KEY POINTS:
Here are more of your thoughts and stories:
DB
I hope property prices stay high. I worked hard, saved money, bought a butt ugly place that wasn't my ideal but was within my budget, worried for the first few years of my mortgage like everyone else, saw interest rates rise, fall and wondered what they would do when I re-financed every 2-3 years, renovated, sold, re-bought a nice place in a better burb, bought an investment property, renovated that, increased the rent on it and am only now starting to see some headway and feel like I'm in control again.
So for all of my effort do you really think I would want some whining city fringe renters have it easy?
Jeremy
I don't get it. I will pay more interest to the bank - and more of this will go back to the overseas company as profit, which will in turn worsen our trade deficit. Also, I will have less money to try and pay off my mortgage and therefore be less able to save for my retirement and therefore be more likely to be dependent on the State. And how exactly is this helping??
Steve Wedd
We haved moved our business offshore today,the high rate of the dollar is costing us export markets, how dumb is this government to sit on its hands and do nothing except let Bollard run amuck. The high cost of building a home in Godzone is laughable we are constructing houses out side new zealand for $150.00 SQ metre and fancy ones at that oh yes including materials and labour and subtrades. Now how could that be?
Tim
For the couple of people saying they're moving to Australia because of this, international housing affordability studies show property affordability is worse in Australia than it is in NZ. And yes, that takes into account their higher salaries. We've lived in Australia for 4 years and am definitely better off financially being back in NZ than we were there.
Jools
Reading all this is mind-boggling! Half the population are complaining that they can't afford a house and the other half are suggesting ways to make it more unaffordable (ie capital gains tax). The government wants us to save for our retirement but you're penalised for having any investments. Bollard keeps putting up the interest rates and the Japanese and others are loving it - thank you very much. They borrow at 1-2% in Japan and invest in NZ making a killing. God only knows how our poor exporters are going to survive. Anyone with brains leaves our country. I so badly want to live in New Zealand, I want my kids to live in NZ but please please please is there anyone out there who can run this country properly. Mr Key I hope you are reading this forum and can actually make a difference when you are elected - if not, New Zealand will be left to the immigrants and the welfare beneficiaries. How sad.
Mary
I do think the time has now come for this Labour government to seriously reconsider using the name Labour, because it certainly doesn't represent the working class anymore! It seems by allowing the OCR to rise yet again, the government is totally ignoring the plight of many working families in their efforts to become first time home owners. Asset testing will never be introduced, the reason being is that there are too many politicians wheeling and dealing in the property market who own and rent out more than one property, thereby contributing to the housing problem in this country!
Chaye D
Why stop foreigners buying property now when this should have been done years ago. When are the local and national governments going to be proactive rather than reactive for the people of this country. Nevermind, Im sending my broker to Alaska to by some cheap igloos so the Eskimos can't.
J Reeve
Although the focus is on borrowing for housing surely businesses are also affected by higher interest rates for overdrafts and loans for capital expense. People have to have somewhere to live and their home is either owned with a mortgage or rented from a property developer. It seems that this is a simple matter of supply and demand. Once there are more dwellings than people then prices and rents will move down Final question Where does all the money earnt by the banks loaning money go to Australian Head offices? Not productive for NZ?
David Cairns
So the housing market is out of control...surprise surprise. That's what you get when you have the whole world competing for a very small market. Try banning overseas investment in the domestic housing market and watch the prices get more reasonable. Cashed up overseas investors are causing housing inflation by artificially increasing demand and things won't improve until this changes. Normal New Zealanders can't compete with foreign millionaire raiders who have no commitment to our society and have made the dream of home ownership impossible for most of the citizens who live here.
Teeb
Dump Bollard.He wouldn't know which way was up!! And while you are about it send this stinking Labour Government with him.
Simon Craggs
It is clear that raising the OCR has done nothing but put pressure on those that are already struggling. A half a percent rise means nothing to a property investor who is making a 20% capital gain in a year. The only way to dampen the housing market is to provide disincentives for investors.
