LVR changes will make little difference

Century 21 New Zealand

Tuesday, 26 July 2016

LVR changes will make little difference

The Reserve Bank’s latest changes to loan-to-value restrictions (LVRs) will make little difference to the Auckland market, and will unnecessarily punish investors and first-home buyers in the rest of country, says Geoff Barnett, National Manager of Century 21 New Zealand.

Under the proposed new restrictions, which many of the retail banks have already adopted, residential property investors across New Zealand will now require a deposit of at least 40%, while owner-occupier first-home buyers across the country will require a deposit of at least 20%. Loans to construct new dwellings will continue to be exempt from the 20% deposit requirements for first-home buyers.

The LVR changes will officially come into effect on 1 September and remove the current distinction between lending in Auckland and the rest of the country.

“I think these latest moves are over the top. These are very blunt instruments and won’t do anything to slow down house prices. That will happen over time when supply catches up somewhat and the price point self-levels. It won’t happen by stinging property investors in Invercargill and making it harder for first-home buyers in Gisborne. We need those people.”

“If Auckland investors can find 30%, they’ll probably now also be able to raise the 40% required. Investors are a minority of the Auckland market and in real terms this move is not going to take many more out.”

Mr Barnett says he’s pleased people buying off the plans will continue to be exempt from the LVR restrictions – a move he says will only help encourage more construction and supply.

“From the outset I’ve been positive about 2016 and remain so. The latest changes will have no real impact and so people shouldn’t sit around, waiting and wondering. In fact, as we move from winter into spring the market will get a natural lift and I’m thinking with interest rates remaining low and demand still strong the coming summer will also be buoyant.

“Things might start settling down somewhat from next year but it won’t be dramatic nor will it be because of the latest LVR restrictions. It will be as a result of more new houses coming on stream and possibly slowing immigration numbers.”

Mr Barnett says Century 21 is on a growth drive across New Zealand with an eye to list more properties, open more branches, and employ more people.

“Our listings are strong, our market share is increasing, and our offices around the country are reporting good numbers. We’re certainly not expecting the latest changes from the Reserve Bank to change any of that,” he says.

www.century21.co.nz

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