Property Institute wants LVRs scrapped in Provinces

Media release

Monday, 16 February 2015

Property Institute wants LVR restrictions scrapped in Provinces

Property Institute of New Zealand Chief Executive, Ashley Church, is calling for the Reserve Banks Loan-to-value mortgage restrictions to be scrapped in the regions claiming that they are having an ‘unreasonable and adverse impact’ on first home buyers in provincial towns and cities.

The Reserve Bank policy restricts trading banks from lending more than 80% of the value of a home in all but a few cases. This mean that first home buyers need to come up with a 20% deposit – a practice which Mr Church says makes it extremely difficult for a young couple to get into a home and which he has condemned for causing what he calls a ‘two tier society’.

“The effect of the policy has been to close the door on a generation of first home buyers who don’t have wealthy parents or relatives”.

Mr Church says that there is considerable debate over whether the restrictions have actually worked in the metropolitan centres – but says that there can be no debate about their impact in regional New Zealand.

“The evidence is clear that LVR restrictions have failed in the provinces. Outside Auckland, Christchurch and Queenstown, house price increases have been modest over the past 12 months – with prices in centres such as Rotorua, Gisborne, Hastings, Wanganui, and Invercargill actually going backward”.

He also notes that the Reserve bank indicated, in March of last year, that it would remove the restrictions ‘once house prices cooled’.

““Our members, who include Valuers, Property managers, and Property Advisors are telling us that that time has arrived for provincial New Zealand - so the Reserve Bank needs to stick to its word and drop the LVR restrictions in the regions”.

Ends

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