Gregg
Dont you think it is strange that all these learned economists look funny? It is any wonder they act funny too.
John Stroh
This Labour Government has a lot to answer for by doggedly doing nothing to change monetary policy and the role of the RBNZ in managing inflation. The slack "do nothing - it's all too hard and out of my hands" approach by Dr Cullen on an economic front has set NZ back years. That this may be the last interest rate hike for a while is nearly as sad as the observation that exporters may have learned to live with a high dollar. This Labour Government has crippled small business quite deliberately, choosing instead to fuel inflation by parking bureaucrats' behinds on seats and implementing complex processes and compliance systems that create jobs for the boys in the Departments.
Colin Francois
Its all very well going on about NZers excessive spending habits, but what about the Govt? & Local Bodies? These unaccountable wasters of public money seem to spend without a conscience, contribute to the inflation rate,and are never held to account! Bollard should have a proper go at these Turkeys, before blaming the "Housing Market" which we know is more likely influenced by Immigration, than anything else!
John
Trouble is, that if you dont like what Bollard does, you cant sack him. Hell, you cant even not vote for him. How come he is so empowered to behave in a way that seems to punish most everybody, and get away with it? I suggest telling the current Government that you will not be voting for them instead. Hit them where it hurts. After all, this situation is mainly caused by Government overspending, they say.
Ray Gilbert
This is yet another example of the stupidity we have come to expect from this government and its cohorts. Not only does it make it harder for exporters to compete, it also encourages more imports, leading to the loss of more New Zealand production and jobs. Increasing demand for housing is fuelled by immigration and the fact is that our infrastructure cannot cope as it is so a more sensible approach would be to curb immigration and dampen demand. If there is a positive side to all this, it is that even those who are traditional labour voters are able to see this government as arrogant, evil and contemptuous. Hopefully its days are numbered. Another 3 years after the next election would see the country's decline as irretrievable and the exodus to Australia and elsewhere reach monumental proportions.
Adrien
The banks are loving this. They are being "forced" to charge higher interest rates by the raise in the OCR. But they get to keep all that extra interest they earn. So the banks are creaming it... more money is just being siphoned out of the country into Australia (where most of our banks are owned).How is siphoning off a huge chunk of money overseas supposed to help New Zealand?
Russell
I dont think this will be the last increase this year. Its time this free wheeling government got real and curbed its spending spree. Whilst higher interest rates are good news for baby boomers with freehold houses (which includes top politicians) and an inclination to spend, generation X and Y are paying the price. In fact we are paying for the free ride baby boomers have enjoyed and have done so since user pays landed e.g. fees were introduced at Universities.
Prem Deshpande
Stronger NZ$ will make imports cheaper 15 to 20% discount advertisements is posted almost every fortnight on TV. Lower Interest rates will help to stop spending and make export stronger. The strength of country is gauged by Exports and not imports . Housing markets bubble has broken in Japan Singapore Hong Kong India and now US. Imagine what would be the state of those guys who bought their house for NZ$ 750000 only to crash it to NZ$ 500000. Bank's will still claim the mortgages. Beware NZ citizens before buying expensive houses at this juncture. Bollard should attack the root cause of house price rise. Foreigners, tourists should be prohibited from buying investments properties for they do not contribute to New Zealand economy. They together with Asian Agents are using Privacy laws to cover themselves and cash on at our expense. Capital gain tax should be imposed on sellers trying to dispose off houses for business only. Tax rate should be much higher say 50% when sold within 3 to 6 months and should reduce when the house is held for a longer period of time. Above 5 years there should be no capital gain tax as the house is bough solely for the purpose for additional retirement benefit.
