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31-01-2013

Newland: Best option? Do nothing

Landlords.co.nz

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.”

Tags: graeme wheeler - olly newland

Source: Landlords.co.nz

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