On horizon, am I considering my needs in two years or 20 years? What happens if my needs change and I need cash? What happens if my circumstances change, and I can’t cash-flow my investment? What if the asset value is highly volatile, and unfavourable when I most need to sell it?
"Identifying and managing these risks can be life-changing.
"How often have we heard about people needing to sell an asset – especially a house - when they least wanted to (e.g., when the value of the house was less than the mortgage owed). Or, when investors have had to be directly involved in managing their property when they were either unable to, or highly inconvenienced. Or, when they were unable to access a better investment opportunity due to the inability of being able to sell their investment property?
"Stacking your investment kete with only one asset (or asset type) accentuates these risks."
Orr said while all houses are not the same (i.e., there is some financial diversification within housing investment), there are some strong common factors that will drive your returns and lead to concentrated risks. These common factors include, for example, the state of the local economy (especially if your employment is also local), the level of interest rates, local climate conditions and insurability, and a wide variety of central and local government policies related to building standards and tax.
"Simply ‘doubling down’ on the same set of risks (i.e., similar assets) is not diversification," Orr said.
He said diversification was one of the few ‘free lunches’ in finance. Diversification in asset holdings can bring the same expected financial return for less risk, or a higher expected return for the same risk. In general, the broader the variety of eggs in your investment basket, the better.
He noted that diversification in household wealth had been supported over recent years by the introduction of Kiwisaver retirement savings schemes, now worth circa $87 billion in the June 2021 quarter.
"However, New Zealand’s household balance sheet still remains highly concentrated in housing.
"The recent extraordinary rise in Kiwisaver balances has been outstripped by recent house price increases. The benefits of diversification are not being fully overlooked by New Zealanders. But the weight of money is still favoured toward housing – helping drive house prices unsustainably higher."
Orr said the drive for better investment diversity "still needs a significant nudge" – both in terms of investment options (more offerings from our capital markets), investor awareness, and at times regulatory imposts where market failure exists.
- Is housing in New Zealand such a superior asset class that it outweighs the benefits of diversification and/or outperforms all other asset classes in risk and return?
- Or, are some of the associated investment risks neither identified, priced or managed?
- And what role does the relatively easy access to bank mortgage debt, and hence the ability to gear (leverage) your mortgage deposit, play in the bias toward housing as an investment class?
- And what do differing tax rates on housing equity versus other returns make to investors' choice?
"Property will always be an important asset class in a well-diversified investment portfolio. However, there are strong grounds to believe that in New Zealand many of the associated risks have been inadequately priced, identified, and managed.
"As such, New Zealand households continue to hold uncompensated risk and are overly exposed to mortgage debt.
"This investment preference has worked well over time for many. However, this is not the case all of the time, for all people, and compared to all of the benefits that a more diversified portfolio will provide for the same or less risk."
Orr said the RBNZ was "the first to acknowledge" the limitations of bank lending rules or regulatory tools in promoting a more diverse investment portfolio for New Zealanders.
"At best, our prudential tools either build resilience in our financial institutions to weather severe conditions (e.g., our bank capital expectations), or minimise the damage if a particular shock hits economic activity (e.g., our lending restrictions). And, these regulations ‘bite’ only if aggregate bank lending has gone beyond what we would consider financially sound for the system."
The RBNZ's tools are limited, Orr said.
"For example, our loan to value ratio restriction (LVR) tool can only impose bank lending constraints on new loans – as they are being made. It does not impact on the vast bulk of loans already made. This means it takes time to influence the risk of the whole bank lending book.
"LVR restrictions are about minimising the scale of the damage, not preventing it in the first place."
Orr reiterated that as was announced in September, the Reserve Bank had from this week, (November 1), restricted the amount of lending banks can do above an LVR of 80% to just 10% of all new loans to owner-occupiers, down from 20% previously.
"We are also currently well advanced in our work to commence consulting on additional ‘debt servicing ratio’ tools that can assist us to limit the more extreme lending that banks can make. These tools impose a cap on the overall mortgage debt a person can borrow based on their income.
"Again, this tool supplements the work banks already do. We will be commencing our consultation later this month and will be encouraging significant input and feedback."
