RBNZ acts to urgently tighten lending to investors; proposes 60% LVR limit for rental property investors nation-wide from Sept 1; also plans to tighten LVR lending above 80% for other borrowers

RBNZ acts to urgently tighten lending to investors; proposes 60% LVR limit for rental property investors nation-wide from Sept 1; also plans to tighten LVR lending above 80% for other borrowers
Reserve Bank Governor Graeme Wheeler speaking at the June 9, 2016 Monetary Policy Statement news conference. Photo by Lynn Grieveson for Hive News.

By Bernard Hickey

Well that escalated quickly.

Less than two weeks after Prime Minister John Key told the Reserve Bank to "get on with it" and tighten lending restrictions for landlords all around the country, the Reserve Bank has proposed a major tightening within six weeks.

The Reserve Bank issued a consultation paper on Thursday morning proposing a tightening of lending to rental property investors across the country from September 1, and also a reduction in the speed limit for other borrowers with Loan to Value Ratios (LVR) of over 80%.

The Reserve Bank said a new LVR limit of 60% would be set for landlords across the country, essentially extending and lowering the current limit for Auckland investors of 70%.

The Reserve Bank said the changes were aimed at further mitigating "risks to financial stability arising from the current boom in house prices."

The New Zealand dollar dropped sharply after the announcement, which is expected to give the bank more leeway to cut the Official Cash Rate as early as August 11 to address a high currency and inflation below the Reserve Bank's target. Some economists now expect the OCR to be cut from 2.25% to at least 1.75% by the end of the year, with the potential for more next year, given annual CPI inflation has been below the Reserve Bank's 1-3% target band for nearly two years.

“The banking system is heavily exposed to the property market with residential mortgages making up 55 percent of banking system assets. Investor lending has been increasing rapidly and is a significant contributing factor to the current market strength. The proposed restrictions recognise the higher risks associated with such lending,” Governor Graeme Wheeler said.

The Reserve Bank said no more than 5 percent of bank lending to residential property investors across New Zealand would be permitted with an LVR of greater than 60 percent. Previously, Auckland rental property investors were limited to a 70% LVR and there was a 5% speed limit on any lending above 70%. The change effectively tightens lending for all investors beyond Auckland and lowers the LVR limit for all investors.

The bank also said no more than 10 percent of lending to owner-occupiers across New Zealand would be permitted with an LVR of greater than 80 percent. Previously, the speed limit for non-Auckland owner-occupiers borrowing more than 80% was 15%. This is an effective tightening back to the 10% speed limit seen until November last year. That loosening from 10-15% for non Auckland owner-occupiers would therefore have lasted 10 months. 

The Reserve Bank said loans exempt from the restrictions, including loans to build new homes, would continue to be exempted.

"These proposed new restrictions would take effect on 1 September 2016 and simplify the LVR policy by removing the current distinction between lending in Auckland and the rest of the country," the Reserve Bank said.

'We need help from others too'

Wheeler then used his statement to call for further action from the Government to address the housing boom.

“The drivers of the housing market strength are complex and action is required on many fronts that extend well beyond financial policy. Broad initiatives to reduce the underlying housing sector imbalances need to remain a top priority," Wheeler said.

“A sharp correction in house prices is a key risk to the financial system, and there are clear signs that this risk is increasing across the country. A severe fall in house prices could have major implications for the functioning of the banking system and cause long-lasting damage to households and the broader economy," he said.

“LVR restrictions to date have improved the resilience of bank balance sheets by reducing banks’ exposure to riskier mortgages. This policy initiative is intended to further improve the resilience of bank balance sheets, and it will assist in restraining credit and housing demand."

Wheeler said he expected banks to observe the spirit of the new restrictions in the lead-up to the new policy taking effect.

Consultation would conclude on 10 August.

Debt to income multiple limits coming too

Wheeler said that the Bank was progressing its work on potential limits to high debt-to-income ratio lending, which would be a potential complement to LVR restrictions.

“We have had positive initial discussions with the Minister of Finance on amending the Memorandum of Understanding on Macro-prudential policy to include this instrument," he said.

The Reserve Bank said the new policy would result in a "significant tightening in credit availability for investors, and a small tightening for owner-occupiers outside of Auckland."

In the consultation paper the bank estimated the proposed limits would affect 70% of investor lending.

"Based on the current LVR distribution, the proposed nationwide investor speed limit would potentially affect around 70 percent of investor lending. The potentially restricted lending would be split roughly evenly between Auckland investors (primarily at an LVR of 60-70 percent) and non-Auckland investors (primarily at an LVR of 70-80 percent)," the bank said.

Reserve Bank figures show investors made up NZ$2.698 billion or 51.6% of the NZ$7.287 billion of new residential mortgage lending done in May, suggesting the new limits would affect around NZ$1.889 billion or 26% of all new lending.

Economist reaction

ASB's Nick Tuffley said the Reserve Bank appeared to be acting with a degree of haste that seemed lacking in previous public statements.

"We had expected further measures, just not quite this soon. But the intention to put new lending restrictions in place means one potential roadblock to responding to the weak inflation environment will be reduced," Tuffley said.

"To us the announcement of new house lending restrictions reinforces the likelihood of the RBNZ cutting in August, given the very tight timeline proposed for implementing the added restrictions," he said, adding ASB still saw cuts in August and November to 1.75%.

First NZ Capital's Chris Green said the warning to banks to observe the spirit of the changes suggested the moves could start affecting the market quickly.

"The proposed tightening in LVR restrictions can be expected to further open the door for an additional easing in monetary policy," Green said.

"Moreover, given this announcement on proposed macro-prudential policy changes, we would assess that the Thursday release of the RBNZ’s economic assessment is likely to be more focused on dampening down the NZ dollar, which continues to remain around 5% above the Bank’s June MPS projection," he said.

ANZ's Philip Borkin said the announcement was a slight surprise "as it was only a few weeks ago that the Deputy Governor had downplayed something imminent."

"But we suspect the latest housing data, the broadness of price growth, and perhaps some additional political pressure has spurred the RBNZ into action," Borkin said.

Borkin said the case for investors having a 40% deposit was not overly strong.

"This is particularly considering the RBNZ’s own stress tests and the fact that most investor lending was already done at sub-70 LVRs anyway. Nevertheless, it clearly shows a desire on the part of the RBNZ to cool housing demand in a world where housing supply is slow to respond," he said.

Political reaction

Finance Minister Bill English said through a spokesman that any decisions were for the Reserve Bank to take, but he agreed with Wheeler that "fast rising house prices could pose risks for the financial system."

“That’s why the Government has a comprehensive and wide-ranging housing plan focused on increasing supply, removing roadblocks to consenting, supporting infrastructure for new housing, building houses on government land and tightening tax rules for housing," English said.

Labour Finance Spokesman Grant Robertson said the Reserve Bank's tightening of lending to rental property investors was the right thing to do, but it showed the Government was stuck in denial mode.

"The Bank clearly recognises we are in a housing crisis that is a threat to our financial stability. They are openly calling on the National Government to step up and fix the crisis," Robertson said.

“National has failed to address what the Reserve Bank described today as sluggish house building and they have failed to crack down on speculators," he said.

“Labour’s plan to fix the housing crisis includes banning offshore speculators from buying residential properties, an extension of the bright line test to five years and consulting on ending the practice of negative gearing."

Green Finance Spokeswoman Julie Anne Genter said the Government's lack of action against housing speculation had forced the Reserve Bank to act.

“It’s way overdue for the Government to show the same kind of leadership, and remove the tax advantages of property speculation," Genter said. 

“The National Government is still the property speculator’s best friend – this Government has made it easier to buy a third, fourth, or fifth house, rather than your first," she said.

