First National NZ: Banks using scare tactics

First National New Zealand: Banks using scare tactics

Banks threatening huge property value drops are using scare tactics to get funds, says First National.

First National Group general manager John Stewart says people should realize recent comments by banks over the possibility of future government taxation affecting land values is extreme speculation.

“The international monetary climate means New Zealand and Australian owned banks are finding it increasingly difficult to raise money offshore, so they are encouraging people to invest with them rather than with other investment vehicles…including shares and property. They are offering higher rates of return on deposits than for some time.

“To do this by using scare tactics posing a potential 34% drop in property values I find reprehensible.

“The Government’s taxation review group is yet to report but is rightly predicting that tax havens protecting property speculators from paying what they should from capital gain will be removed.

“That being said, it is unlikely that any taxation moves will result in the huge drop in property values alluded to by the recent Westpac report,” Stewart said.

“Similarly dire predictions a year ago by banks and commentators of 30% drops in property values resulted in drops averaging 10%, so that puts such predictions in context.”

The direct result of banks offering higher returns to investors would be a considerable increase in mortgage interest rates.

“At the same time, it is likely that the banks won’t require large volumes of funds to meet mortgage requirements ongoing and who knows, perhaps will resort to a mortgage war to release the funds they have gathered.

“Whatever the outcome of the Government’s tax review, First National feels that the average taxpayer who owns one home should not be penalized for the tax escape techniques used by the moneyed few.

“However, allowing property value drops of up to 34% would be political suicide by any government and trouble for the banks. “So why would a bank want to say things like this, knowing that if such a situation would eventuate, they would lose their shirts as a huge proportion of the public would not have sufficient equity to survive?

“Simple…they want to scare people away from the property market in the hope they would consider depositing funds with the bank.

“Manipulation of financial markets is the sort of thing that caused the global crash in the first place.”

As an aside, Stewart noted with interest that other commentators are presently predicting a lift in property sales and values driven by a large increase in immigration numbers against fewer new home builds.

ENDS

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