There have been a number of articles in the last few weeks about the Reserve Bank’s concern over the overheated housing market and possible policy changes aimed at “correcting” that.
Bollard warns of ‘excesses’ in economy – NZ Herald 14 Oct 2005
Reserve Bank plays with fire – Stuff November 11 2005
Government looks at curbs on home loans – NZ Herald 11 Nov 2005
Bankers recoil at housing market plans – NZ Herald 11 Nov 2005
Most of the media commentary has been very negative about the Bank’s suggestion that it intervene in mortgage markets to reduce borrowing. The consensus seems to be that it will generally increase the cost of borrowing overall and may overcompensate for the rise in house prices, causing a price collapse.
Personally I’d be a bit surprised if the consequences were quite as dire as is being suggested. Nonetheless I find the proposals fairly distasteful, simply on the basis that I don’t think it’s the state’s responsibility to interfere in open markets without clear moral justification.
One report also noted that the Australian and British markets, which had similarly been viewed as very overheated, have corrected themselves quite naturally without intervention.