Life is about to get tougher for property investors as the Reserve Bank considers clamping down further on their access to credit to buy houses.
Auckland’s housing market has refused to buckle under Reserve Bank pressure aimed at reining in house price growth, which is starting to accelerate again.
And it’s not the only region where house prices are gathering pace.
Reserve Bank governor Graeme Wheeler openly concedes that puts the health of the financial system at risk.
But he’s not giving up yet.
Speaking at the Finance and Expenditure Select Committee today, he told Labour Party finance spokesperson Grant Robertson that the central bank was exploring further measures to tighten the credit noose for investors.
“In Auckland, investors account for 46 percent of the transactions, for the rest of the country it’s around 40 [percent] or a bit more, so it’s very significant,” Mr Wheeler said.
“It’s providing a lot of impetus in the market. So that’s one area we’re looking at around the LVR [loan to value ratios] around investor activity [though] we’re still doing the analysis.”
Measures to introduce loan limits based on income levels – called debt to income ratios – are also in the pipeline.
Reserve Bank deputy governor Grant Spencer acknowledged they were complex and difficult to implement.
But he insisted first-time home buyers would not be the hardest hit.
“If you look at the lending that is high debt to income, a much bigger proportion of that is investor lending than is owner-occupied lending,” Mr Spencer said.
“So, a debt to income ratio, the appropriate threshold in terms of the hurdle, will tend to impact investors more than owner-occupiers.”
Mr Wheeler said tougher controls for investors could be introduced before the end of the year, though debt to income limits were some time off.
He declined to outline what changes he was considering.
At present, the Reserve Bank’s measures are limited to Auckland property investors, who cannot borrow more than 70 percent of the value of a property.
ASB Bank chief economist Nick Tuffley said the limit could be lowered, and a wider net could be cast to capture investors nationwide.
“One option for the Reserve Bank is increasing the size of the deposit needed in Auckland for investment properties. They could look at expanding that investor deposit restriction elsewhere round the country, given there’s a degree of spillover coming through.”
But Mr Tuffley warned these tools had limits.
“The challenge with all of these tools is that the impact on the housing market at least does wear off after a period. So up to six months is all we can hope for with some of the tools that are coming through,” Mr Tuffley said.
“But there are aspects these tools do have which are longer lasting. For example, banks’ share of loans with low deposits has actually reduced as a result. So you’ve had changes in the banking system.
“The impacts on the housing market, however, have been temporary.”
Building and Housing Minister Nick Smith was coy about the Reserve Bank’s plans to target investors.
But he admitted investors had crowded out first-time buyers.
“I’ve been quite open about the fact that the government wants to screw the scrum in favour of the first-home buyer relative to the investor,” Dr Smith said.
“That’s why we’ve introduced the home start scheme – $430 million – that’s why we’ve increased the tax obligation on those that are investing in properties. That’s why we supported the Reserve Bank governor when he put tougher LVR rules on investors as compared with owner-occupiers of houses.”
But Mr Robertson said the government could solve this crisis easily by building affordable houses itself.
And he said their failure to do that was what was putting the financial stability of the country at risk.
Oil Prices Slide as U.S. Crude Stockpiles Surge, Heightening Demand Concerns
Oil prices declined on Thursday as concerns over demand intensified due to a larger-than-anticipated build in U.S. crude stockpiles.
Brent crude oil, against which Nigerian oil is priced, dropped by 0.5% to $83.25 a barrel while U.S. West Texas Intermediate crude oil fell by 0.3% to $78.28 a barrel.
The Energy Information Administration’s report revealed a substantial increase in U.S. crude oil stockpiles by 4.2 million barrels to 447.2 million barrels for the week ending February 23rd.
This surge surpassed analysts’ expectations and marked the fifth consecutive week of rising inventories.
While gasoline and distillate inventories witnessed a decline, concerns regarding a sluggish economy and reduced oil demand in the U.S. were amplified.
Satoru Yoshida, a commodity analyst with Rakuten Securities, highlighted that the significant stockpiles have heightened investor worries.
Moreover, the anticipation of delayed U.S. interest rate cuts further weighed on market sentiment, potentially undermining oil demand.
Traders have adjusted their expectations for rate cuts, with an easing cycle predicted to commence in June rather than March as previously anticipated.
Market participants await the U.S. personal consumption expenditures price index for insights into inflation trends, while the possibility of an extension of voluntary oil output cuts from OPEC+ looms over price dynamics, amid lingering uncertainty in the demand outlook and geopolitical tensions in the Middle East.
Crude Oil Shortage Threatens Dangote, Government Refineries, Minister Raises Alarm
The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, has sounded a clarion call over a looming crude oil shortage that threatens the operations of the newly inaugurated Dangote Petrochemical Refinery and government-owned refineries in Nigeria.
Addressing stakeholders at the seventh edition of the Nigeria International Energy Summit in Abuja, Minister Lokpobiri expressed concerns that unless deliberate efforts are made to increase investments and crude oil production, these refineries may struggle to obtain enough feedstock for petroleum product manufacturing.
The Dangote refinery, a colossal project spearheaded by Dangote Industries Limited, has a daily requirement of up to 650,000 barrels of crude oil, while government-owned refineries could need approximately 400,000 barrels.
However, the current pace of crude oil production and investment in Nigeria falls short of meeting these demands.
Minister Lokpobiri highlighted the need to ramp up production and attract investments in the upstream sector to ensure adequate feedstock supply for the refineries.
He emphasized the importance of efficiently utilizing Nigeria’s abundant oil and gas reserves to enhance domestic energy security and economic prosperity.
Furthermore, the minister underscored the significance of investing in energy infrastructure and transitioning towards more environmentally friendly practices to address Nigeria’s energy needs effectively.
The alarm raised by Minister Lokpobiri underscores the urgency for strategic interventions and collaborative efforts to mitigate the impending crude oil shortage and secure the future of Nigeria’s refining industry amidst evolving global energy dynamics.
NNPCL Pledges End to Nigeria’s Energy Scarcity Within a Decade
The Nigerian National Petroleum Company Limited (NNPCL) has announced a bold initiative aimed at ending Nigeria’s persistent energy scarcity within the next decade.
Mele Kyari, the Group Chief Executive Officer of NNPCL, revealed this ambitious plan during the opening ceremony of the seventh Nigerian International Energy Summit in Abuja.
Kyari’s announcement comes as a beacon of hope for millions of Nigerians grappling with chronic power shortages and energy deficiencies.
In his statement, Kyari expressed confidence that all issues related to energy scarcity in the country would be resolved within the next 10 years.
Assuring stakeholders of NNPCL’s unwavering commitment, Kyari emphasized the company’s dedication to collaborating with partners to bridge the energy deficit gap and foster prosperity for all Nigerians.
He highlighted NNPCL’s pivotal role as a key partner to oil-producing companies in Nigeria, facilitating the divestment of international oil companies from onshore and shallow water assets in the country.
Furthermore, Kyari underscored NNPCL’s statutory mandate as the enabler of national energy security, emphasizing the importance of sustainable production from divested assets to ensure energy security for Nigerians.
In addition to addressing domestic energy challenges, NNPCL is also exploring avenues for sustainable energy investment across Africa.
Kyari revealed the company’s intention to invest in the proposed African Energy Bank, aiming to secure funding for energy projects on the continent and guarantee regional energy security.
The event, attended by prominent stakeholders including government officials and representatives from international organizations, marks a significant step towards reshaping Nigeria’s energy landscape and fostering economic development through improved energy access.
As NNPCL charts its course towards energy abundance, Nigerians remain cautiously optimistic about the prospects of a brighter energy future.
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