RBNZ engineering our next recession

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Forums › Finance and wealth management › RBNZ engineering our next recession

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#3002905 29-Nov-2022 07:24

GV27:

While I don't disagree that this was something that shouldn't have been allowed from the start, it ended up being the only way many people could actually get a deposit together in the first place.

I know a few people like that. It may take away retirement funds, but the retirement funds wont be paying rent

mudguard

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#3002948 29-Nov-2022 08:52

tweake:

the catch is they let people use it to buy a house. that adds fuel to the housing market, the market simply ups the price to take advantage of it and takes away their retirement fund. first home buyers have to give away a huge part of their retirement so someone else can retire a bit more comfortably.

using it to buy a house was the worse thing they ever did.

The thing is, how many people would've opted out or contributed the bare minimum if you hadn't been able to pull it out for a house?

That's exactly what I did and I put 8% in for nearly a decade for that very purpose. Whereas if it was locked until I was 65 I probably would've put my contributions on hold, manually topped up the $1042 each year and used my money for other things.

tweake

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#3003197 29-Nov-2022 17:11

GV27:

tweake:

using it to buy a house was the worse thing they ever did.

While I don't disagree that this was something that shouldn't have been allowed from the start, it ended up being the only way many people could actually get a deposit together in the first place.

sadly all to true.

but because it added fuel to house prices, just like lowering interest rates etc, the house prices come up to take away that advantage.

no different to subsidies. eg give away $1000 for insulation and insulation costs go up $1000.

tweake

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#3003198 29-Nov-2022 17:11

mudguard:

tweake:

the catch is they let people use it to buy a house. that adds fuel to the housing market, the market simply ups the price to take advantage of it and takes away their retirement fund. first home buyers have to give away a huge part of their retirement so someone else can retire a bit more comfortably.

using it to buy a house was the worse thing they ever did.

The thing is, how many people would've opted out or contributed the bare minimum if you hadn't been able to pull it out for a house?

That's exactly what I did and I put 8% in for nearly a decade for that very purpose. Whereas if it was locked until I was 65 I probably would've put my contributions on hold, manually topped up the $1042 each year and used my money for other things.

a very good point.

Batman

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#3003207 29-Nov-2022 17:23

i don't think Kiwisaver was the issue.

the RBNZ printing 71 Billion dollars and keeping interest rate at near zero ... well what do you think was going to happen next -

tweake

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#3003225 29-Nov-2022 18:16

Batman:

i don't think Kiwisaver was the issue.

the RBNZ printing 71 Billion dollars and keeping interest rate at near zero ... well what do you think was going to happen next -

its not as simple as that. thats really just the tip of the iceberg. the fundamental problem is kiwis use property to increase wealth. after 40-50 years of almost non stop boom in house prices, they have bleed buyers dry. the whole lot falls over, hello recession regardless of printing money or other factors. it was always going to happen. so kicking the property market over and driving the economy into a recession is the best option of a bad situation.

whose to blame? really its every politician and every profit making home owner in the last 40-50 years.

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#3003226 29-Nov-2022 18:19

tweake:

its not as simple as that. thats really just the tip of the iceberg. the fundamental problem is kiwis use property to increase wealth. after 40-50 years of almost non stop boom in house prices, they have bleed buyers dry. the whole lot falls over, hello recession regardless of printing money or other factors. it was always going to happen. so kicking the property market over and driving the economy into a recession is the best option of a bad situation.

whose to blame? really its every politician and every profit making home owner in the last 40-50 years.

Agree, govt is foolish to think they only need to control goods & services inflation.

They also needed to give mandate to RBNZ to control house price inflation, either nationally or regionally

tweake

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#3003289 29-Nov-2022 18:54

Eitsop:

They also needed to give mandate to RBNZ to control house price inflation, either nationally or regionally

its not really RBNZ job. to control housing requires some extremely major changes. changes which a lot of people will be very angry about. hence why no govt will ever do anything about it.

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#3003334 29-Nov-2022 20:52

tweake:

its not really RBNZ job. to control housing requires some extremely major changes. changes which a lot of people will be very angry about. hence why no govt will ever do anything about it.

house prices could very simply be controlled by RBNZ, doesn't need any major changes.

All excessive inflation is bad.. incl house price inflation..

The RBNZ just need to have extra mandate to ensure house price inflation doesn't exceed 5% per annum. even better that it doesn't exceed 5% in each region. They need to have cash rate per region of NZ.

The cash rate should be there to maintain house price inflation.
And a new better tool to maintain other inflation, a tool that just doesn't impact mortgage owners.