“In Government, the Greens would push for a capital gains tax on all properties except the family home, to encourage Kiwis to invest in more productive industries, and free up more homes for first-home buyers. The Green Party would also implement a Warrant of Fitness for rental homes, build more affordable homes, and restrict overseas buyers as part of a suite of measures to address the housing crisis.”

Property investor reaction

Property Institute CEO Ashley Church called on the Government to strip the Reserve Bank of the power to influence housing policy. See more here in Greg Ninness' article.

“This is essentially a u-turn. Two weeks ago we were told that these measures would be introduced ‘at the end of the year’. Now they’re suddenly sufficiently serious that they need to be introduced in 6 weeks’ time? What’s changed?," Church said.

“Could it be that last week’s serve from the Prime Minister has spurred the Reserve Bank into action?," he asked.

“If the Reserve Bank can now be politically influenced it calls into question the entire basis of its existence and the terms of the Reserve Bank Act. There was a time when the Reserve Bank could be trusted to act above politics, in the best interests of the nation. If that’s no longer the case – perhaps the Government should consider withdrawing some of the powers it has given the Bank – or even reviewing the Act”.

Church said the requirement to have 40% equity would be little more than a speed bump for investors and he called for a wide range of policies to address the issue.

“One-off, incremental and politically motivated, announcements won’t cut it. We have a runaway market and a generation of kids who can’t, now, afford to get into a home of their own. We need a comprehensive set of smart measures that send a clear signal to private developers, redirect investor activity into the building of new houses, and give our young people a fighting chance to buy their first home."

(Updated with more detail, economist, market and political reaction)

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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34
up

Good time to be a foreign buyer.

Maybe, maybe not.. Looks like risk is becoming more of a consideration in the Auckland market.

foreign buyer is fine as they brings money into the country and the risk is at foreign bank. Not us.

Not for the bank, for the purchaser. With an investment that costs money, (potentially) doesn't keep inflating, stays flat for a long time, or even drops.

Can a foreign bank register a mortgage over a NZ property?

Generally speaking, no. But ppl only believe what they wanna believe, like Asian ppl can borrow from their bank at a mortgage rate of 0.x%, while the truth is that their mortgage rate is 4.35%, sigh
https://www.hsbc.com.cn/1/2/misc/loanlending

Exactly right. I wish all the speculation pumping up prices were driven by foreign capital and foreign risk.
Unfortunately I think it's mum and dad investors' risk and our banks generous lending what it's fueling it. At least since November 2015 when China imposed capital restrictions that had a big effect in Australian, Canadian and NZ bubbles.

Exactly what people were saying 5 years ago. If you don't buy now, you will pay more next year.

30
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You are right. With 40% of sales going to foreign purchasers, they have only addressed 60% of the purchasers leaving the foreign 40% with less competition. Same will apply to the proposed debt to income ratio. The Government needs to step up and address the foreign purchasers issue (and a lot of other things)

True. But the RBNZ cannot impose restrictions on immigration.

20
up

That is why I said that the government needs to step up.

20
up

Immigration is another aspect of the picture, and foreign buyers are not immigrants. They're ones who come here and buy property and then go home, or do it remotely. Shouldn't be allowed, but the Government is in denial and there are no reliable stats to tell us how big the issue is.

You don't need to know how big it is

The first release of data on foreign (non-resident) buyers was a mere 4%

A perfect demonstration of the impact of 4% was given yesterday by David Chaston - here
http://www.interest.co.nz/news/82648/review-things-you-need-know-you-go-...

Total national sales of all NZ residential properties were 5% but had the effect of pushing up ALL property prices NZ wide by 14%

He said

MONEY FROM THE SKY
The Reserve Bank today reported that the value of ALL housing in New Zealand reached $905 bln (yes, NZ$0.9 trillion). That is a +14% increase from the $791 bln our housing was worth twelve months previously. There are 1.809 million residences in the country, and in the year to March 2016 91,800 sold. So the prices achieved on those 5% have reset the market prices overall. And this data reveals housing gained 'value' by $110 bln in a year ($32 bln in the previous 90 days). To save you working it out, that is $300 mln per day! (Ok, so if you want to know, that has been $12.5 mln per hour!) Of course, most of that has been in Auckland. We owe $234 bln in mortgages on this.

What the calcs for Auckland only, are not given

It demonstrates it only needs 5% to push up ALL prices right across the board

Sharing the feel good factor across all of NZ, are we ?

Yes but that excludes foreign buyers who bought through corporate entities using trusts and companies... we are not seeing the whole picture here

22
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People need to realise the RBNZ is not the problem, in fact they are the ones protecting NZ, the Govt has let everyone down....FHB, investors, the tax payer and our social lives. They are all some way or another affected by property in NZ and we have been let down.

16
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Chris M - National government cannot even think about acting against foreign purchaser, hence the denial for they know if they accept that foreign buyer is a problem, will have to act and for reasons best know to them are so obliged and under pressure from them that the only option for them is to deny.

Also a large number of the 'local buyers' are parents of students who got permanent residency and are probably borrowing offshore so won't affect them one bit. The actual people affected are only the home grown investors. Do you think the chinese have some hold over Key? Is he scared of implementing immigration controls against them? Is it part of some trade deal he's done with them, along with agreeing to import sub par steel?

Ads national government still in denial to control overseas speculators. Shame.

If they act now together with RBNZ, would have been good but the less said the better about national

Having signed away our right to do anything specific about foreigners in the market, they kind of have to stay in denial, don't they, otherwise what would it make them?

16
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Looks very sensible to me. Now they have that in place they will cut interest rates.

And watch property prices rise when they cut interest rates

13
up

The Reserve Bank has today released a consultation paper proposing changes to loan-to-value restrictions (LVRs) to further mitigate risks to financial stability arising from the current boom in house prices.

What is the published metric that enables the RBNZ to conclude risks to financial stability are at a level that necessitates the imposition of these declared measures? Anxious bank depositors need to know.

16
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They are dancing around the real issues; there isn't really a financial stability risk, and certainly not to bank depositors. The RBNZ pretty clearly do not want the asset bubble to get a lot worse, even if I suspect they realise the downsides of such a bubble are major distortions in social issues like house prices and ownership, the huge transfer of wealth to leveraged property investors, the concentration of economic activity into such endeavours, the attraction of foreign capital chasing these easy tax free returns, the resultant effect on the exchange rate and trading industries, and the resultant non inflation.
The dance is necessary because Bill English has neither the vision nor humility to admit that his brief for the RBNZ was very poorly constructed. The RBNZ desperately need to get the exchange rate down, and the only tool they believe they have, and indeed do have to read English's brief to them, is dropping interest rates. But we all know that just sets the system off further into a negative spiral, without some other tools.
A catch is that nothing in this latest move discourages the foreign money, so actually the result will merely be an accelerated selling up of NZ, with only a brief hiccup in house prices..

I still need an answer - just as others sought one in this example.

The better stats, as the best lies, are often difficult to discern because they contain a great deal of truth; requiring a great deal of further analysis and scrutiny to unpack the error or mistake. Sometimes, however, it takes very little effort (reflecting both on the numbers and the person wielding them). Read more

A very good summary; I like it. There are certainly some half truths and distortions involved in the whole saga.

One of the main risks could possibly be a political risk. Hence you will never hear it spoken or see it published.

