Industry weighs in on LVR reinstatement

The Reserve Bank will reinstate LVR restrictions on March 01

Industry weighs in on LVR reinstatement

The Reserve Bank of New Zealand (RBNZ) has announced that it will reinstate loan-to-value ratio (LVR) restrictions on March 01 at the same level as pre-COVID-19, with a further tightening of investors’ restrictions taking effect on May 01 – but how does the industry feel about it?

Century 21 New Zealand owner Derryn Mayne welcomed the announcement and expects rapidly rising house prices to ease in autumn.

“We all know last year’s nearly 20% rise in house prices is not sustainable. Good on the Reserve Bank for confirming it’s set to cool the jets in a manageable way. What this also confirms is that those Kiwis looking at selling their homes should act now,” Mayne said.

From March 01, the reinstatement of LVR restrictions will see 20% minimum deposit requirements for most owner-occupiers and 30% for property investors. From May 01, 40% deposits will be required from 95% of investors.

Mayne said the reinstatement, combined with major tenancy law changes, will see many Kiwis pull back from buying a residential investment property.

“With property investors now making up about 27% of all buyers, putting the brakes on them makes some sense. Putting the brakes on many first-home buyers will be hard on young Kiwis though. In Auckland, a mandatory 20% deposit could mean $200,000 needed upfront. Sadly, that could mark the end of the road for many prospective first-home buyers unless the government has a plan for them,” she continued.

ACT Leader David Seymour said the RBNZ’s decision to reinstate LVR restrictions was inevitable but would not make much difference to the fundamental reasons house prices continue to rise disproportionately to other asset classes.

“What needs to be remembered here is that house price inflation will only stabilise once proper measures are taken to improve supply. Instead, the government has signalled it will attempt further demand side tweaks and schemes that are unlikely to make any real difference,” Seymour said.

“All signs are that the areas that can deliver lasting change, RMA and infrastructure funding reform, won’t be as swift nor as thorough as they need to be so that future generations can fulfil their dreams of homeownership.”

NZ Property Investors’ Federation (NZPIF) executive officer Sharon Cullwick emphasised the need for balance between allowing investors to enter the market to provide rental properties for some of the 22,000+ people in emergency housing, and meeting the needs of first-home buyers.