Loan curbs will 'raise rents and hit buyers'

Auckland rents are predicted to rise on the back of the Reserve Bank's new mortgage rules. Photo / Doug Sherring

Investor association slams Reserve Bank’s bid to rein in Auckland house prices.

Reserve Bank restrictions on property investors announced yesterday will push up rents and ruin first home buyers' chances, representatives say.

Andrew King, NZ Property Investors Federation executive officer, said the knock-on effects of yesterday's changes could be disastrous for those saving while paying rent.

The new rules were likely to reduce the stock of rental properties as investors would be unable to stump up with the deposit, meaning existing rents would go up.

"The Reserve Bank is really stopping people being able to save for a deposit [for a first home]. Anything which makes rents go up makes it that much harder for first-home buyers."

David Whitburn, past president of the Auckland Property Investors Association (APIA), predicted Auckland rent rises - which increase about 3.5 per cent per year - would go up 5 per cent annually.

The median weekly income for Aucklanders in paid employment was $900 last year, up from $882 (2 per cent) in 2013, according to Statistics New Zealand.

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

"It's bad for tenants and there's no question it will reduce the supply of rental properties."

Reserve Bank governor Graeme Wheeler rejected the rent spike prediction. "We don't see that rents are likely to rise significantly. They shouldn't rise, for example, if new owner-occupiers take the place of investors."

But some said the bank had sent the right signals to dampen Auckland house price growth. Shamubeel Eaqub, New Zealand Institute of Economic Research principal economist, called for further changes.

"The RBNZ decision highlights where the current pressure on house prices is coming from, speculative buying by people betting house prices can only go up," he said.

Loan specialist Bruce Patten predicted more houses would be built because the 30 per cent restriction does not apply to new houses.

Rates, not the new LVR investor restrictions, would be what drove up rents, he said.

Labour's housing spokesman, Phil Twyford, questioned why the provinces were still saddled with loan-to-value restrictions, albeit reduced.

"Why should first home buyers in Dunedin, Palmerston North or Gisborne face minimum deposits when there is no housing crisis there?"

New rules

Moves targeting the Auckland real estate market from October 1 will:

• Require residential property investors in the Auckland Council area using bank loans to have a minimum 30 per cent deposit.

• Let banks lending outside Auckland offer 15 per cent of new mortgages to buyers with deposits of less than 20 per cent.

Couple's plan lies in ruins

Andrew and Shay Clark sold their Ellerslie townhouse and switched back to renting so they didn't "over-commit" to a massive mortgage.

They still wanted a house big enough for their son to run around in, and found weekly rent cheaper than mortgage repayments on a similar-sized house in the suburb.

Their plan was to buy another property in a lower-price bracket and rent it out so they are still in the market for when they retire.

But because they won't be living in the house - it will be an investment - they will have to stump up a 30 per cent deposit under Reserve Bank rules announced yesterday.

They say they can't afford such a high deposit, but would be approved by a bank for a lower deposit had they been buying a home to live in.

The rules won't apply if they build a rental property.

"If we were to buy for ourselves and live there, we could spend about $800,000," Ms Clark said, "but if we buy to rent out, we can only spend $445,000."