Couldn't the Reserve Bank require the banks to substantially increase their capital and thereby force them to increase their profit margins. This would tend to decrease interest on deposits while putting upward pressure on borrowing rates. This could simultaneously:
Put downward pressure on the currency
Put downward pressure on asset bubbles
Increase the resilience of the banks

10
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The opposite is happening

The parent companies of the big 4 banks have been pulling money (capital) out of NZ, back to head office in Australia at the behest of APRA

That is deeply concerning and all the more reason why the RBNZ needs to take strong action. Clearly the Australians are setting things up so that in the event of a crash, Australian depositors will be looked after at the expense to NZ depositors. The government should also be concerned and take action where it can.

Australia has an insurance scheme for bank deposits

It probably only activates after the shareholders equity is depleted.
It would be nice if we had the same here.

What's your source? If you're referring to ANZ needing to repatriate capital from NZ Branch to AUS branch, this captial is being replaced/sourced locally.

"published metric". Whoo listen to you.

Why does it have to be published for them to act?

Solely because the RBNZ unilaterally captured retail depositors in the open bank resolution scheme.

The stated underlying premise noted by an apparatchik is as follows:

Whilst there are differences between different classes of unsecured creditors, they all have the same legal claim on the bank. Each has freely invested in a private institution and has enjoyed a return on that investment whilst accepting the risks associated with the investment. Under the OBR, it is expected that all unsecured creditors would be treated equally with the same proportion of claims remaining frozen for all depositors and creditors. Read more

Great Point Stephen.

I as a bank depositor would like to be able to better understand the risks I face and how I manage these.

Get a bigger mattress?

SH has the question of the day and most likely is the question of the week!!!

oh shXt. Better act quick for my last purchase. :P

It's going to be a busy 6 weeks for investors to buy up all they can.

that'd be a bit dumb since this is likely to decrease house prices in the short and medium term..
But if they want and banks lend the money.. why not? Their risk..

But rents will increase so that will encourage more property investors. Hence prices at worst stay the same but more likely keep going up. Regret not buying yet?

Why do you think rents would increase? I don't see it that way.

Plenty of empty houses right now waiting empty to be sold for capital gains because rental yields are too low.

If/When the prices fall (and with less demand they will), those speculators will decide to rent them out instead.

If prices go up is not because houses are more attractive as rental properties. On the contrary, they go up because the business is in flipping them.

I've made 15% gains recently with ETF in oil. There are better and safer markets than property markets to make a profit. I honestly think this is a game change. Time will say whether it is too late already.

Rents are UP its all over the news today, rents are soaring. As property prices increase then rents will increase. I was paying 80% of my income on a Mortgage so until your paying 80% of your income on rent you can also get squeezed hard to the point you have to move. Never forget you have no control over the rent and as long as there are ques of people to rent the price can keep on going up.

Nope. Rents can only go to what people can/will pay, and renters are increasingly able to choose and demand more for their money - we certainly have.

14
up

****ing in the wind from the RBNZ. Investors are already just using their equity from existing properties to buy more, not cash reserves. This will only stop new investors entering the market, but existing investors will still be able to hoover up housing stock.

Harder to buy for all investors. You still need to have 20% equity in your own home, so would need 60% to buy an investment of equal value, 80% to use another investment property.

With investors generally only on "interest only" mortgages and who have bought recently, will not have much spare equity at all in their portfolios.

21
up

Great they made it nationwide and a good move overall.

Looking forward to the Loan to Value restrictions hopefully in time for XMAS :)

Reserve bank has acted....

Now the governments turn..... tick tock tick tock ..... with an 8 year wait hopefully we will see some action soon

Currently the 10 year government bond yields 2.6% so where else will investors out their money of they sell up?

Investors will not sell up they will hold.

Plenty of other options around, no excuse for being stupid and/or lazy to look for them.

19
up

This is brilliant for foreign buyers as it takes out the locals.

Where is the logic for a foreign buyer to invest now with this and other moves likely to stagnate or drop the property value together with a falling exchange rate once the measures take hold?

Preservation of capital .

This is not a normal world.

Why would anyone take on negative interest rates? For example.

Same reason people buy propety.

10
up

Foreign buyers are speculators. If the price is likely to decrease because demand has been punished.. why would any foreign speculator be interested in such unattractive market? Just because they would have less NZ competitors?

Also your comment implies that you really believe house prices will always go up no matter what.

Time will say but I don't see why foreign buyers would be interested in "investing" here given the conditions. In any case I rather have foreign capital speculating in NZ than local borrowed money from local banks. The risk wouldn't be systemic.

5 years back I thought it impossible for prices to increase much further. As did most people.

These days I just look to Vancouver to see how far our prices may go -- and we are nowhere near them yet.

I don't know if foreigners buy in NZ for the price gain necessarily. More of a safe haven, which just got easier to buy-in.

If I'm not mistaken it is cheaper to buy in Vancouver according to house prices to income ratio than in Auckland. NZ was considered the most expensive country to buy in proportion to incomes: http://www.stuff.co.nz/business/75945463/NZ-tops-world-in-Fitch-house-pr...

A safe haven makes sense when you don't pay taxes (or pay little) on your gains. If there is no gains likely and no liquid money (a house is a very illiquid asset) I honestly don't see why anybody would invest in NZ unless to launder money?

I think you are mistaken (http://i.cbc.ca/1.2505618.1390339722!/fileImage/httpImage/image.jpg_gen/...).

As a country NZ is skewed by the large proportion of people who live in Auckland. Outside Vancouver and Toronto, Canada is reasonably cheap. Vancouver is absolutely nuts - and I think it isn't unreasonable to suggest that it is that way for the same reason that Auckland is.

My wife has family who used to live in Vancouver but were pushed out because of the cost of housing.

22
up

These LVR limits should have been imposed ten years ago.

'These LVR limits should have been imposed ten years ago.'

Hindsight is 20/20?

17
up

That is a good thing right ... then perhaps we will start to classify foreign buyers correctly and the media would be forced to correctly report the extent of their buying and not just report on a small subset such as Non-Residents.

Remember foreign buyers are Non-Residents + Temp Visa Workers + Foreign Students

The media refer to foreign buyers as just Non-Residents

Non Residents (4%) + (Temp Visa Workers + Foreign Students) (35%) = foreign buyers (39%)

In Australia they are referred to as foreign Persons and as of this year a new stamp duty tax is imposed on them. We could do the same in NZ as taxation is allowed according to the FTA with Korea.

Good example is the headline of this article
http://www.interest.co.nz/property/81501/linz-says-3-home-farm-and-busin...

35% temp workers and foreign student buyers are ignored by the headline. NZ media time to be more open with the public. Reading the article the real story comes out "
Technically, the combination of the 3% declared foreign tax residents, 35% who said they were students or on temporary visas,"

16
up

You are correct Joe but this national government manipulates the data to suit their requirement and if are not able to manipulate or cover up will outrightly reject it and may come out with another data (Being in power can do anything) to rubbish the data that does not suit them.

Media too use to fall earlier but now are able to see through the government lies and cover up so will now be hard for national party from here on.

So why don't the opposition parties say something of these statistics?

25
up

I call it Karama
British scooped up land from the moaris for worthless muskets and blankets
Asians now scooping up land from the british for worthless little printed pecies of paper.
Ha, ha.
Chinese must think our leaders are the most stupid people on the planet.

15
up

"Chinese must think our leaders are the most stupid people on the planet." Or are grateful for their co-conspirators.

Opium wars. Now its Contac NT payback time.

China can and will be put in her place when required. Nothing has changed. Us Westerners are still top dog.

14
up

China is on the way to metaphorically 'owning' New Zealand (if not through on-going land and asset purchases then likely through increasing influence on our politics). There's been a slow motion neo-colonization of New Zealand for some time (not saying this is a 'good' or 'bad' thing, just you'd be naïve to not acknowledge it happening).

