Should the rules around property change?

The housing market tends to go into a boom and bust cycle. While it’s looking a bit sad at the moment, expect it to come back again. If you believe the Reserve Bank governor then it’s all the fault of politicians.

Reserve Bank governor Alan Bollard did a lengthy (18 mins) interview on radio this week where he discussed a number of things including the state of the housing market and his ability to influence it.

He maintains there are still fundamental distortions in the economy which favour investment in housing and there is little he can do about it.

Commentators often point to monetary policy as being the tool the bank can use to influence the market. Bollard made the point that he has been pushing up interest rates to get the market to come off. It has done that with a “thump” he says.

However he also points out that monetary policy is not, and I love this, “perfect technology”.

It appears he is a tad frustrated that politicians haven’t done anything to stop the Kiwi love affair with property.

His frustration is that the bank has proposed ideas such as mortgage levies and ringfencing, but he says nothing proposed has “been taken up in a serious policy way”.

Reading between the lines it seems that Bollard is saying there will be another housing boom because politicians are too scared to change the rules.

I’d be interested in hearing readers’ thoughts on whether the politicians should do anything, or whether they think property investment will be much of an election issue. Leave a comment below.