New Zealand banks approved three times as many mortgages for investors as they did for first home-buyers over the past year, Reserve Bank figures show.
The Labour Party says the disparity in lending is further evidence that Auckland’s housing market has become a ‘speculators’ paradise’.
Mortgage lenders say speculator activity is growing rapidly ahead of October rule changes – which will require investors to pay larger deposits on residential property.
The Reserve Bank’s lending data showed that in the first half of this year banks approved 31,123 home loans for investors and 9,890 for first-home buyers.
The average loan size was also larger for investors.
Auckland housing is like a drunken crowd.
Markets are crowds and behave like crowds. Both are simply collections of people in one form or other and as such – markets and crowds can have great wisdom or be completely irrational. The psychology of crowds and markets are similar and both are equally unpredictable and near difficult to control.
The behaviour of the Auckland housing market is starting to resemble a crowd gone rowdy and riotous – not too different from a few hundred teenagers on a Coromandel beach on New Year’s Eve. It may not be at the drunken bottle-throwing stage yet – but by all appearances one more step and it’s out of control.
At the moment we have two sides each trying to lead the property market crowd in different directions. On the one side we have the Reserve Bank and some others trying to get everyone to go home by shouting rather ineffectually through their bullhorns – on the other, property investors and other interested parties are still handing out the liquor. Like partying teenagers the property revellers ignore one side (no matter what sense it talks) – and listen only to the other.
However we know how fickle crowds (and markets) can be – they can turn on a dime. Whether this party ends in a quiet dispersal with mild headaches in the morning – or in carnage – is unknown at this stage. Nevertheless with every passing month – the risk of a crashing bashing end becomes greater.
Crowds of all kinds become extreme because they work on social approval: when one person throws a bottle it is OK for others to do so; one person paying $1m for a small dilapidated shack justifies others to do the same. We are comfortable with dangerous behaviour because it is validated by others.