Much like the Maori, I suspect European New Zealanders will eventually find themselves as the minority ethnic group going forward over the next century, and the large Asian countries will carry ever increasing clout in our daily affairs.

Totally agree. But what can be done?
European NZ's speak out and are called bad names, xenophobic etc
In the name of defending thier own culture.
Well guess what.
European NZ has a voice too.

NZ needs to quickly figure out which politicians represent the interests of this country (and its existing inhabitants) vs. which politicians are out chasing foreign money or working for favours from foreign parties.

Given that the National party has history with Chinese money and political donations, is any of this really that surprising?

The National Party should have learnt from the age old idiom.
"He who sups with the devil should have a long spoon".

But they haven't.
Too busy selling the country off. For Votes. And entry Visa's.
And when voters who elect Govts, of any stripe, are distracted by the rising price of their house, and they feel better off.

Well, Game Over.

13
up

Yes, we might all sympathise with the Maori situation a bit more when the madness has run its course. Money is becoming worthless, and when large amounts of our property has been traded for worthless bits of paper or electronic numbers on a computer people will see their folly, maybe. There is a good reason why these bits of paper and electronic balances, especially from overseas, are being traded for real estate - it is REAL, property is the new Gold, money is losing its value rapidly - trade money for REAL stuff - before everyone realises this.

10
up

Well Kiwis must be the most stupid people on the planet to put with the pile of BS that JK has placed in the path of our future.

Kiwis so dumb lah!

There will be implications for future bank leverage and earnings growth. Maybe there might finally be more capital directed to more productive uses.

20
up

The foreigners will be laughing their socks off about now..

It might not be enough but it is a step in the right direction and slowly but surely property investment is going to become less and less attractive. Prices are so precariously high it won't take much to reduce the upward momentum. Hopefully overseas investors are turning their sights to London where you can snap up a bargain at the moment. Auckland only promises losses.

headlines keep getting better....
"Chinese Media Is Now Warning Canada’s Housing Crash Will Be Worse Than The US"
https://betterdwelling.com/city/vancouver/chinese-media-now-warning-cana...

And ... Meanwhile in another Canadian state which previously was the darling of Canada http://www.cbc.ca/news/canada/calgary/td-economics-report-alberta-recess...

If I wanted to cause a market to crash, this is how I would do it. This won't fix financial instability it will cause it.

Interesting - care to elaborate?

10
up

I guess RBNZ is doing what best it could do in the current scenario, have increased the LVR and this time nationwide - may be slightly more for Auckland along with bringing forward Loan to Income restriction early instead of waiting till end of the year as realized that will have to use both together to have some impact, hopefully.

If national government too could rise and take some action now along with RBNZ to curb speculation specially non resident, would have definitely made some impact but our government is so intimidated by Asian friends that leave about taking action cannot even think of it and the latest example is the steel saga that that they do not know how to react but are just hoping and praying that the other country does not act.

Exports are important but should not have allowed any foreign country to dominate you in such a way in the first place that you lose your sovereignty in taking action suited for the country.

Question now is : Will the national party act now to curb non resident speculation which too is a major contributing factor or will it still be in denial and cover up mode with passing the blame to all but themselves and watching from side as a spectator.

Great news. Now just maybe some sanity will come back to the market. However I see major problems.
Investors will club together and buy properties using multiple securities. In that case much tension will be created as different investors have different ideas on what their individual goals might be. Also groups of investors may give guarantees to banks they never intended, and argue about management, when to sell, taxation issues etc. the lawyers will have a feast out if this.

10
up

[ Personal abuse. Comment removed. Check your email. Ed ]

Ed, does this mean you know who Independent_Observers email is so he is now known by his REAL email address by yourself? Can you please confirm that you do not know what our email addresses are or can you look them up?

It will be the email address you used when creating the Interest.co.nz sign in.

I didn't think to use a pseudonym email so what I am getting at is that if we are hurling abuse it each other interest.co.nz know exactly who we are through a quick LinkedIn check, leaves me a bit cold actually...

We probably shouldn't hurl abuse at each other though. I don't think it's a good look. I_O was getting like a boiler about to burst - people will tend to keep pushing it until they go too far. Having an email dialogue offline with the site owners can give a commenter the opportunity to state their case and it is usually quite effective if you get told off by the owners. However, it is very easy to leave the wrong impression (or right impression depending on your motivation) on the Internet, Poe's Law and all that.

Ooh might they start b.... slapping each other?

10
up

People were warned but did not listen as greed is a powerful thing. If this does not work the RB will implement debt to income restrictions. The beginning of the end?

11
up

Rastus,
There is no crash, they will print more money. Until finally one day the masses revolt.
Then your loaf of bread cost 100 bucks or whatever number you choose.
If NZ wants a lower dollar right now they should follow chinas lead, use basic supply and demand formula.
PRINT money (increase supply) and buy real assets (such as gold) to drive the kiwi dollar lower.
When it goes the other way, you have an asset to sell (gold) to support the dollar and drive it back up.
RBNZ are currently on the losing side of a currency war, I am sure they know this.

I agree with all your remarks here.

The thing is, buying gold for example is far too sensible for most New Zealanders to get their heads around. Rather spend it on a new SUV or a holiday.

And yes, RBNZ is on the losing side of a currency war and I'm sure they would know it. Everyone else I've spoken to involved in finance outside of this country does.

Ive got a $10,000,000 in Zimbabwean currrency that I would swap for the same in NZD. Any takers ?

and better still use it to fund increased R and D facilities to help develop high paying jobs and technology - invest in our infrastructure - as enjoy the depreciation in the dollar making exporters more competitive

Now bring on rules to reduce bank's leverage and increase capital ratios?
I don't think they have the guts to do the obvious and simple.

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Market will correct at some time but with interest rate so low, need Government to act on demand also besides supply to control the housing crisis but the government intention in actually trying to stop rampage in housing market is a question mark.

Hard to trust the current government and hope that they do something win back the trust

Many comments above on how foreign buyers are going to mop up stock.
Ask yourself as a foreign buyer :
Will the reduction in buyers herald a market price fall?
Will a correction to the NZD cause further value reduction in their investment value?
Will the total effects be a move out of the market ?

The global problem for investors is that there is $10 TRILLION of bonds with a negative yield. Where will they put their money to gain a return?

You ask questions supporting your case.

Ask the question-- as a chinese person, how do you view the chinese economy.

How do you view the heavy state interference, corruption, and the death penalty.

What is your view on the pollution of your country?

Where is your capital most likely to be preserved? Sure, you could lose 30% in a decent housing collapse but you still have most of your money.

I am Anglo -Saxon in origin! But in answer to your question I see further movements of funds from China into NZ. Main reason being you don't have freehold ownership of land in China as it is on 70 year leasehold agreements. I also expect more immigration from Europe as it is in seriously troubled waters.
NZ=safe haven=premium assets.

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God nearly everyone on this site is such a complete and utter miserable b@stard. No matter what controls the RBNZ puts in place all you lot would ever do do is whinge whinge whinge.
This used to a be sensible site with lots of differing opinions, but even most of the moderates have left now. Now its just an anti government, anti everything moan fest where you all try and out do each other with your wailing about how life is so unfair, and the nasty nasty Chinese are stealing your birthright.

I'm out. Enjoy the sad little misery pit you've all created.

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Sounds like your having a moan mate

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Feeling worried Finance Gal? With a name like that I am guessing you are a mortgage broker. you shouldn't complain about the complainers - you've had good times.

Constructive post.

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Don't have any children out there looking for first homes at starting prices of $600K I presume FG?

