Newland: Best option? Do nothing
Thursday 31 January 2013
Reserve Bank Governor Graeme Wheeler should leave the market well alone, says property commentator Olly Newland.
Today’s official cash rate announcement included the clearest signal yet that house price inflation, and the household credit growth that goes along with it, is squarely in the Reserve Bank’s sights.
The Green Party has called for the OCR to be raised to lower the dollar and help exporters. Others have said Wheeler has indicated he’s likely to raise the rate sooner than expected to curb house price growth.
But Newland said: “Every time anyone meddles with the market there are unintended consequences.”
He said if the OCR was lower, imports would become more expensive and there would be inflation. Increasing the OCR would make exports even more difficult.
Restricting loan-to-value ratios would hit lower-income people the hardest and raise rents, he said, and a capital gains tax would dry up the supply of property on the market.
“History has taught us that the pendulum swings slowly from one side to the other correcting anomalies slowly but surely. That’s a much better way to cope with any stresses or strains that may appear from time to time.”
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Residential property values just keep raising in Auckland – with new QV data showing increases of 20.4% over the past year, 5.6% over the past three months and 60.1% since the 2007 market peak.
New, more targeted regulations for earthquake-prone buildings are a win for commercial property owners and businesses.
The Reserve Bank has cut the OCR to 3.25% today. Here is what the governor Graeme Wheeler said.