137 Comments
Old history, repeating here. Finance Minister Dr Cullen bemoaned NZrs insistence on investing in property rather than equities, shares etc. Only a few days later his protege Cunliffe invoked measures that collapsed the share price of Telecom, a cornerstone for thousands & thousands of mum & dad type investors. They consequently lost thousands & thousands. The reason NZrs invest in property is that it has proven to be of the safe haven type, and not only that, lucrative too. On top of that tax structures, loss attributing qualifying etc, and low interest rates hardly presented much disincentive.
That is what they said in 2019. I expect that high general inflation will flow through to continued nominal inflation of house prices with negative real value growth for a year or 2.
The risk is that the government amends the minimum wage again and in so doing drives up the cost of new houses (directly via the cost of hammer hands and indirectly via the labour cost of materials). I generally think of housing as a hedge against bad government policy that devalues the dollar (such as declaring that more dollars must be paid for lower / the same productivity. All this really does is devalue savings denominated in dollars).
It’s how the banking system views other assets that’s the problem.
Most people that want to invest a decent amount of money beyond their owner occupied home will be using equity in their current home rather than having cash. When they go to the bank to tap this equity to invest in something, the bank is required by law to ask them what it is for. If they say shares very few banks will consider this and if they do it’s at a very high interest rate. If they say property then this is usually ok.
So without selling the family home most people can really only invest in one asset……housing.
I know this example misses general savings, but most kiwis wealth is in housing and I’m sure most people can see the point.
The problem for Orr now after being asleep at the wheel for 12 months is that the "All in" on the housing market is now severely limiting his options. He now has record inflation that turned out not to be "Transitionary" coupled with runaway house pricing and everyone is donkey deep in debt and now has to get interest rates to rise.
If only we had someone with the power and responsibility to oversee the risks within our financial system. Someone who would ensure we don't get a financial bubble built up that is big enough to put our entire economy and financial system at risk - you know, something too big to fail.
Shame that post appears to have been left vacant and instead we just got Adrian "madoff" Orr to stoke a financial bubble to the point where we there is no escaping this without years of pain - either a sharp correction, or years of slow growth impacted by deleveraging.
Instead he likes to spend his time giving lectures, rather than implementing solid policy.
This could end pretty badly for some people that are over leveraged and house prices take a dive. The best we can hope for is everything just levels off for years of slow to no growth. If inflation keeps going and rates keep rising and shipping costs do not return to pre-Covid levels its not going to be great for us in the middle of nowhere for imports/exports.
Why is that the best to hope for?
There is no network upside to your scenario.
The credit created by recent rises is already realised. Property in NZ is mostly in extremely favourable equity positions.
It’s far more advantageous to have those with unrealised capital gains to take a pretend haircut and reduce the expense requirements of new market entrants. You know disposable income to get some cash velocity.
There is the case for recent market entrants who will be negatively impacted. Legislate non recourse loans and make it the banks problem. You’ve seen ho much profit they make. Let them shoulder the burden of irresponsible lending.
Such a pathetic attempt to reframe the narrative. Recent FHB have been shafted in so many ways. Investors have for years been using the favourable tax treatments, existing equity and lopsided RBNZ rules to squeeze FHB out of the market. The political class has been repeatedly voted in on promises of addressing the issue of affordability and housing shortages, but then not only failing to address affordability but actively making it worse to juice short term economic "growth". And vested interests in the media constantly creating FOMO to try and push new buyers into the market.
You are then going to try and shift the blame onto FHB? After years of affordability getting worse and worse, with no help in sight, they finally jump in out of share desperation to afford getting completely out of home ownership, but now its their fault? jesus, what a utter crock of shit
there are strong grounds to believe that in New Zealand many of the associated risks have been inadequately priced, identified, and managed.
For more than a decade now, risk has been almost impossible to price accurately due to massive market manipulation by central banks. The audacity to come out at the 11th hour and criticize households for holding excessive amounts of "uncompensated risk" is staggering.
How about that $53b in government bonds you bought up at over-inflated prices, Mr. Orr, in order to drive down people's perception of risk and keep them borrowing? How is that asset class working out for you?
I firmly believe he understood the mess he was creating, but does these sorts of speech's simply so when it all comes crashing down he has something to point back to and say "See, I DID warn everyone". While at the same time creating the conditions ripe to create the risks, moral hazard and financial instability he is warning about.
