Loan-to-value ratios have done their job: valuer

Mark Davidson, a valuer of Opteon, formerly Sheldons.

An Auckland valuation expert is backing the Reserve Bank's plan to relax lending restrictions which he says have already taken the heat out of the property market.

Mark Davidson, a valuer with Takapuna-based Opteon, said his business had not expected the central bank to move at this point in the market cycle but its earlier actions had worked because more first-time buyers were purchasing properties.

The central bank plans to ease lending restrictions on home buyers and property investors from January.

Currently no more than 10 per cent of loans to owner occupiers can go to those with a deposit of less than 20 per cent. From the start of next year, the cap on banks will be eased from 10 per cent to 15 per cent.

It will also ease the restrictions for investors.

At the moment only 5 per cent of lending to investors can go to those who have a deposit of less than 40 per cent. That will be altered to allow 5 per cent of lending to those with deposits of less than 35 per cent.

Davidson said the loan-to-value ratio (LVR) restrictions had served their purpose and produced a firm dampening effect on the market during the past four years.

The LVR rules had restricted investor activity and helped owner-occupiers.

"Home owner activity has already risen from 9 per cent to 10 per cent of all mortgage draw-downs pre-LVR restriction to currently 14 per cent to 15 per cent, showing that first homers now have a real chance to get on the ladder," he said.

"This has got to be a positive thing and it is surprising to see the Reserve Bank loosen policy, albeit subtly. The traditional investor areas in south and west Auckland have taken a hit in the last 12 to 18 months in both transaction volume and prices and this will certainly help lift those metrics," he said.

He questioned whether loosening would continue.

"When we saw the LVRs ratchet up from 20 per cent to 30 per cent to 40 per cent for investors, it impacted the market so we expect the same in reverse as the restrictions come off, albeit gradually," he said.

Property projects had been stalling due to developers and buyers having trouble getting access to money, he said, so the Reserve Bank was now trying to "kick start the demand side of it".

"The banks and other lenders need to work on the supply side or else we will see further price growth through lack of new stock coming on line."

The Unitary Plan was designed to allow more first-home buyers into the market, creating an opportunity for the development of more terraced-style housing in areas where they wanted to live, he said.

"This can't happen without the demand and supply side working in sync."