Barnett says hold fire on loan-to-income restrictions

Media release
Century 21 New Zealand
Wednesday, 26 October 2016

Real estate boss says hold fire on loan-to-income restrictions

Head of Century 21 New Zealand, Geoff Barnett, is cautioning Wellington’s decision-makers over increasing calls for the Government to give the Reserve Bank the power to introduce loan-to-income restrictions.

“I just think that could be a pretty brutal and blunt tool, and it may not be necessary. I appreciate that the Government and Reserve Bank are in continued discussions about possible loan-to-income restrictions but they first need to fully assess the impact of the latest round of much tougher loan-to-value ratios (LVRs),” says Mr Barnett.

Since 1 October, changes have included ensuring most Auckland propertyinvestors pay a 40 per cent deposit, up from 30 per cent. While most investors outside Auckland also pay a 40 per cent deposit, up from 20 per cent.

“Up until now the different LVR restrictions have helped de-risk the banks but they haven’t had an overly dramatic impact on the housing market. But given how many investors make up the Auckland real estate market in particular, I can’t help but think that lifting the deposit requirement to 40% for investors will have a more measurable effect.

“So I’m calling on the decision-makers to let the latest LVR restrictions take full effect over summer and then make a full and frank assessment of their impact and the residential market. I would hate to hear before Christmas that loan-to-income restrictions are imminent.”

Mr Barnett says Auckland is already witnessing a more sustainable growth path in house prices, making for a much more realistic market. And it’s not just because of the latest LVR regime. Housing supply is catching up and more land is getting released.

“I call on Wellington’s policy makers and implementers to hold their nerve. They’ve been very patient in recent years and so what’s a few more months. Let’s see the full impact of the 40% deposit rule for investors before introducing an even tougher restriction on the average Kiwi home buyer,” says Mr Barnett.

He says regardless of the Reserve Bank applying some policy brakes on bank lending, overall Century 21 expects another strong summer across the country with consumer and business confidence up and interest rates down.

www.century21.co.nz

ENDS

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