An analogy in the spirit of Halloween:
Orr puts a giant bag of candies in front of the house with a big flashing "FREE CANDIES FOR EVERYONE" sign. Then the next day he writes a post in the neighbourhood Facebook group about how he's concerned for the dental health of all those kids he saw eating candies last night...
Been looking at buying a bach for a few years, prices rocketed up obviously much to my disgust. Decided to be patient and not rush in, which now seems like a great decision. I'm feeling there might be some bargains in a year or two for people with cash. Already seeing listing numbers creep up and sales slow significantly in the area I am looking. Popcorn is ready!
...in the area I am looking....
In that one phrase is the seed of our problem. New Zealanders are convinced that "if prices fall it will be a good time to buy" and so will try to outguess each other as to when that time is.
Not until YOU don't want to touch any investment property with someone else's bargepole, will The Bottom have been reached. And that will be a fair way off; after many false falls, and many people catching the falling property knife on the way down.
investment property
Another seed of the problem, if you will. Why does everything have to be an "investment". Can a person not just purchase a second house, or bach, as something to enjoy. I couldn't care less if the value goes to $10k, it is for creating memories and enjoying with family, not making a buck.
VTHO you are joining what could quite possibly be the world's least desirable club - Kiwi's sitting on the sidelines waiting for property prices to fall. This forum/chat group is a ground zero for bearish property pundit's. Enjoy........
A year ago there were >250 houses for sale in Coro on Trademe, today it's 138 in peak Spring selling season.
By all means, nothing wrong with holidaying abroad either. You don't have to spend $2m either, some of the best parts of the Coromandel are away from the goto hotspots and you can still get a decent place for $1m.
My point is about the waiting for prices to fall, it's been a pretty poor strategy.
An intelligent person knows what the asset is worth. an emotional person will just do because he sees so many others doing it.
Be an intelligent human not a cow following a cow.
And yes the time will come for the grounded and intelligennt ones to grab the deal. Darwin did say survival of the fittest. He didn't say survival of the richest.
Yup we may be at peak house prices
1) RBNZ seams keen on raising interest rates
2) Polls are pointing to Green party in govt in 2023. Wealth tax on the cards?
3) Govt will need to raise taxes to pay for its Covid/lockdown debt. Especially if the RBNZ refuses to monetise the debt & embrace MMT. Which they don't seam keen on doing.
3) No immigration at the moment.
Could be a case of the 2020/2021 years being the pandemic party which is to be followed by the 2022 -2025 hangover.
To be fair to him, the kiwi investment psyche has revolved around housing for decades. The late 80s share market crash helped bolster this love for housing and I see no reason for it to change unless thousands of peoples investments are wiped out in a property price nuke. Most mum and dad investors don't even know who Adrian Orr is, let alone care what he says. Interesting times ahead for sure.
A friend of mine purchased a few years back. Now it's rented out. When rates dropped, she was pleasantly surprised that her mortgage dropped. She just saw it as an act of kindness from the bank. Zero knowledge of RBNZ existence, what central banks do or the OCR. This is someone who's now one of our landlords. It is a little worrying.
Jeeze, now he tells us. For the last 30 years nearly every govt tax rule and societal message about how to get ahead financially, has focussed almost solely on housing.. I don't just have all my eggs in one basket I've got my kids and grandkids eggs in there too..
Given the RBNZ now have a mandate to consider house prices in OCR settings does this mean they will slow down any interest rate increases due to the risk of house prices dropping from what they see as an unsustainable level? The speech today mentioned the vulnerability of households to interest rate increases and that impact on financial stability.
Given the RBNZ now have a mandate to consider house prices in OCR settings does this mean they will slow down any interest rate increases due to the risk of house prices dropping from what they see as an unsustainable level? The speech today mentioned the vulnerability of households to interest rate increases and that impact on financial stability.
Real estate might be a good inflation hedge but still might not deliver you great returns e.g. if inflation is accompanied by a recession "stagflation". Residential property in NZ went through a sustained period of negative real returns during the 1970's, early 80's I understand. Simply high unemployment and low growth can really put a dampener on real valuations.