Joe
Why people keep saying that we need capital gain tax (CGT) on property investments? We already have CGT! Property investors who flip their investment properties for quick profit are already liable for CGT. What we need is to have the IRD to enforce the rules vigorously. As for the genuine long term investors who hold on to the properties for long terms (10+ yrs) and be good landlords, CGT is not going to affect them much. In fact, people who're buying investment properties now at the current market are speculators rather than investors, as the yield is too low and the numbers don't add up. For those people, IRD can and should enforce CGT on them. Having said that, experiences form overseas have shown that CGT is not effective to curb the housing market, and in some cases CGT makes it worse as speculators would simply increase the prices to cover the CGT.
Barbara
Don't shoot the messenger. It's Bollard's job to "take away the punch bowl" just as the party (inflation) gets started. Politicians dislike going into election year and bursting a bubble. At stake is the economy (recession), jobs and business conditions necessary for their re-election. The culprit to blame is "you" the voter. Politicians tend to get re-elected with their fiscal spending promises. They engineered an election victory last time by buying your vote with fiscal spending promises. They have kept their fiscal promises. As a consequence, the NZ money supply has been printed faster than any other time in history. The NZ economy is out of whack with reality, with prices escalating into hard assets like NZ stock market and property both near or at an all time highs.
Mallory Eades
Tough luck to Labours core voters.
Saumil
Is there any point in increasing the rate by 0.25% every few weeks when it is not having the desired impact? Is there any point in addressing the sympton rather than the cause? If Mr Bollard believes the housing market can be cooled by rate increases, he is totally wrong. The fact is that there is very little connection between interest rates and housing market. The migrants who have arrived in NZ within the past 5-6 years are now settling down and want to have their "own" house at any cost. They are on a buying spree and as long as they like a house, they are prepared to pay any price. In addition, a couple of years back, under John Banks, in their greed to collect more rates, Auckland City Council increased the CV of all the properties. This high amountl of CV has become the informal "minimum" or "benchmark" for properties sold by way of auction. In short, as long as the net inflow of people remains positive, there is virtually no hope of housing market cooling down. We simply have to wait and watch.
"D Trump"
Mr Bollard. Your Fired!
Ronnie Koh
The way Bollard is handling this we will be in even deeper trouble before it gets better.
Jeanette
Whats the panic people, when interest rates rise to 18% as they were when National was last in Govt ... thats worth a moan. You dont know how lucky you are. Stop moaning...
Daniel
I find it most amusing reading these comments. Most people that write in are either ill-educated regarding finance or they have heafty mortgages that they are finding hard to manage. How can someone say the Government is doing nothing for the economy? If they were doing nothing then Alan Bollard wouldn't have a job! In the not to distant past interest rates have been more than double as they are currently. So many people take out all sorts of loans these days without making any significant savings before splashing out. The consequence of too much spending is an economy that protects itself by making it harder to spend. So if you are the spending type, get over it!
Adrian
Hmm, here we go again, too much consumer spending. But what about Government spending and its impacts.The real issue is that under Don Brash's Reserve Bank Governorship we had a governor that could control inflation by the use of interest rates and was not scared to say no to the Labour Government. Now we have a Don Brash trained Governor with out the gall to say no to Cullen and co and does not know what else to do except accept the continual government increased pricing policy whilst maintaining record surpluses. If only the business community could work this way.
Remember Cullen and co are basically immune to inflation due to the fact that the state pays for their housing, their transport and gives them subsidised meals.Maybe Cullen can introduce a few more taxes and increase prices of fuel over the next few weekes to make sure that we get another interest rate rise.
Food-for-thought
Practical economists know that both fiscal and monetary policies are both required to effectively counter persistent inflation on due to rising house prices. The underlying cause has to be tackled. As Mr. Bollard only control the monetary side of the equation, he should have raised it 0.5% instead of 0.25%.
This would then shock the so-called experts - economists and research analysts - from predicting another rate hike: which is the cause of hedge fund managers being willing to take on more carry-trades(vis-a-vis the Japanese Yen)fuelling recent rises in the NZD. This "shock-economics" is required; as the Finance minister is unwilling to take the appropriate fiscal measures - via the imposition of a capital gains tax on properties - in curbing 'multiple-property' investments by individuals and speculation by speculators.Gradual increases in interest rates will not help:it will actually enhance rational expectational behaviours; which is precisely what Mr. Bollard doesn't want.
