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REINZ surprised at minimal changes to LVRs

29 November 2017

REINZ surprised at minimal changes to LVRs for first time buyers

The Real Estate Institute of New Zealand (REINZ) is surprised at today’s announcement by the Reserve Bank of New Zealand (RBNZ) which has seen Loan to Value restrictions eased for investors from 40% down to 35% but remain at the same level (20%) for first time buyers.

Bindi Norwell, Chief Executive at REINZ says: “We’re surprised and concerned that LVRs have remained the same for first time buyers. For some months now, the Institute has been calling for a review for first time buyers to make it easier for them to get a foot on the property ladder.

“We constantly receive feedback from our members around the country that for many young couples, saving a 20% deposit is just too much for them - especially when they’re already paying rent. With a median house price of $530,000 in New Zealand, this means a deposit of $106,000 is needed. In Auckland, with a median house price of $850,000, this is a deposit of $170,000.

“While it’s important to get the balance right between responsible lending and saving a deposit, it’s also imperative that individuals don’t become over leveraged – particularly if interest rates go up in the next couple of years, which they are forecast to do. Today’s announcement only provides minimal assistance to help first time buyers who are desperate to achieve their property dreams.

“The silver lining in the situation is that from 1 January 2018 banks can lend over the LVR ratio to 15% of owner occupiers, whereas, currently they can only lend at this level in 10% of cases. While this will make it easier for banks to be more flexible around lending criteria, the question is will they ease restrictions for first time buyers in line with the recommendations or will they keep lending at current levels?

“It’s a considered approach in terms of slowly reducing LVRs for investors, but we would call for the Reserve Bank to take the same approach with owner occupiers by continuing to monitor the impact on the market – particularly in relation to first time buyers.

“It is now even more important that we increase the supply of affordable housing across the country, especially for first time buyers,” concludes Norwell.


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