Further restrictions will probably miss the mark

Wednesday, 11 May 2016

Further restrictions will probably miss the mark

Talk by the Reserve Bank of introducing new lending restrictions or tightening existing ones such as further restricting loan to value ratios (LVRs) in the Auckland market may help, but won’t be the solution to current housing issues in New Zealand’s largest city, says Geoff Barnett, National Manager of Century 21 New Zealand.

“Late last year we saw the Government and Reserve Bank introduce restrictions on loan-to-value ratios and overseas investors to help cool the Auckland housing market. They certainly had an impact but not for long. Things are once again taking off, with the second quarter looking strong. What’s more the latest REINZ figures show its having a wider effect, with many of the regions now seeing significant increases.

“Speculators and investors stood back for a while but they always adapt to change and that’s what’s happened following the first round of restrictions. First-time home buyers also adapt their approach, with more now privately lending off the likes of their parents if their bank has ruled their deposit or serviceability is too light.

“Auckland grew by 43,000 people last year alone. The demand is relentless and the housing supply is of course still well short. What we need is to fast track, and reduce the cost of, the consent process to speed up new home construction. What’s more interest rates remain low, while economic growth and consumer confidence is relatively strong.

“For better or worse any changes from the Reserve Bank won’t be able to head off the sheer growth and demand for houses in Auckland, particularly when you consider the predominant view that it’s only probably going to keep getting more expensive in Auckland in the coming months and years.

“Any Reserve Bank changes may see investors and buyers changing their approach. They might buy an apartment or buy further out from the city centre. However the buying will continue to outstrip supply which will only see prices keep going up for some time yet.

“Six months ago we were all told Government and Reserve Bank restrictions would slow down Auckland. That happened for a few months over summer, but now some will be wishing they bought six months ago instead of waiting it out.

“The Reserve Bank may be looking at potential measures again, but our advice to buyers in the current market is don’t think sitting back and waiting will help,” says Mr Barnett.

www.century21.co.nz

ENDS

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