The Chinese aren't nasty, they're sensibly buying up our hard assets with increasingly worthless cash. Good on them! With leaders as spineless as ours we deserve what we're going to get.

The Reserve Bank said loans exempt from the restrictions, including loans to build new homes, would continue to be exempted

I would really like to know from all the big time property investors on this site what percentage of their properties are new builds?
Because the incentive is there to do so, or is it preferable to keep supply restricted for faster capital gains?

Interesting. Many apartment projects are sold to a mix of investors and owner occupiers so making it harder for investors would be stupid as it would make projects even less likely to proceed restricting supply for both investors and owner occupiers.

I didn't buy investment property because I thought a lot of other investors would also buy it thereby pushing up prices - I bought it because I thought supply restrictions caused by council and investor blame would push up house prices (10 years later starting to think I may have been right). Only thing that would scare me would be supply increasing faster than population. Anything else, CGT, LVR restrictions etc couldn't care less - they just restrict supply and push rents/prices higher.

Spot on Bob. These restrictions will make a minor impact on the AKL market as it is supply which is the issue and that isn't going to change for 2 or more years. All these restrictions are for is to limit the downside for when that downturn does come.

Exactly.
Apart from a very minor blip, these restrictions will have little to no impact on the market except to incentivise further supply restrictions.
Simply a necessity for the inevitable OCR drops in the coming 6 months..

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It will be either a brave or foolish person to think that this isn't the start of the sunset of the "golden weather" for substantial capital gains from homeownership and investment properties.
We have had a "perfect combination" of factors for rapidly increasing property prices including; fairly liberal bank lending policies compared to international standards; a world awash with money due to money printing resulting in historically low (for New Zealand) interest rates; high rates of immigration; land shortage; foreign investors; . .. . ; and a purchasing frenzy driven by every man and his dog to who no matter how financial savvy being able to make considerable "paper profits".
The reality is that increasing prices is not sustainable without a sudden correction so the RBNZ announcement makes sense.

And additionally I see (and hear) the revulsion ordinary people are starting to have to this awful act of selling nz. I presume the National party's focus groups are reading the same way. Personally I think the ' no crisis' crowng will be in for a complete refurbish and reshine into something quite different. (Or National is history.).

Good move RBNZ, this will help my strategy.

Do these arrangements apply to "NEW" mortgages only, or, will they apply to roll-overs and reset mortgages

IF it applies only to new mortgages as from 1 September, that will discourage borrowers from shopping around different banks and then shifting their financial arrangements to a new bank, because a replacement mortgage at a new bank is classed as a new mortgage by the RBNZ

Probably the most important unanswered question

(a) Applied to New mortgages only will slow down leveraged buyers
(b) Applied to New mortgages and Resets will force some leveraged investors to liquidate

The Banks and the Bank lobbyists will be lobbying hard for (a) and not (b) in submissions

Updated with political reaction and more comments from bank economists.

any comment yet from
NZ first,
the maori party whom i suspect are getting uncomfortable supporting national on its housing policies
peter im still here dunne

Well, if some of these measures don't have an effect, then I guess we will then HAVE to address the elephant, who is about to calve, in the room.

Would this apply to new lending only or to existing portfolio? E.g. if I have my own owner occupied home in auckland at 80% as well as an investment property outside of auckland at let's say 75% LVR would this impact me? I take it on 01/09 the banks may be holding quite a number of loans in this category.

If I was to refinance my lending from one bank to another without requesting more lending would the new bank still want me?

This would be on new lending. The RBNZ isn't going to somehow invalidate billions of dollars of existing loans since that would cause all kinds of mayhem : Human sacrifice, dogs and cats living together – mass hysteria

Refinancing with another bank would however probably constitute 'new lending' (for that bank) so they'd be unwilling to advance you the money. Changing the terms (fixed vs floating etc) of your loans with your existing bank wouldn't since it's the same loan.

Redocumenting your loan with your existing bank may end up being new lending depending on what you're doing.

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The article leads off with - "Less than two weeks after Prime Minister John Key told the Reserve Bank to "get on with it". Wow - that is the pot calling the kettle black - what has the nationals done to restrict demand with matters that fall directly under their brief - immigration for example??
These Nationals are fast becoming the "do nothing" government - I would challenge anyone to list something significant they have done to limit the housing ponzi and its associated pressure on traffic, education and health. All talk usually ending with something like "at the end of the day we will do nothing"

Mitt Romney - " Leadership - leadership is about taking responsibility, not making excuses"

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Yippeee, Dare accepted and acted upon. In whose court is the ball in now ?

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There are dozens of balls in the government's court, they just stand there, stunned, every time one is served to them, not even sure they have a racquet in their hand.

They actually have a phone in their hand with the first 10 speed dials all being a Chinese number - stuff the wife.

Sounds like the game might be more like pocket billiards, there.

It seems that the new rules don't apply to new builds so guess where investors will go?
Straight into new built apartments and popular priced houses which will escalate from demand and likely shut out FHB 's yet again.
Rents are sure to rise even further as stock diminishes.
I'm getting my knife and fork ready , it's party time!

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please advise as stock diminshes for rentals, the houses are not going anywhere, and if investors can lend more to build new wont they move in that direction therefore increasing supply.
as for FHB they were screwed ages ago for most it is now a pipe dream unless they move out of auckland or have rich parents
the part that disburbs me is no restrictions of foreign buyers so they could very well fill any hole and we may have more empty houses sitting around

Yea, I feel Big Daddy is more lucky than smart when it comes to his finances.
He is right that prices will continue to increase further, despite this announcement. However, as always, the correct logic isn't there.

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The whole thing really is ghastly isn't it? Do these people really not have an iota of feeling for young FHBs?

Its all about keeping GDP positive, who cares about GDP/capita.
National for whatever reason are seen as the economy party, without positive GDP they will struggle to get re-elected and it seems they can achieve positive GDP by doing nothing, easy peasey.

Rents will decline if there are more new builds ceteris paribus.

Investors will pile into new-builds, new-build values will rise, construction costs will soar (already happening) and the increasing values of new-builds will drag up used house values too. An example of a distortion caused by this regulation. It's worth reading the BS19 document too from the RBNZ, so one can understand how tightly regulated we have become, yet foreigners with either cash or off-shore loans can still swoop in and take our property with impunity. Everyone seems to have forgotten the foreign demand influence today what with all the excitement.

Ha will make no difference. All of these rules including any capital gains tax will have zero effect. It's a replay of the 1970s again. Yawn

I'm thinking its more like a replay from the 1980's. To be exact its looking like early '87 to me. Shudder!

Not likely there is no oversupply. Too many envious people on this site. The 'what everyone owes me mob'!

Yep, tax rules need to change around housing, then tackle overseas investment. The end.

Making business and real growth attractive would be quite a mint idea in my book.

I have a lot of sympathy for first home buyers but we no longer have a free market.
Indeed I feel sorry for sellers who may have difficulty in selling if investors are shut out.
The RB has decreed who may buy what, how much money they must have, where they can buy and where they cannot.
We now have a regulated market which will create distortions left right and centre.
As I didn't create the regulations, or indeed create the problem having cautioned people before, you can hardly blame me for taking advantage of the new regulations.

You feel sorry for sellers who can't sell due to the diminished numbers of investors. But what about the shortage of houses and vast numbers of people wanting to become owner occupiers that we keep hearing about? Demand will still be there just maybe not at the dizzying heights that investors have pushed prices up to. Sellers can still sell for a large profit but for a slightly lower amount than they may have expected. Surely that's a good thing for future of our society isn't it?

