You had to feel for Reserve Bank Governor Graeme Wheeler this week. So far, he has little to show his high LVR "speed limit" is achieving what he wants. This week's BNZ-Reinz survey of real-estate agents showed first-home buyers simply left the market this month, clearing the way for older rental property investors.
A net 78 per cent of agents reported fewer first-home buyers in the market, down 105 points from the longer-term average of 27 per cent seeing more first-home buyers. Meanwhile, 6 per cent were seeing more property investors.
This survey came out a day after deputy-governor Grant Spencer used October's results to argue the high LVR did not discriminate against first-home buyers in favour of investors. The central bank also said banks had significantly reduced high-LVR lending and increased interest rates - but it was too early to say if it was working to slow house-price inflation.
Reinz figures this week show annual house-price inflation runs at 10 per cent nationally and 16 per cent in Auckland. Wheeler said this week he'd like house-price inflation to get closer to consumer price inflation, which is barely above 1 per cent and is targeted at 2 per cent.
What will Wheeler do if the high LVR policy fails to cut Auckland's inflation rate from 16 to 2 per cent? Will he be forced to put up interest rates just to burst the bubble?
Wheeler wouldn't answer that question this week, but his deputy tried. Spencer said the bank might try to "lean against" the bubble rather than burst it.
We all "leaned with Dean" in San Francisco. We may find ourselves having to "lean with Graeme" in the years to come.