The challenges we face with an over-valued exchange rate and over-valued housing market are not likely to dissipate quickly given the extent of the supply/demand imbalance in the housing market and the likely continued attractiveness of New Zealand assets to foreign investors.
It is critical that priority be given to implementing the measures needed to alleviate the shortage of housing and land supply, which is the dominant cause of the increase in house prices in Auckland and Christchurch. But the LVR restrictions announced today have a useful role to play alongside the supply measures.