The effect of these new LVR requirements is to force "property investors" to increase the level of their equity held in each investment

Question is, will they seek a return on that extra equity, or will they be content that the cost of that will be offset by any expected reduction in mortgage rates in line with an expected cut in the OCR, or will they seek to increase rent levels to cover their increased equity costs

Given the 5% halo effect outlined yesterday by David Chaston would an increase in rents at the margins, filter through to all rentals - Longer term, I suspect it will have that effect - upwards

You can bet the Government, Bill English, and RBNZ haven't thought this through

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Any solution should start from #jkexit

What everyone has forgotten is that a large part of the market remains free of regulations.
That is home owners who can buy and sell free from LVR rules and make as much tax free profit as they like.
So we now have a two tier market.
One for investors who will be regulated and one for home owners who can cash in tax free profits to their hearts delight.
There will be consequences.

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It's a start. Way too late but ....a start. At least the RBNZ are beginning to move arms and legs, meanwhile government still sit smugly with arms and legs firmly folded.

Talk about flip flops of policy,
As for saying this will not apply to new builds. Surely he needs to be told investors are not buying new builds because they are too expensive and not appropriate for rental properties.
I wonder if the bankers ever get around to asking valuers why prices are going up. How difficult can it be to figure that existing housing stock will always track the price of new builds. It has very little to do with who is buying the property. Goodness that is as crazy as suggesting food prices will go up if restaurants buy it instead of house wives.

Surfisup --Very True. If one considers house prices in relation to their distances from business centres and work places, I personally think. House prices are still cheap in Auckland.
Look at Sydney and Canada or any place for that matter -- and precisely it is the foreign investor who is comparing prices before putting in his money into NZ houses.

Surfisup --Very True. If one considers house prices in relation to their distances from business centres and work places, I personally think. House prices are still cheap in Auckland.
Look at Sydney and Canada or any place for that matter -- and precisely it is the foreign investor who is comparing prices before putting in his money into NZ houses.

Property Institute just called for the Reserve Bank to be stripped of its powers to influence housing policy.

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So did some investor guy named Bob I met in the pub at lunchtime. Suggest they have too much skin in the game to be considered unbiased commentators.

What I would suggest is that the government be stripped of its powers to influence housing and they be given to a group who will actually do something and have the long term well being of NZ in mind.

I agree. Seems a little strange for them to have this power.

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Little move by National government to curb speculation will go a long way.

People who can make a difference and were voted to take responsibility and act have failed.

Do we need a government who does not care what the people of their country feels but when their Asian masters speaks, it sends shiver down their spine. Why be so helpless and at the mercy of other nation that have to dance to their tune. Patriotism and self respect is missing.

What is that idiot doing. Why does he make policy for the whole country when most of the small regions don't have a problem.
After all the cock ups the reserve bank have done since 2008 to the Northand economy we were just starting to get back on our feet with house prices back to 2008 levels so people were starting to catch up with essential spending. This will bring us back down to where we were again. It is so stupid.
Can anybody please explain why the Reserve Bank cannot pick postal codes for the problem areas and just put restrictions on those places. We have people living in cars because there are no houses for them to rent, this is because nobody had built cheaper houses for years as the values were lower than the build costs. Building was just starting to make sense, now we are all stuffed again.

I think the problem post code you are after is Wellington 6140!

Why would high house prices in a region with low wages help?.
who would buy these new builds if they can not afford them on the wages paid in northland

You have to have houses values at at least the build value to get any built. As you say it is a low wage area so most have to rent. They are sleeping in cars as nobody has been building. It was just starting to improve.

that's where a state building program would work, create employment and subsidize FHB into houses.
it will cost the government in the short run but the savings for the government over the long term will more than offset it
forget Auckland its a bubble let it pop it will fix itself, they need to put more effort into growth in the rest of the country

What is the central banks mandate?
it is likely
a) Financial Stability and
b) targeted inflation rate,

They are addressing the issue they have noted all along - which is Financial Stability of the banking sector which is increasingly exposed to housing... that's it... they only have limited tools to address this problem caused essentially by the govt... interest rates and bank lending restrictions

The property investors club and property associations will hate it because well... it limits them and takes away buyers and they all have a vested interest - what is the quote about never asking a barber if you need a haircut? they have vested interests so are therefore bias...

It is the RIGHT MOVE to try and cool a stupidly hot market driven by cheap money and poorly thought out immigration policies - because the govt is basically doing nothing and their policies created the problem in the first place

If financial stability is the central banks mandate, then, why do they allow interest rates to fall so far?

At a certain point the housing market risk outweighs the business economy risk -- this change where the housing market became more of a risk to the economy probably occurred 3 or so years ago.

In the 80's, NZ pioneered the idea that interest rates can be used effectively to control economic risk and inflation. It worked back then. But the financial structure of the economy is very different now compared to the 80's. Who'd of dreamt of negative interest rates back then? Or the scale of money printing which should cause inflation but does not.

More reason for the rest of NZ to hate JAFAs more now..

So you hate over a million people you have never met....have another puff Smokey

I dislike this attitude, it is nasty and vindictive and espousing hate for hates sake (I don't live in Auckland, although was raised there).

It says more about the person saying it than the target.

Why do you say this? I'm interested. Maybe you are one of those keyboard warriors who says things from afar but too cowardly to say it to an auckland persons face?

Sarcasm, mate, now that Auckland's runaway housing crisis has made RBNZ issue the same rule for all of NZ.

I have plenty of ex Auckland family and friends that take great delight in calling me a jafa. I guess it is half tongue in cheek and half serious.
my take is its because 80% of all discussion on TV or politics is about Auckland and its a bit of what about the rest of NZ we need things too.
classic today rolling out 40% nationwide because of why, Auckland investors

Don't be too hard on SmoKey, we JAFAs are thick skinned.

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Just added new figures showing these limits could affect almost NZ$2 billion of lending a month, or about 26% of new lending. RBNZ says the limits would affect about 70% of lending to investors.

"Reserve Bank figures show investors made up NZ$2.698 billion or 51.6% of the NZ$7.287 billion of new residential mortgage lending done in May, suggesting the new limits would affect around NZ$1.889 billion or 26% of all new lending."

Bernard you're riddled with envy. It's childish behavior. Once again you'll be wrong and prices will keep going up.

i agree property prices will keep going up in auckland, due to planning laws, high immigration, low interest rates and offshore buyers.
but the hope is now some FHB will be able to compete on a more level playing field to buy that house and it is not tilted all investors way with leverage.
in saying that this will hurt little mom and pop investors and highly leverage investors only, long term cash flow positive investors no problem in fact more for them

Interesting that Zachary is quiet. Or is he the same person as Property King?

I've been reading all the comments. I'd like to see some heat taken out of the market AND mortgage rates drop lower so I am reasonably happy with these new rules and hope that things can become more stable without further action needed. So, nothing bold to suggest really.

Yes, this could be the first step to an expected soft landing, provided hot money from elsewhere doesn't screw up the calculations. QE is the elephant in the room. The GFC's shadows are still long and dark. Much money has been created in the last decade chasing few worthwhile assets and remember Banks have to be enabled to make profits continuously to keep the financial system afloat.

This is seems to have been a massive capitulation by the RBNZ to the governments. wishes. The Property The Investor Institute CEO can be expected to comment from his perspective but he is absolutely right about the U-turn and the perils of political interference. This is also a very significant change for a market trend which might have become somewhat delicate. I hope is doesn't trigger a more violent correction than the government wanted. Investors who have recently leveraged up may be in difficulty next time they have to re-negotiate their interest rates with their banks. I not happy with any changes that advantage foreign buyers with foreign funds over NZ citizens borrowing from NZ banks.

