RBNZ dampens macro-pru talk

The Reserve Bank of New Zealand has downplayed talk that it will have to increase the use of its Macro-Prudential tool kit to cool a resurgent Auckland housing market.

New Zealand's banking regulator also rejected suggestions that it may have to follow APRA and ASIC with tougher regulation of rental property investor lending.

Reserve Bank of New Zealand governor Graeme Wheeler rejected talk in a Parliamentary Committee hearing that the bank should use its Macro-Prudential tools again to slow down activity in the Auckland housing market, where volumes surged and prices rose sharply to record highs in November.

Wheeler said it was not clear any resurgence in Auckland was permanent and the biggest issue remained a lack of housing supply, which the bank could not address.

The Reserve Bank imposed a limit on high Loan to Value Ratio mortgage lending in October 2013, which helped halve Auckland's annual inflation rate from almost 20 per cent to under ten per cent. But a drop in fixed mortgage rates and the National Government's re-election on September 20 has fired up the housing market again.

Buyers had feared a Labour/Green Government, which would have imposed a Capital Gains Tax and banned foreign buying of homes.

Wheeler said it was too early to say if there was a new boom or whether the renewed activity was seasonal or simply linked to the election result. He said the bank would get a more accurate picture in February or March, but even then, he thought Auckland's problem was a supply issue the Reserve Bank could not address.

"The issue there in Auckland is very much a supply side problem. It's housing supply. Period," Wheeler told the Finance and Expenditure select committee.

Labour Finance Spokesman Grant Robertson then asked if the Reserve Bank was looking at tightening its use of its high LVR speed limits or using other Macro-Prudential tools.

"No. At this stage we're not looking at any further Macro-Prudential instruments," he said.

"The challenge is to get supply sorted out as quickly as possible."

Wheeler pointed out that Auckland needed an extra 10,000 dwellings a year for the next 30 years to keep up with future population growth. Auckland had built just 7,500 new dwellings over the last year, which was also not enough to catch up with previous under-building of 20,000 to 30,000 homes.

Meanwhile, Deputy Governor Grant Spencer said Australian regulators were looking at toughening rules for those banks increasing rental investor lending by more than ten per cent per annum, and also at interest-only loans to owner-occupiers.

"Generally, that growth in investor lending they're seeing in Australia, we're not seeing to the same extent in New Zealand," Spencer said.

"Here most of the interest-only is on investor lending and Agri lending. We do monitor interest-only and talk to the banks in our prudential discussions, but it's not something that we're focusing on right now," he said.

"The evidence of froth in the Australian market is around investor lending, and it's not reflected in the New Zealand market at present."