The Reserve Bank announced last week that new restrictions will be put in place for lending on property in an attempt to cool the already heated property market.
The changes announced will see property investors throughout the country needing a minimum required deposit of 40 percent, while those looking to buy their own home will be required to stump up at least 20 percent.
The Reserve Bank has announced the changes in an attempt to reduce the risk to financial stability that may arise with the current property boom. Governor Graeme Wheeler claimed that the banking sector was heavily exposed to the property market, with residential mortgages making up over 55 percent of banking assets. However, Wheeler also added that the drivers of the housing market were complex and that action was needed on many fronts that extended well beyond financial policy.
The targeting of investors by the Reserve Bank has been welcomed by both the Greens and Labour, although they claim that it will do little to slow rising Auckland house prices. Grant Robertson also took fault with the Government, saying that there was only so much that the Reserve Bank could do. “The Reserve Bank can only do so much... what is lacking here is a Government prepared to step up in terms of controlling demand,” he said.
However, Housing Minister Nick Smith was confident that prices would ease given the new lending restrictions, although did admit that at the current moment housing was unaffordable for first home buyers. “People should be patient… I think the general commentary is that the market is overheated” Smith said when talking on Radio New Zealand recently.
New Zealand Property Investors’ Federation executive officer Andrew King told Newstalk ZB that the conditions are going to negatively affect both investors and renters. “I think investors are going to have a bit of a shock. It is going to make it harder for a lot of rental property owners to actually provide rental property for tenants,” King said, adding that the price of rentals was likely to grow.
The changes are planned to take effect September 1.