Alwin
Time to leave for Australia.
Charles
It's like the story of Jonah from the Bibble. I take all the blame for both the rise in interest rates and the high exchange rate. As an exporter, I changed my pricelist to US dollars. You guessed-I am now receiving 15 per cent less than when my prices were listed in Kiwi dollars. So I left the US dollars in a foreign currency account and borrowed money on my house to pay the bills. Well as you guessed, the interest rate just went up. Dear God: Can you please give me a break and stop punishing all of New Zealand for my sins? Ha?
Tony McMillan
With the latest interest rate rise from the Reserve Bank, the question has to be asked, "what does Alan Bollard think he's achieving?' From my perspective I can not see that the Reserve Bank has achieved anything of substance to date. In reality the interest rate rises target only those with floating mortgages, or those with fixed rates that are due for renewal. In the meantime our international competitiveness declines as a result of a high dollar, thus putting exporters at risk. Surely this is economic suicide for a supposed exporting nation. So what is Alan Bollard telling us – the sins of the many must be paid by the few? Is it not time to target those individuals / companies that are driving the property market? It would be interesting to know what profits have gone untaxed within the property market. The time has come for the government to stop sitting on its hands and come up with a revised Reserve Bank Act or provide an alternate mechanism for dealing with the current housing boom. Alternatively, if Alan Bollard can not provide a more constructive solution than simply putting up interest rates (again), it is time he followed Stephen Fleming's lead and quit his post.
Steve G
This issue isnt in any way an Auckland issue. As the owner of a single home (the one I live in)the major inflationary pressure I see is the rising cost of my mortgage. And the high rate of interest I'm paying is the major factor in preventing me making some decent savings. Isnt it the definition of stupidity to keep doing the same thing that didnt work before? Bollard sucks.
Partha
The Government has to come forward to implement Capital Gain Tax on sale of Housing. They can give 100 per cent exemption on Long Term Capital Gain (Those who sells the Houses after keeping 5 years) and invest the profits in share market, Bank Fixed Deposits etc;. Any short term Capital Gain which is of less than five years period may be taxed accordingly.By imposing taxes on Capital Gain, Government can definitely restrict the artificial growth of housing market.
Graham Corles
Bollard does not have a clue how this country runs. Government spending is creating the rise in inflation. Therefore, Bollard should be sacked.
Raj Subramanian
My friends have investment houses and charge nominal rent. But the Government forces them to hike rent that will affect the renters in the long term. If this Government talks about providing cheap rental houses being built by them, it is to the benefit of some bureaucracy not to the common man. We got competition driving prices down everywhere except governance of this country.Petrol Tax, Hike in interest rate,property tax, fuel surcharge, GST, Investment tax,Carbon Tax, Diesel surcharge, Personal and Corporate Taxes,Tobacco Tax, Alcohol Tax,Gaming tax-including lotteries,Estate Duty,Gift Tax, Fringe Benefit Tax, and what else is left out by Government. How to create competition in Governance and make it cost efficient? World Free Trade and removal of 183 day rule for residency is the answer. That will make citizens opting to be residents of any country.
Murray M
The interest rate rise will not affect me at all. My family are well insulated against the pressures caused by this government which continues to spend. Under a Green government, (bullets fired by Labour) the rich are bound to get richer and the poor poorer. And yes I am a homeowner with a mortgage.
Kiwi Teetee
Thank you, Mr Bollard. You have chosen to reward savers and punish spenders. Keep it up, it does wonders for my savings already. You need to slowdown peoples spending habits on frivolous consumer goods and non-productive investments (like houses) and get people to start saving their money. For every dollar you earn people should be saving 10c, however given our balance of payments, for every dollar we earn, we are spending another 10c or more.
