In China, the solutions are tailormade to the locality, with some cities requiring deposits of 40 percent or more, others putting limits on how many homes an individual can buy or barring non-residents from buying.
More recently, the Reserve Bank of New Zealand (RBNZ) has been lobbying the government to get permission to add debt-to-income (DTI) limits to its macroprudential arsenal aimed at combating the brisk pace of home prices.
“DTI policies can increase the resilience of households to income shocks, reducing the number of forced house sales in a downturn,” the RBNZ said in March. Together with loan-to-value restrictions, the RBNZ said it hoped to achieve “a more targeted response to rising house market risks”.
That remains just a proposal for now, however.
“There hasn’t been any real political appetite or enthusiasm for DTIs,” said Christina Leung, senior economist at the New Zealand Institute for Economic Research. “There’s a lot of uncertainty as to … what it would do to house prices.”
In Australia, such policies won’t wash, said John Hewson, professor at the Crawford School of Public Policy, Australian National University.
“We have had a long history of deregulating our financial system, so there is a strong reluctance to start regulating banks with lending restrictions or interest rate caps,” said Hewson, a former leader of the ruling Liberal Party.
Regulators are also worried about the risks from a slowdown in the home-building boom.
According to official estimates, every A$1 spent on residential construction generates A$1.31 worth of spending elsewhere in the economy, and every A$1 million creates 17 full-time jobs.
And unlike in China, Australians still largely expect government to let the market take its course.
“They should … just sit in a corner and not do a thing,” said Lindsay Partridge, managing director of Brickworks.
“Any of the things that they do are going to affect confidence, and that is going to affect construction activity … The state governments should release more land for construction and just let the market run and correct itself.”