Oh right, so the RBNZ's clowns first implement an ultra-loose, unsustainable and shortsighted monetary policy, with unsustainably low interest rates.
Then, when the inevitable consequences (inflation, housing bubble. mis-pricing of risk, mis-allocation of capital, fragility of the financial system etc.) start showing up, they "plead" with Kiwis to ignore the very market conditions that they helped create. And still they refuse to acknowledge reality and drag their heels in normalizing interest rates, which should be at a significantly higher level than they are now, so creating the conditions to go even higher with interest rates later on.
And when the housing bubble finally bursts, Orr will not hesitate to blame Kiwis for it. At best, inflation will progressively eat up the real value of houses, even in the better scenario where house prices do not decline significantly. As an asset class, NZ housing is completely out of sync with economic fundamentals, and in one way or another it will revert to fundamentals, and this is going to be painful to anybody who bought into the Ponzi and is over-exposed.
Unbelievable.
Lol, I remember him saying that he would rather deal with inflation than deal with recession. Is this part of his strategy to deal with inflation and financial instability? Why stop people from investing into property? Surely since Jacinda mentioned that she would like to see small increases in house prices, it must be good investment right? Why worry much while we still have our "wealth effect"? Lets keep this party rockin ;)
Asked to explain why a fall in prices would be bad, Ardern said: “What we’ve simply expressed here is that the growth that we’ve seen is unsustainable. So, if anything, it is much more sustainable to have those much smaller increases. I think people expect that you see that in the market.
“What we also accept is that for most New Zealanders, their house is their most significant asset… A significant crash in the housing market - that impacts people’s most significant asset.”
Put to her that people who invest in shares, for example, don’t always expect the value of that asset to go up, so why should it be different for housing? Ardern responded: “This gets to the heart of the issue of why so many New Zealanders turn to the housing market.” Ardern then walked off stage, having previously signalled she was taking last questions at her post-Cabinet press conference.
Ardern wants to see small increases in house prices, admitting people 'expect' this | interest.co.nz
Yep. Talk about boys who cry wolf:
April 1998 – RBNZ Governor Don Brash warned rental property investors expecting unending and high capital gains would be disappointed: “Far too many people still see getting heavily into debt to buy a second property as the best way they can save for their retirement, even though, in my view, they will be disappointed.” House prices have risen 330% since he said that.
Sept 2003 – Reserve Bank Governor Alan Bollard said after house prices rose 14% in the previous year that rental property investors should soon expect real deflation: “I’m concerned that this could end in disappointment, especially for unsophisticated investors rushing to get on the housing investment bandwagon.” Prices have risen 218% since he said that
Feb 2015 – Reserve Bank Governor Graeme Wheeler warned there could be a sharp correction in house prices. Prime Minister John Key supported that warning, saying: “We are building a lot of houses in Auckland now. People can get a bit carried away with the fervour of these things and believe it is all going in one direction. History shows you house prices go up and down.” Finance Minister Bill English said: “There’s no asset price that can go up at over 10% a year forever, so sometime it will stop. And in this case we are really starting to get more supply coming at speed into the market.” Prices have risen 58% since they said that.
House price explosion is New Zealand's great social disaster that will reverberate for generations.
And Orr come up with this platitude. He needed to do his job instead.
As for the eggs. We now have too many people without enough eggs to put them anywhere owning a house.
Orr hopes he can get Aucklanders to doubt what Kiwi's know. Like so much of the NZ economy Duopoly bakes in profits and rewards investors. Auckland Property has for decades been an even surer bet because its not even a Duopoly but a Monopoly. Put simply with a population of only 500,000 in the 60's Auckland's visionary city fathers converted Manukau from Rural to Residential opening up cheap land for expansion. That maintained families ability to buy at a House at 3 x's Median Family Income for next 30 years. If "North Auckland" had been opened up and converted from Rural to Residential 30 years ago when population of Auckland was only 870,000 then the unrestricted land supply would have continued. Auckland property prices would not have been the one way bet they have become. If 1960's era Auckland could find a way to invest in Motorways and opening up thousands of Hectares for residential land then no reason 1990's Auckland could not have done the same--but instead fell victim to "central planners vision". Helensville to Orewa and area north of Albany is twice the size of the formerly rural Manukau-and less fertile land to boot. Misguided Auckland council plans of the past 30 years cause monopoly land prices and the public know it (and Orr can't admit it). Until the City Fathers smarten up like their 1960 era "Grandfathers" investing in Auckland "Land"-which is what Housing investing is-will continue to reward those with the DTI ratios that can gain entry to the promised land. Orr should use his bully pulpit to point that out. The diversification pitch is applicable to other audiences--but Aucklander's know better.
