Banks to loosen purse strings for Bay home buyers

Auckland is already suffering from a rental property shortage and the Reserve Bank LVRs will exacerbate that says Andrew King. Photo: Michael Craig.

Auckland investors could now need a deposit of at least 30 per cent to buy a house, but buyers in other regions such at Tauranga have hope.

In response to the growing housing market risk in Auckland, the Reserve Bank today announced proposed changes to the loan-to-value ratio (LVR) policy.

The policy changes, proposed to take effect from 1 October, will require residential property investors in the Auckland Council area using bank loans to have a deposit of at least 30 per cent.

However, would-be buyers outside of Auckland could have the existing spend limit for high LVR borrowing increase from 10 to 15 per cent, to reflect the more subdued housing market conditions outside of Auckland.

Tauranga real estate experts have previously told the Bay of Plenty Times Aucklanders moving to the Bay helped contribute to a housing boom which was upping house prices. But the prices were being balanced out by an increase of building in the area. The proposed changes to the LVRs for Auckland buyers could result in even more Auckland residents moving the the Bay.

Landlords have expressed shock and dismay at 30 per cent rental property LVRs, saying tenants will suffer, rents will rise and Auckland rental properties will become more scarce.

Andrew King, NZ Property Investors Federation executive officer, said Auckland was already suffering from a rental property shortage and the Reserve Bank would exacerbate that.

"Talk to the Salvation Army about the number of people moving in with each other and over-crowding," King said.

"If anything, we need more rental properties and this will stop that happening.

"This just shows how desperate the Reserve Bank is. How long do they want to keep this in place?

"They're singling out residential property investors as causing high prices in Auckland. I just don't see that being the case.

"The biggest thing is net migration and that's foreigners coming into the country, kiwis coming back or not leaving.

"Migration is the biggest factor," King said, referring to the causes of spiralling Auckland house prices.

Andrew Bruce, Auckland Property Investors Association president, expressed unhappiness about the new measures.

"As we've seen in the Auckland market when you limit supply this has an impact upon price so by limiting the amount of investors able to provide accommodation for people will have an impact upon rents.

"Secondly having only an Auckland region policy will create distortions around where they classify the Auckland boundary to be.

David Whitburn, Auckland Property Investors Association immediate past president, predicted Auckland rent rises now running at about 3.5 per cent would almost double.

"People will still come to the big smoke and get the big wages but rents will rise and that's an unintended consequence.

Although he would have preferred 25 per cent landlord LVRs instead of 30 per cent, he was somewhat more philosophical about the situation than King.

"I actually don't mind it. It's quite sensible. It's the supply that's the biggest issue and that's where the Government and Auckland Council need to pull their socks up on a lot of issues such as high development contributions," Whitburn said.

"This will encourage owner occupiers to buy houses rather than landlords," he said.