Richard Wallace
I live overseas now and have for a period of time. It amazes me how people stay in New Zealand and put up with this carry on. Its just an island with more rules than anyone else in the western world. Your lifes are controlled by people whom all earn in the 6 figure range with large expensive accounts. The low income earners take it on the chin, election time they let more low life and refuges into the place to remain in Government. Until you people get some balls to sort the government out the place will always be a third world group of third world islands. This new tax they are placing on petrol what a joke. Why does the media not question how much they make out of it now. I will only come home to retire not for any other reason, it's a small minded group of islands at the bottom of the pacific with little to offer. Its a sad state of affairs. Alot of the time kiwi's are mistaken for Australians. Why is that? New Zealand is never promoted like Australia. New Zealand needs to sort the problems out with Maori and end it. It needs to be sold out to the Americans or British to sort the place out and give the decent New Zealanders that live there a chance in life. New Zealanders should not be subject to Bollards crap nor that of the New Zealand Government. Helen Clark is not showing any grey hairs, why would that be?
Eric Hansen
Bollard should go. If he had acted sooner things would not have got so bad.
Joanne
The meddling of the Reserve Bank is doing more harm than good. There are other factors to rising house prices, interest rates are only a small factor. How about natural market cycles, demand from immigration, world wide increased costs of concrete, labour shortages? In one hand the Government berates the price of houses and low home affordability (Herald, 24 April 2007) and in the other it pushes the dream of a home further from first home buyers by encouraging the Reserve Bank to use the OCR as a misguided tool to slow the housing market. Now with petrol tax rises the Government is taking a second stab to cause a life time of renters. Who can save for a deposit with the cost of living now so expensive? The Reserve Bank should stick to their knitting and not be a glove puppet for the Government.How will it affect me? I won't be buying another investment property and I'll be catching the unreliable trains at the cold exposed train stations.
Leonard Lee
Bollard, I'd fire you if I could. As our dollar shoots to record highs, buyers will revel in their increased purchasing power. Our exporters will go out of business; New Zealand will become less competitive in the global economy. House prices will continue to rise because international demand will continue. New Zealanders - the people you work for, will suffer, and ultimately so will the country.
Alan Wilkinson
In response to John Boon, his colleague's claim that fluctuating immigration rather than Government strangulation of development (both land and building) is the cause of house inflation is demonstrable twaddle. If it were true, it would be possible to build new homes more cheaply than buying existing ones. It isn't. End of story.
Dan
Huh? What's the big deal with the interest rate rise I bought a house in house in 1987 and interest rates were running at 18 per cent fixed for 5 years. Get over it. Cut down on your spending like going for overseas holiday. Drink less lattes and buy instant coffee. High interest rates are here to stay.
Grant
If government heeds the advice of the RB that the dollar is at an "exceptional and unjustified level" they should be using the ill-gotten surpluses they have achieved from excessive taxes to pay off overseas debt. That would obviously be the best use of money and would immediately reduce the exchange rate (a bit). House prices are merely the reflection of what people with free will believe to be their value. It is just another investment avenue but the difference is that the gains are not taxed. There is a very obvious solution to that.
Mike Moran
I dont get it. Interest rates are tax deductible in the hands of property investors who also construct their affairs so that refunds are obtained monthly. What impact will the reserve bank increasing interest rates have on this group of people if the interest cost on borrowings remains a tax deductible expense? The people who get hurt are homeowners with a rising mortgage cost who cannot deduct this costs against other income and exporters. Am I missing something?
