Proposed rules favour large investors says First National

for public release

9 May 2017

Proposed RBNZ rules favour large investors says First National

First National Real Estate Chief Executive, Bob Brereton, says further Reserve Bank controls on mortgage lending risk skewing the market in favour of large property investors.

Mr Brereton was responding to last weeks comments, by Reserve Bank Governor Graeme Wheeler in which Mr Wheeler said that house price growth has slowed in the past eight months in response to tighter loan to value ratio restrictions but warned that the rate of house building remains insufficient to meet rapid population growth and the existing housing shortage. Mr Wheeler also warned that the property market may be about to take off again after several subdued months and advised that the Bank will soon open consultation on proposed ‘debt to income’ restrictions which would limit the amount that home buyers could borrow.

However, Mr Brereton says that the Reserve Bank can’t have it both ways.

“Mr Wheeler can’t complain that there aren’t enough houses being built while also threatening a new round of restrictions on borrowing. He can either slow down borrowing or encourage it, but he can’t do both”.

Mr Brereton said that the existing LVR restrictions have already imposed significant difficulties on house buyers and warned that new restrictions would make that situation even worse for home buyers while potentially improving the position for large scale investors.

“Many large investors don’t have the liquidity restrictions faced by first home buyers or mum and dad investors and the likely flow on from extended periods with the LVR and then Debt to income restrictions will be that those larger investors will grow ever bigger due to their strong equity, strong cashflow and access to credit”

Mr Brereton said the situation could also actually be further exacerbated if demand and prices fall off over the next few months.

“A prolonged period of lower overall demand as a result of lending restrictions will allow large scale investors to hoover up properties at below market rates while doing nothing to improve housing stock”.

Mr Brereton said that First Nationals own data showed that listing stock has moved and areas such as south Auckland had begun to see renewed interest in property after a significant drop off in demand since October. But he warns that this recovery is fragile and could be ‘snuffed out’ by further RBNZ tinkering.

“The Reserve Bank needs to leave the market alone and allow investors to sort out the supply issues facing cities like Auckland”.

ends

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