Comments on: LVR restrictions: exempting new construction

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Comments on: LVR restrictions: exempting new construction http://www.tvhe.co.nz/2013/12/10/lvr-restrictions-exempting-new-construction/ The Visible Hand in Economics Tue, 10 Dec 2013 22:28:44 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: Shamubeel Eaqub http://www.tvhe.co.nz/2013/12/10/lvr-restrictions-exempting-new-construction/#comment-42560 Tue, 10 Dec 2013 22:28:44 +0000 http://www.tvhe.co.nz/?p=10538#comment-42560 In reply to Miguel Sanchez.

I like the “yes minister’ comment. It definitely has a feel of that.
I hope you are right that my fears on independence and transparency are misplaced – because they are very important and necessary aspects of the RBNZ.
I dont know how the RBNZ could have known the impact of the LVR restrictions in the first two months, when the initial impact was going to be large. But the bigger issue I have is not that it will have an impact on new building, rather how it fits with the most important reason and test for this policy: financial stability.

]]> By: Miguel Sanchez http://www.tvhe.co.nz/2013/12/10/lvr-restrictions-exempting-new-construction/#comment-42559 Tue, 10 Dec 2013 07:46:00 +0000 http://www.tvhe.co.nz/?p=10538#comment-42559 In reply to Logan.

They have put the acid on councils to some degree, indeed probably more than is warranted on their part. This policy is supposedly about the risk to financial stability from a collapse in house prices; high house prices are only at risk of collapse to the extent that they’re a product of excessive demand; and if demand is excessive then you don’t really want supply to match it (see: Spain, Ireland).

]]> By: Miguel Sanchez http://www.tvhe.co.nz/2013/12/10/lvr-restrictions-exempting-new-construction/#comment-42558 Tue, 10 Dec 2013 07:33:00 +0000 http://www.tvhe.co.nz/?p=10538#comment-42558 “What did the RBNZ actually know about how high LVR loans were being used, by whom and where?”
This policy has always had a “Yes Minister” vibe about it. Something must be done about the housing market; this is something; therefore we must do it.
In their defence, though, I think you’re overplaying the independence card. Digging in your heels against all evidence to the contrary does not equate to independence, nor does it give people confidence that you can be trusted with such independence. The Reserve Bank listened to informed advice that the policy as it stood was not having the desired outcomes, and they changed it. Making a bad policy less bad is still an improvement.
Unless, of course, you’re suggesting that they’ve been played by the Master Builders Federation and some shonky research. But then let’s see the counter-evidence.

]]> By: Logan http://www.tvhe.co.nz/2013/12/10/lvr-restrictions-exempting-new-construction/#comment-42557 Tue, 10 Dec 2013 03:29:00 +0000 http://www.tvhe.co.nz/?p=10538#comment-42557 I’m surprised RBNZ hadn’t tried to deflect the criticisms onto the building industry, councils etc, more.
That new housing relies so strongly on such lending must be a sign that building costs are too high.

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