Landlords with more than five properties might be the Reserve Bank's next target after Governor Graeme Wheeler warned of "further measures" to discourage multiple investors.
Wheeler this week revealed how the bank was considering discouraging multi-property investors who benefit from the loan-to-value regime at the expense of first-home buyers.
The rules introduced in October last year restrict lending at loan-to-value ratios (LVRs) of more than 80 per cent to 10 per cent of new lending. And while first-home buyers struggle to save a 20 per cent deposit, equity-rich landlords are swooping on the cheaper properties, creating a new set of issues.
Two data sets show investors are snapping up 45 per cent of residential properties, spending $1.2 billion a month compared to first-home buyers spending $430 million a month on just 19 per cent of housing stock for sale.
Nick Tuffley, ASB's chief economist, said five-property lending control measures appeared to be the bank's next likely lever.
"The bank is proposing to put in place larger capital requirements for banks for borrowers with more than five properties. That might change how loans to such borrowers get priced, assuming banks don't just spread the extra capital cost over the whole balance sheet," Tuffley said.
But Tuffley expressed concern about the practicality of implementing the rule. "In general, the challenge would be finding measures that borrowers can't readily evade."
Wheeler said: "The issue is also around people who invest and buy multiple houses. We have been thinking quite deeply about whether we need to introduce measures to discourage some of those practices", revealing the bank had consulted with financial markets, realtors and investors, "and we're currently exploring that in-house".
Two data sets show investors are snapping up 45 per cent of residential properties. Photo / Thinkstock
He also acknowledged LVRs had favoured investors over first-home buyers and, giving the bank's six-monthly Financial Stability Report, said while the temporary restrictions on low-deposit mortgage lending had curbed fast-rising house prices, the bank would keep them for now because of demand pressure from strong inward migration.
The five-property control move has been talked about since last year when the central bank first proposed forcing banks to put aside more capital to back loans to rental investors with more than five properties.
That was initially delayed until December so banks could work out how to comply with the rule. They argued that it would be difficult to know which investors had more than five properties.
They also said such a rule would increase costs for borrowers.
Interest.co.nz this month said five-property lending restrictions would kick in next month but a Reserve Bank spokesman said they would be delayed to the first half of 2015 while the regulator talked further with bankers.
Landlords now appear to be the economy's nemesis but they have, predictably, cried out about this.
Andrew King, NZ Property Investors Federation executive director, said anti-landlord lending curbs were "ridiculous". "There are very few speculators, so it would appear they are talking about investors, not speculators," King said.
"The idea that rental property owners are forcing first-home buyers out of the market is false.
"Low rental yields make it very hard to buy rental property, so investors want to pay as little for them as possible. In addition, low rental prices mean rental property owners are actually helping first-home buyers to save a home deposit."
Curbing multi-buyers
• David Whitburn, Auckland Property Investors Association past president, says the Reserve Bank could be considering:
• A loan-to-income ratio (LTI) like that in the UK. The Bank of England permits a maximum of 15% of all new loans at a ratio of more than 4.5 times income.
• Setting the LVR for investment properties at 70%.
• Requiring portfolios with a certain level of debt (for example more than $1.5m) to have a maximum LVR of say 65%.
• A hybrid LTI and LVR, perhaps allowing a maximum of 5 times LTI ratio and 85% LVR to be exceeded for a maximum of 10% of all new loans.