Handle9

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#3003338 29-Nov-2022 20:58

Eitsop:

tweake:

its not really RBNZ job. to control housing requires some extremely major changes. changes which a lot of people will be very angry about. hence why no govt will ever do anything about it.

house prices could very simply be controlled by RBNZ, doesn't need any major changes.

All excessive inflation is bad.. incl house price inflation..

The RBNZ just need to have extra mandate to ensure house price inflation doesn't exceed 5% per annum. even better that it doesn't exceed 5% in each region. They need to have cash rate per region of NZ.

The cash rate should be there to maintain house price inflation.
And a new better tool to maintain other inflation, a tool that just doesn't impact mortgage owners.

Honestly what you've just written is absolutely nuts.

tweake

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#3003346 29-Nov-2022 21:20

Eitsop:

tweake:

its not really RBNZ job. to control housing requires some extremely major changes. changes which a lot of people will be very angry about. hence why no govt will ever do anything about it.

house prices could very simply be controlled by RBNZ, doesn't need any major changes.

All excessive inflation is bad.. incl house price inflation..

The RBNZ just need to have extra mandate to ensure house price inflation doesn't exceed 5% per annum. even better that it doesn't exceed 5% in each region. They need to have cash rate per region of NZ.

The cash rate should be there to maintain house price inflation.
And a new better tool to maintain other inflation, a tool that just doesn't impact mortgage owners.

correct me if i'm wrong here but you seam to be saying increase mortgage interest to control house prices.

unfortunately i do not see that working as its only one factor and doesn't address root cause. it can also hamper things like new homes. you still want people to afford to build new homes, we just don't want them being on sold for a higher price.

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#3003396 29-Nov-2022 21:54

I firmly believe that an essential part of fixing housing (in so far as it can be 'fixed') is to offer people an alternative tax free method of saving.

Most other countries do that and I can see no reason why it ought not to be the case here. If you could rent a reasonable house you could afford and still save money somewhere with tax advantages, I am sure that would alleviate some of the issues.

The usual cry is that we should have CGT but the only reason to have that is to raise money (which governments habitually mismanage). It certainly should not be marketed as any kind of method of reducing house prices - the UK has had it since the 1960's and I doubt anyone would consider UK property cheap.

Less tax is usually better.

johno1234

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#3003399 29-Nov-2022 22:10

Eitsop:

tweake:

its not as simple as that. thats really just the tip of the iceberg. the fundamental problem is kiwis use property to increase wealth. after 40-50 years of almost non stop boom in house prices, they have bleed buyers dry. the whole lot falls over, hello recession regardless of printing money or other factors. it was always going to happen. so kicking the property market over and driving the economy into a recession is the best option of a bad situation.

whose to blame? really its every politician and every profit making home owner in the last 40-50 years.

Agree, govt is foolish to think they only need to control goods & services inflation.

They also needed to give mandate to RBNZ to control house price inflation, either nationally or regionally

No need. That's exactly what the RBNZ via the OCR and its existing mandate. When interest rates go up house prices stop rising or go down. It's all quite plain to see historically.

Eitsop

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#3003404 29-Nov-2022 22:25

johno1234:

No need. That's exactly what the RBNZ via the OCR and its existing mandate. When interest rates go up house prices stop rising or go down. It's all quite plain to see historically.

Yes, but they don't have a mandate to control house prices.. they need to have multiple mandates

- goods/services inflation 1-3%
- maximise employment levels
- national/regional house prices max 5%

House price increases, while good for people who have houses, I believe it is a root cause of

- youth crime
- social ills
- depression
- suicide
- unaffordable retirement
- high food/product costs (as land/rent costs are high)

Its not how hard you work, that you reap the rewards, how much you speculate.

GV27

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#3003421 30-Nov-2022 06:56

tweake:

its not really RBNZ job. to control housing requires some extremely major changes. changes which a lot of people will be very angry about. hence why no govt will ever do anything about it.

Agreed. Talking about houses needing to be 'more affordable' is an easy political slogan, but the 'how do we handle the families and people who would be left in a position of negative equity if the market had to adjust to a DTI cap of 5x?' is a difficult question. By and large, we already know what is required for affordable housing. It just comes at a huge cost and is a hard sell politically.

Especially so given that many who bought in the last three years or so will have been the ones who were constantly getting told not being able to get a big enough deposit was purely down to not working hard enough, when prices were rising faster than they could earn money. To have them cop it again and face negative equity on what were essentially over-priced starter homes while investors and elder NZers who have made huge tax-free gains and then cashed out is going to go down like a cup of cold sick.

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