So true, as if falling house prices would not be the first domino in falling all other asset prices. Maybe he mean keep your saving in cash, and you have to be mad to do that with current inflation rates being higher than any interest you may earn.
Mad house prices in NZ are symptoms of an ailing economy NOT its cause. If risk adjusted returns on other activities were producing similar outcomes, banks would have happily inflated them to the moon instead. Residential housing is the last hole this credit/investment water can flow into as all other holes are already full to the brim
"...This is not in our mandate - nor does it make sense. Monetary policy is best used to manage overall consumer price inflation stability i.e., an aggregate consumption price index, rather than being used to target a specific asset price. Likewise, trying to target both consumer prices and house prices with monetary policy will quickly lead to confusion and suboptimal outcomes."
In other words, interest rates may need to be pushed up dramatically for their mandate to control consumer price inflation at 1% - 3% and if asset bubbles end up being collateral damage that is not his problem.
To those who say "they" will never let the housing market fail and its impossible for house prices to crash, pay careful attention to his words.
"Likewise, trying to target both consumer prices and house prices with monetary policy will quickly lead to confusion and suboptimal outcomes."
One could also replace "House Prices" in that sentence with "Maximum Employment" to now read "Likewise, trying to target both consumer prices and Maximum Employment with monetary policy will quickly lead to confusion and suboptimal outcomes."
That change the current Labour Government made to the mandate had the biggest unintended or intended consequence that I can remember.
Amusing. Let me guess. When he's alone (in the toilet cubicle or the family are at the supermarket), Orr gets on his 2nd phone and adds to his sack of the ol' rat poison and a collection of high-risk, high reward altcoins. Also, the safe in the home office is filled to the brim with gold, silver, and recovery phrases for his hard wallets.
Why not Mr Orr? It is you who took the decesion to bring the OCR down to .25 just over an year ago and then gave free money to all the banks to spread it out on NZ like there is no tomorrow.
There was no reason to put all that free money in the market at the time because NZ economy was strong and was going strong but you have created a chamber filled with gas now that one spark will ignite it and all will be burnt.
Lots of people will suffer but i guess stupidity has run its course and some will feel the consequences of your decesions.
I hope Karma gets you.
While it's a good statement from the RBNZ, the RBNZ are mostly responsible for kiwis putting all their eggs in one basket (the government is also responsible), by making their risk weightings for real estate loans much lower than business loans, in addition to fueling the "can't lose" fire by decimating interest rates over the past decade and abandoning LVRs. The government is just as responsible, by guaranteeing loan repayments, making housing tax efficient, putting up immigration to insane levels and limiting building in built up areas. Again, he needs to be looking in the mirror and talking to his mate GR as to WHY NZers put all their eggs in one basket. It's like he is blind to everything him and the government do to inflame the market, thinking that the way to enact change is through talk instead of actions. Signs of being completely delusional.
Well expressed Blobs. Not sure why he's talking about 'eggs in one basket' when the whole economy appears to be crowding into that single trade.
BTW, I think the banks create their own risk weightings. The RBNZ doesn't do it for them nor do they sign off on this particular benchmark.
There are minimum prescribed weighting for bank assets under the Basel IV(?) rules but the banks, with the RBNZ oversight have the ability to use their own models. Recently the RBNZ has required banks to load up on substantially more capital which should have made lending across the board more circumspect but you are correct, they should be raising the weightings for residential property to reflect the relatively higher risks that they now seeing with it.
https://i.stuff.co.nz/business/126856502/adrian-orr-says-reserve-bank-o…
Can someone please explain, how do Orr get away with such statement / explanation.
If he is not responsible for housing market than why did he removed LVR when under fear that house price growth may stop - AT THAT TIME HE WAS RESPONSIBLE FOR HOUSE PRICE SO ACTED OVERNIGHT.