John Smith
I had a student loan, started my professional life few years back at a average low salary, bought a little place and struggled with payments expenses etc. I was left with no money after the paycheck. One day a real estate agent visits me and proposes to put the place on the market as I could get about 70 per cent more than what I paid for. I had no intention of selling though. Eventually I let the place go on the market believing that nobody will pay such an inflated price. When I start receiving a lot of inquiries I was surprised. As a matter of contingency I start looking at other more expensive houses to buy and put a conditional offer pending the sale of the existing one. Guess what ; I ended up in a much more expensive house although with a bigger mortgage to pay ie a bigger liability. But under no circumstances I could afford to buy such house on my crummy after tax pay. I did this exercise 3 times in 4 years. Now I cashed out of all, sold the last house paid of the remaining mortgage, have no liabilities, but have money in the bank that otherwise I could never save from my stupid high taxed job but have no house now and will go overseas to find a cheaper place to live. I got lucky but I am not a gambler. I ask myself: why work hard, educate yourself put yourself in debt without being able to recover the investment in yourself when you can get free money from trading in houses. I asked myself why the student loans are not tax deductible, but houses are? Till someone gives me a good answer I am of to another place.
Tim
Boy are the money gurus thick . The housing market is like most things supply and demand driven . We live in a free market situation except for the fact that that the material suppliers lack competition , In fact there is no competition and 1 major company is holding the country to ransom while the 1st home buyer is suffering . Maybe it will be soon a situation where we will be importing our houses from abroad like so much other product while our deficit worsens , in this country where we grow the timber, all kiwis should have a cost effective home.
Jon
I think I am off overseas myself. No one seems to want me here; the consistent advice is "move to a cheaper area". But can someone more intelligent than I (keeping in mind I have offered a reward for actual advice rather than advice "on how I saved 10 years ago and bought a house - therefore why can't the young do the same thing today"). If I have to answer that question - then do I really want to be surrounded by the level of intellect of the people saying it. Lets look, once again, at the facts. Someone once said to me (and Chris Carter has promoted the concept - spending $2.5 million on an education campaign to people in state housing). Why don't you own the houses you rent thus not wasting money on dead rent. There is actually a reason. I rent a nice house - its worth over half a million dollars. I pay a little over $400 per week to rent it which I can afford. Or, according the National bank website (could someone actually retype the figures in to the website rather than making aspersions on our 'laziness and need to make sacrifices") it would cost me over $1000 per week to get a mortgage on this house. Thats why I don't buy it - because I don't have a spare $1000 per week! I don't just take 'issue' with the flippant comments of the NZ Property Investors Federation and REINZ - I actually find them offensive due to their patronising through the use of false figures eg - stop drinking coffee and you can afford a home.
Carl Forster
The Reserve Bank and This Labour Government are not interested in the NZ Eccomony, Business or the people of NZ. It is too late and this Labour have to go.
Richard Jones
Surely a better way to fix this problem is to simply reduce the terms available on housing loans. ie at the moment they are 25 - 30 years max. Reduce it to 20 years so it becomes just as unaffordable, therefore slowing housing values, but does not adversely increase the value of the $ dollar and therefore affect our exporters. The higher the rates are going, the longer the banks will extend the term of the loans to make it affordable. Next move to be made now with this increase, the banks will now release 35 - 40 year mortgages and nothing is solved.
Jo J
Gee the Patricia Fields of this world are such nice people!!! What she and others forget is that whilst I am paying off someone elses mortgage I cannot save enough for myself to buy a house, and by the way the rent I am paying is enough to pay a mortgage on! And... peoples circumstances change often through no fault of their own .I have a low income because I chose to stay home and raise my children instead of giving them over to others to do so and support my husband in his career path. Now there is no husband I guess its just my bad luck that prices of houses have outstripped what I can save in month after paying rent!
Robbie Peris
I have saved $50000 and still cannot afford to buy a decent house because of the current house market. Most of the mortgages are on fixed term and I wonder how could Mr. Bollard control the inflation by playing with the cash rate. Doesn't it make sense to increase our tax and hence control the spending across the board? I also would like to see laws to tax capital gains and to restrict people buying additional houses.
Christopher
Even with decent salary in NZ, finding the funds to pay student loans and take on a huge mortgage will be near impossible. Overseas work for some years might have to be the answer.
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