How will valuers be able to value any property from now on?
Valuers must value on the basis of a willing buyer and willing seller to come up with independent valuations.
In many cases that will not be possible as the market will become skewed with buyers or sellers working under heavy regulation.
More unintended consequences are bound to follow.

The change is not too drastic from an Aucklander's perspective as we have weathered the 70% LVR. I bought a property under that regime and thought I had to raise a 225k deposit and was quite surprised when my existing equity in other properties covered it. The bank did make me put in 100k.
To tell the truth I was more concerned when I bought a property effortlessly raising 100% of the mortgage and getting 5k back. It seemed dangerously easy. It has now possibly increased in value by 160k in 18 months. I did sort of get the feeling I was walking into a trap at the time although I always feel a bit uneasy about these things - but I feel it just shouldn't be that easy.
I have been helping a FHB look for a property up to 700k in Auckland and it is very difficult and I'd have to say a little depressing.

workmate just sold his house in auckland and is headed to Christchurch, has not brought there yet, now will hold off a bit good timing some people have all the luck

He should be penalized for being lucky..

sometimes luck just comes your way and you have to jump onboard. as they say wjhat goes around comes around
he had bad luck in that he sold his own place and went halves with family which did not work out so took a small loss to get out but now look like his luck has turned and that small loss might not be so bad in that he can get something cheaper in christchurch if he holds off for a little while and with there annual house growth of 1.5% there is no frenzy to worry about

Yeah only joking of course. People should count on a bit of luck coming their way throughout their lives.

Great that new builds are excluded. Promote supply isnt that what we are short on. Strange when you hear people say it should apply to new builds in a market short on supply.

Also great that its nationwide as hopefully that slows down the circus for the rest of the country.

Now for loan to value restrictions and stamp duties. Also the govt gave the reserve bank a kick to get started does this mean the reserve bank will now do the same to the govt ?

Cant see this being a politically influenced decision... so the RBNZ are saying to the government, we can do what needs to be done, why cant you..

Baby boomers win, Gen X & Y lose ... again. All the young Aucklanders who fled to the Tauranga and Hamilton markets will now see their investments stagnate or decline. Meanwhile, opportunities in Auckland will continue to diminish as the Chinese continue their unimpeded rampant purchasing of everything.

the reason why BigDaddy is covered is he is long in commercial property, the elephant in the room will now be commercial property and new builds...my next investments will be in commercial property as only require 30% LVR, as Bob Jones said to the effect: why would I want to deal with residential tenants when I can deal with professional commercial tenants...unintended consequences coming up...should have been 40% in AKL and 30% in rest of NZ, do you think Gore & Balclutha needs 40% LVR....?

I have no intention to buy more and more investment properties, but perfect timing to put the rents up.

agreed, my portfolio is now fairly extended so will now take this opportunity to squeeze the yield out of my tenants for the next 3 years and then reevaluate...any work that I was planning to do to fix up my places I will put on hold as cannot afford to borrow off 40% and 30% was just OK...so for now my tenants will have to put up without that heat pump I had in the works, or new paint job I was about to give...you see if you play with matches you will get burned...lucky I just put my fire-alarms in....but they are not getting anything discretionary...well done RBNZ you just made all of NZ renters a lot worse off for the next 100 years....moldy mushroom flats here we come...

watch out next target will be policies favoring tenants over landlords. you better get down to the polling booth next year to make sure the greens are not part of the mix
•Reduce speculative investment in the housing market by tightening the rules around loss attributing qualifying companies and introducing a capital gains tax on all but the family home.
•Shift the standard tenancy conditions towards more secure and predictable tenure arrangements.
•Increase acquisition and building of state housing units by at least 3000 units a year for the next 3 years.

Rental wof has to be in the mix as well. Which all adds up to fhb (if they have any sense) to go nowhere near the property market for some time.

Everything you do to hurt investors will hurt tenants more...not all people want to own a home nor can they afford to at certain periods of life...I think this a sad day for NZ's free market....I am one of the lucky ones who has a LVR portfolio of 40% equity so remain unaffected...however my and every tenant in NZ going to pay dearly with these new measures...with higher rents and a poorer standard of living...I read the RBNZ statement and they made no mention on investor home maintenance reductions...do you think Mummy and Daddy investor can afford to fork out $10,000 to fix a leaky roof, better get your raincoats tenants...p.s. Bernard, hats off to you as you won mate...

your the type of landlord the greens will, use for their policies, as the minority (renters) are now becoming the majority policies will be slowly rolled out to appease them over landlords threatening to raise rents every turn
I can see in ten years things like they have in Europe where rents can only be increased by the rate of CPI unless approved by a housing commission or department.
houses to be leased for years (already a green policy)
certain standards to be met to even being allowed to own and operate rental housing, already slowly rolling out
you may think will ever happen but if there are votes in it even national will move on them
my suggestion make hay while you can things are changing and investors in residential housing are becoming less desirable to the ruling party of the day

I live in Germany the much touted Utopian property society...2 things: Rents can go up what ever they want by % and they do...twice by my landlords, also property prices have gone up her 30%-40% in the last 4 years so property inflation is rife, trust me, I put up my rents every year and fix any of the issues in my properties, but as I say heat pumps, painting, anything really costly like that is off the table indefinitely and the WOF aint gonna fix that...

I hope you are a NZ citizen, as the three main opposition parties want to ban non citizens from buying property. That is another policy that I expect to see rolled out within ten years, as I said before change is happening albeit slowly but happening non the less, so make it while you can or make plans for future investments that will be more favourable, my suggestion commercial much better returns and easier to look after plus many ways to invest

If you buy an investment that needs a new roof and can't afford it...then you're an idiot, not an investor. Sell up, take the loss and let some young people buy and renovate.

Rastas, Can you refrain from insults, as only an idiot would think a 100 year old house does not need maintenance.

Maybe more ownership of property in co-operatives, so while you might lease a home, perhaps for life, you might also have shares in the actual bricks and mortar.
Maybe there is some light at the end of the tunnel

Such a wonderful human being aren't you. Your tenants will drop you in a heart beat so ....

Are the new LVR rules for new mortgages or for renewals as well?

This seems to be the plaintive hope of all the anti-landlords. Will they get a kick in the guts when interest renewal time comes around?....please.
Ahh, no.

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The Govt and the reserve bank keep nibbling at the edges of the problem.

1. They can't crash the market as the financial system is based on DEBT and CONSUMPTION.

2. Bring in a law that you can only buy and existing property in nz if you are a CITIZEN for 5 years and have worked here for 10 years other wise you buy a new property.

3. Ban the chinese, Korean and Japanese Govt from landbanking around the edges of our cities and townships waiting to screw us kiwis at a later date more likely our children.

4. Stop the huge money laundring that is going on.

5. Stop people fronting as directors of companies who receive the money then buy houses.

6. Stop property speculators, money launders from stating that they are importers or growers of food when they register their front companies at the companies office when in fact they are property speculators.

Get govt thinking about the citizens of the country the people who built up this country to where it is today not looking after overshore speculators and big business.

In just a short 8 years the country has been turned upside down and is in a huge mess.

Re: 3 and 4 yes!
Liberal lefties scream 'racist'if you even dare say this, but we are all being taken for a spin by the Chinese, they have ulterior motives which is economic imperialism...''soft power' if you like....the west has been conned through greed and desperation...it's a disgrace

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Auckland new motto.....A CITY THAT NO KIWI CAN AFFORD TO LIVE IN ANY MORE ONLY THE RICH AND TOURISTS ARE WELCOME AND THOSE SLAVES THAT ARE WILLING TO DO ALL THE WORK FOR $15/20 AN HOUR....

AUCKLAND Home of the RICH AND THE POOR COME VISIT OUR CITY SOON....