So when it comes to supporting and promoting Housing ponzi is concerned and will act but when time to control the ponzi........
This is amazing to see our Govt/PM say the same and warn us in Dec 2020. From then to now the prices are increased by 40% and at some places, they increased by 100%.
There is no value in this kind of empty warnings from empty people and why someone will listen to this plea when they know they can make a hell of a lot of money in the next year. Shame
I keep thinking, ah yes, this is very reasonable, RBNZ is not meant to target one asset class... then I remember the RBNZ dropped LVR's to zero for most of 2020...
What the f**k is this!
When I started studying economics my lecturer told me "the main reason to learn economics is so you don't get tricked by economists", when all other rules in the economic handbook can be re-written in a heart beat this piece of advice turns out to me more a more true.
Orr has painted himself into a corner. He is now standing on his tiptoes with the weight of a speculative economy on his shoulders. In short “an extreme stress position” Does he dare wreck the ponzi bubble with interest rates, or does he put the final stab in the back of not asset owning tax payers and all youth/future Australian tax payers by pretending nothing bad is happening….
Gonna be a really interesting next six months.
Reserve Bank Governor Adrian Orr has made a plea to Kiwi households to diversify their investments away from a total focus on housing. Orr used a speech to the Property Council of New Zealand Retail Conference 2021 to urge Kiwis not to put all their eggs in one basket, or 'kete'. And he again made that point that the RBNZ sees current house prices as unsustainable.
The RBNZ Governor needs to address his concerns to banks which he supervises, not individual investment choices.
Around 61% of NZ bank lending is dedicated to residential property purchases for one third of already wealthy households because the RBNZ offers them a RWA capital reduction incentive, to do so.
Bank lending to housing rose from $50,788 million (48.36% of total lending) as of June 1998 to $319,231 million (61.39% of total lending) as of September 2021 - source
But wouldn't the lack of growth return the OCR to current levels in 3 years or so?
The current inflation rate although high may soften with contracted economic activity.
Those who took out mortgages last would have done so on the cheap for 3 year terms (hopefully).
So, this burst of bank interest rate terms although high will catch a few out potentially leading to some selling.
I see headwinds with rising OCR and bank carded mortgage rates for another year but reduced economic activity should bring the OCR back down?
Perhaps, I am missing something.
Perhaps I'm being cynical, but I think what you are missing is that it is no longer in the interests of boomers for interest rates to stay low. The youngest boomers are now 56 - the vast majority would have paid off their mortgages by now. The majority will be already retired, and looking for safer investments like term deposits. So for them it is better if interest rates are higher. And given that for the last 20 years at least if you wanted to design economic policies to benefit boomers at the cost of everyone else you basically couldn't have done better than what actually got done, is there any reason to think this won't continue?
Not blaming individual boomers, btw. Simply stating the facts that NZ has a history of designing and maintaining economic polices in their favour at the cost of just about everyone else.
Many boomers have chosen equities.They have large portfolios containing NZ , US and Aussie shares. These portfolios give them regular dividends and there have been huge capital gains over the last 12 years or so. The smartest boomers own both investment property and equities. That is what Orr is suggesting. Get diversified. Some very brave boomers are also holding cryptocurrency. Good on them.
al, you may be right as any boomers with half a brain with have stacked their portfolios with stocks rather than interest bearing bonds. And we have been coining it. However, any investor with half a brain with manoeuvre their portfolio depending on what is happening with interest rates, boomer or not. Anyone with a Kiwisaver account will have their managers looking at interest rates as soon as their return is moving toward to riskier returns being made on the Stockmarket. So, it won't just be us boomers. It's just common sense.
Your last sentence started OK, but ended in nonsense. Economic policies are set by the Government of the day, and boomers don't have the numbers, 65+ only makes up 15% of the population. Extrapolate that back, and it's not like we got the Government we wanted every time. Do you think Ardern is looking after boomers? And just as an aside, my investment portfolio has literally gone ballistic since Ardern took power in 2018. In fact, my returns are always far greater under a Labour Government than a National Government.
