Australia and New Zealand are looking outside traditional monetary policy to do the same thing -- cool red-hot housing markets in their biggest cites without hurting borrowers, banks and their economies -- but they are following different paths.
The success, or not, of these experiments could prove critical to the outlook for interest rates in both countries, while offering a guide to other rich nations on how to manage housing booms when the broader economy still needs support.
The Reserve Bank of New Zealand is by far the boldest of the regulators, taking the radical approach of targeting only the Auckland housing market with restrictions on loan sizes and tougher capital requirements for lenders.
The urgency is understandable given New Zealand's household debt is a stratospheric 160 percent of disposable income, near record levels hit in 2009, with Auckland house prices tripling in just over a decade.
The RBNZ expects its measures could lower annual growth in house prices by 2 to 4 percentage points, an outcome that could provide scope for cuts in interest rates.
"Ultimately, we suspect this marks a turning point for the Auckland housing market," judged economists at ANZ.
Australian rules
Across the Tasman Sea, the backdrop is much the same in Australia, where investors chasing capital gains are driving home prices in the most populous city, Sydney, up by more than 14 percent a year.
But at the same time, the Australian economy has been hit by the end of the mining investment boom and a slowing Chinese economy, with the Reserve Bank cutting rates to a record low this month to support sluggish activity.
Regulators have taken a more behind-the-scenes and general approach to Sydney's red-hot market.
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Bankers complain that officials from the Australian Prudential Regulatory Authority (APRA) are "camped" in their mortgage departments, ensuring they keep growth in investment loans below a 10 percent annual speed limit while tightening standards on products such as interest-only loans.
There are also signs that regulators' patience with the banks might be wearing thin, with APRA Chairman Wayne Byres last week issuing a thinly veiled warning of tougher steps ahead.
"(Banks) have now had long enough to revise their ambitions where needed, and we will be watching carefully to see a moderation in growth in investor lending in the second half of the year as revised plans are implemented," said Byrnes.
He also flagged the need for banks to set aside more capital against their mortgage book, which would be on top of higher capital requirements as part of rule changes globally.
More targeted policy measures
The factors driving Sydney and Auckland housing are similar -- years of underinvestment in housing stock, being the favoured destination for new immigrants, low interest rates, tax incentives for investors and a love of sprawling houses.
The New Zealand government has joined the central bank's effort, putting a capital gains tax on investment homes sold within two years of purchase and increased tax scrutiny on overseas investors.
Australia has also tightened criteria for foreign buyers of residential property.
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Yet with Australian interest rates at record lows of 2 percent and rates in New Zealand not much higher at 3.5 percent, there are only so many alternative investments to property, especially for people looking to fund their retirement.
So what policymakers are hoping for is not to kill the property booms, but to tame the most exuberant cities while spreading investment more broadly.
"All it does it shift the Auckland boom onto the rest of the country," said Rodney Dickens, managing director at Strategic Risk Analysis, said of the prudential measures.
"If I'm an investor and this has made investing in Auckland harder, I can go invest elsewhere."