LVR restrictions for investors

Press Release, Harcourts
For immediate release

20 July, 2016

The Reserve Bank’s decision to raise LVR restrictions to 40% for investors will not stop Auckland and Christchurch’s spiralling house prices.

Rather it is designed to protect provincial New Zealand’s property market from collapsing, says Harcourts CEO Chris Kennedy.

The last changes to Loan to Value ratios, in November last year, had little or no long-term impact on Auckland and Christchurch. Stock has continued to decline, and intense competition for available houses has pushed prices up further.

“This latest measure shows the Reserve Bank’s fears for the rest of New Zealand, which is currently undergoing the ‘halo effect’. It wants to dampen unsustainable price hikes in the regions.”

Mr Kennedy says Auckland is now a small international city, and investment and immigration will continue to buoy its property market.

This is not the case around the rest of the country, where large-scale growth and employment is not expected.

The new restrictions are likely to affect a certain kind of investor, Mr Kennedy says.

“Most seasoned investors have good equity in their investments and a residual pool of money they can access. They will still be able to meet the 40% deposit threshold. The rules will impact upon, for example, a young couple who cannot afford to buy in Auckland and want to purchase a property in Huntly – not to live in, but to rent.”

Mr Kennedy says ultimately the Reserve Bank is limited in the practical impact it can have on the property market. It can tinker with some of the wider economic parameters operating in the background, but the core issue remains - there are not enough houses.

“Instead of relying on the Reserve Bank to control the property market central government needs to take action. It’s recent announcement of a $1 billion fund to fast-track infrastructure development by councils with high demand for new housing is a step in the right direction.

“But we need more. Incentives and fast-tracked process to promote intensive, affordable housing developments are needed and they’re needed now.

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