Reserve Bank restrictions hurt tenants and small investors

Reserve Bank restrictions hurt tenants and small investors

One of the Reserve Bank's tasks is to keep inflation between 1% and 3%. It appears that the purpose of the LVR tightening is to allow the Reserve Bank to lower interest rates, thereby stimulating the economy and lowering the NZ dollar.

“They are more interested in their KPI's than in the effect on tenants or people trying to prepare for their retirement,” says Andrew King, Executive Officer of the NZ Property Investors’ Federation.

Record levels of migration, not seen in a century, means there is enormous demand for housing, both owner occupied and rented. The high demand for rental property in Auckland is not going to be made easier under this policy. Rental prices will continue on an upward trend.

People who were hoping to use rental property as a means of saving for their retirement will be disappointed. However it is likely that more experienced investors will see this as an opportunity. With many smaller investors forced out of the market, this will make it easier for them to buy rentals on favourable terms.

Consequently, while new entrants to rental property ownership will be disappointed, higher rental prices and lower competition from other investors, matched with high demand from tenants, will mean that experienced and better resourced investors will see this as an opportunity.

ENDS

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