Well, my point was that every government over the last 20 years or so has been pursuing policies that, for the most part, have benefited boomers at the expense of everyone else. That's all - I'm not claiming it was intentional, or that the government that won every election was the one that the majority of boomers voted for (I have no idea if the latter is true). Do you disagree with the claim that no matter what party was in power, the policies at the time tended to have favoured people in the life stage boomers were at at the time? (i.e: low immigration and low house prices when building a portfolio. Rapidly decreasing interest rates for the majority of the time people in that age group were paying off mortgages, combined with high immigration, less infrastructure spending pushing up asset prices. Now interest rates creeping up just at the time conservative investments are what boomers are mostly looking for).
And yes, I think Ardern has done an excellent job looking after boomers - whether that was her intention or not!
How dare he. This is the very same Mr Orr who deliberately threw fuel on the flames of the housing market by slashing interest rates to 'protect jobs and the economy'.
He took the view that this was the lesser of two evils, but now refuses to admit that he grossly overdid it. It's the fault of others-nothing to do with him. indeed, he now lays the blame on those who quite rationally chose to use the ridiculously low OCR to pile into the market.
I would like to see him forced to explain this in person to a group of those who have watched the dream of home ownership vanish over the horizon.
What an arrogant pr***k.
Why would Orr come out with this speech today, hes not the idiot that poster suggest. One cant help wondering if the bank(s) are giving Orr the "continue on this path and we are going to have to start liquidating borrowers as asset prices reset" message. With no options remaining, would his response be a public warning...?
Going to be a really really interesting next six months.
"Mr Orr, head of well known drug cartel, the RBNZ today said although he'd doled out more drugs than ever last year, he was worried that it may be affecting some people's health. And that they should, like, scale back a bit and you know, eat some fruit and veges now and then".
Silly question. Who exactly is Orr addressing.
If the investors are growing less then he can only be talking to home owners and all they're are doing is buying a hose to live in at the going rate. Is he suggesting people not have a house or only consider renting?
What the heck is he suggesting?
I think he's saying "Oh man, we screwed up royally last year! Prices up 30%, lending through the roof, what do I do? Oh, I got it, just tell people to cool it a bit. Then if the sh*t hits the fan, I'm on the records as telling everyone to be careful. Their own fault if they get burnt, nothing I could do."
i.e. he's doing CYA.
Lol Adrian Orr. I mean, it's not like you put all your eggs in one basket with quantitive easing that has screwed the economy so much it will take NZ'rs a decade to climb our way out of the hole you dug. But hey, carry on. At least you'll be remembered for something I guess.
A house in Goodwood Heights sold in Jan 2020 sold for $780000 and in December sold again for 1.03 million and just last week was sold again for 1.31 million.
And this people after giving opportunity to speculators to whip and make easy, fast and big money...are crying wolf....
What sort of people are they !
We know they are shameless manipulated creeps and stand exposed but still Thick skin so to take all this drama from Orr and his team as......
https://i.stuff.co.nz/business/126856502/adrian-orr-says-reserve-bank-o…
This people are so cunning as hard to understand why are they saying it now and to whom.
"Orr pleads with Kiwis not to put all their eggs in the housing basket"
Mr Orr is pleading ......what about average KIWI/FHB pleading/expecting him since months to control housing ponzi.
Laughable when his own charts compare housing performance with equity performance from a base of 100
NZ Equity performance in the chart +40% Housing performance +50% (page 9 of the Housing Matters report) https://www.rbnz.govt.nz/research-and-publications/speeches/2021/speech…
Talk about an own goal AND they use the same graph in the Financial Stability report the next day
https://www.rbnz.govt.nz/financial-stability/financial-stability-report… (page 15)
Housing Market 1 - RBNZ 0
Don't get it. 12 months 31% return...18 months 42% return...still going higher right now at $10k a week....and I'm paying 2.79%pa for the capital you spewed into the market for me to do it ...all that money Orr magiced up to give the banks their best year in history! And laden families now and in the future with lifetimes of debt! Nice one bro... Orr..mate you know the game...there's no money in it for the protected financial sector if we all diversified to take riskier positions with equities and why would anyone as the market is full of over priced stock to assets and with diminishing yields not even covering inflation. This is as everytime you turn up, always an attempt to whitewash and shirk from the obvious. Orr, It was a mistake.
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