Wasn't it reported that Masala paid less than that ? May be others too.

AUCKLAND IS HEADING FOR A HUGE CRASH THAT MAY GIVE A LOT OF PEOPLE A VERY BAD RASH...AUCKLAND YOU ARE BANKRUPT GAME IS COMING TO A VERY FAST ENDING....

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Sure sounds like a lot of squeals from the property crowd. I dunno what the issue is, just give up the Sky TV and the lattes and you'll afford it in no time.

+1 would LOL again.

What I don't like at all about this announcement is how it will hit first home buyers.
Why not whack the investors but give the first home buyers a break???

Yes it will hurt FHBs outside of Akl now needing a 20% deposit but values will come down pretty quickly I expect.

Any housing solution has to start from #jkexit.

This move is about risk reduction - the RB has made that clear. They've ignored their inflation targets for two years so why change this 'strategy' by dropping the OCR?

This government needs to act fast. They should target increasing the ability of low income earners to pay their rent, abolish rental subsidies and reduce GST to pre 2011 levels. All of this would stimulate the economy - 'trickle down economics' by looking after those at the top simply does not work.

Bankers are lapping this up - it's easy money (much of which goes off-shore) and effectively they are collecting the rent from investors. On the subject of bankers, why should a bank CEO get paid the same as 100 or so minimum wage earners? and

Why should those who invest in property be favoured over other investors?

Why should Google, Apple, Starbucks et al get away with tax avoidance / evasion?

Where does the buck stop?

I have the impression that many of the rental properties in the entry level suburbs have been bought by people with a mortgage free house and two incomes looking to invest their extra cash in something other than shares, term investments or finance companies. This type of buyer will still easily have the equity to purchase a single rental property or upsize by renting out their first home and moving to another one.

Spot on. People who have been clever in paying off the mortgage on their first homes are in a great position to leverage the equity to buy investment property. There is a new class of buyers, First Rental Buyers. How many of them are out there wanting to buy ?

Cash will be king again very soon

,Yes that's right with lower interest rates and a slight drop in prices good news for some

xelnaga.....audible laugh great post

Investors need to buckle down expenses and then they too can afford again...

I am willing to place bet (or be told otherwise) that any country that has higher LVR rules will have higher rents compared to those that don't...how making investors trump up more cash to buy a house is going to bring rent prices down is just fallacy...we are going to get in an odd situation where house prices will stall for the next 6-12 months and rents will go up 10% maybe 20% in some areas...

I am willing to place bet (or be told otherwise) that any country that has higher house prices has higher rents

What the Reserve Bank is trying to do is curb house price rises. Lets not forget 46% buyers are investors. Let them buy/build new builds and increase supply.

Let's go back to the Singapore example, house prices there are about par with Pononsby by for 3 bed terrace, but guess what the rents are 50% higher because they have high LVR and government interference, the less interference the fairer the market for all participants...look at Bombay look at Malaysia, all basket cases due to high government regulation

Sweden has government interference too:
A LETTER FROM STOCKHOLM ON RENT CONTROL

that's where the government needs to step in and build supply. its pretty simple private enterprise will not do something if the rate of return is not economic .
either the government spends its money subsidizing people to rent as in NZ with 2 billion per year in accommodation supplements and wage related rents. not to mention the lost income from neg gearing.
BE admitted on Q&E that removing the depreciation saved the government 900 million per year.
would it not be better to spend those funds to build houses employ people and get young kiwis into their own place.
I would rather subsidize young kiwis into houses rather than older kiwis to a nice retirement fund
PS I fall into the second category

Singapore ...lol

What's the tax rates ?
What's the average wage for someone buying/renting in the Ponsonby equivalent
What's the demand like

Demand sets the rent end of the day... kiwi landlords would charge more if they could, however, they can only charge what the market will pay.

That is a poor example just because they have LVRs doesn't mean that is the main driver or even a significant driver to rents... loads of other factors in play.

What everyone does know is higher the prices the higher the rents in general... That's a global rule of thumb

Also, why not have people buy their own homes instead of renting ... That's what they are trying to encourage

New supply is exempt so use your cash to provide a service to society and build new homes. That will get the rent down if rent hikes are your concern. Will also help decrease house prices for fhb.

Lvr changes and we get this from landlords... have to order extra popcorn for when the loan to income restrictions come in place. Let's hope 4.5 to 1 like the UK. Then we will hear some hard luck stories from investors aka speculators.

The majority of investors investing in Auckland today are not investing for rental yields. Not when the rent doesn't cover the interest payments. They are after tax free capital gains (after 2 years).

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I'm always amused by the naked hypocrisy of some landlords. Working people trying to afford a place so they can start a family with a bit of stability, and start building some financial independence? OMG those entitled spoiled brats, how dare they want something for nothing, rant rant rant. But their greed for endless capital gains, belief that they've the right to charge top dollar for rotting, leaky shacks, putting their paws out for taxpayer rent subsidies, leveraging equity paid for by the people they're gauging, defending systemic imbalances that enable them to outbid the aspiring owner/occupiers every time? Oh, no, somehow they don't see that as a grotesque sense of entitlement that would put them top of the podium in the Entitlement Olympics.

Also last time i check the Reserve bank didn't announce any rent controls. Don't think it is their job to do that.

We saw what lack of government intervention did in the Global Financial Crisis and the US housing bubble so again poor argument. Free market without intervention doesn't work and there needs to be some sort of government intervention to protect society/consumers from themselves.

JP I think our "do nothing" excuse of a government is too interested in getting re- elected and giving JK a cherised 4th term to actually be interested in good long term decisions for the well being of all Kiwis. You're on your own bro.

I reckon that is all they and Key are there for as well. If they get a forth term it will be a limp home and JK will definitely not last the whole term. He already realises the tide is turning against him, but will hang in on the belief he has enough impetus to get to the line then leave before the tar and feather brigade knock on his door.

Build more houses fast and to quality ! Simple solution. House prices are well over inflated. We should be targeting house prices to deflate to 2013 prices ! Government needs to take control on Auckland council and if they are wasting time to build then fine them or lock up the people delaying house builds, give them criminal records so they cannot travel. Do what it takes to build the houses. Bring in Australian builders and companies if not enough builders in NZ and stop time wasting. Lets get it done otherwise we create great problems in society and support services collapse ie teachers, hospital, police, people working in coffee shops move out as too expensive and then we have structural problems in the city and it tanks. Just build quality homes, but lot of them so we can get prices back to 2013. Then we can reduce risk of a very hard landing and just have a medium landing.

Singapore?! Keywest's post omits one teeny tiny fact: 80% of housing is government-provided public housing. Most folks live in apartments in housing blocks, they own them and purchases are subsidised. There are strict rules on letting them out. The property Keywest refers to is the remainder- private property. Yes there is high LVRs for this, but the govt introduced this and higher stamp duty to curb rampant speculation by locals on the back of overseas speculators. Mainland Chinese were turning up with suitcases of cash, distorting the market. Ring a bell?

Singapore?! Keywest's post omits one teeny tiny fact: 80% of housing is government-provided public housing. Most folks live in apartments in housing blocks, they own them and purchases are subsidised. There are strict rules on letting them out. The property Keywest refers to is the remainder- private property. Yes there is high LVRs for this, but the govt introduced this and higher stamp duty to curb rampant speculation, especially by overseas speculators. Mainland Chinese were turning up with suitcases of cash. Ring a bell?

I am talking about homes, not government flats, but you made me think maybe we need to stop talking about FHB's and start talking about FAB's, First Apartment Buyers, because a true home like most places in the world are unaffordable for FHB's

or alternatively we could put New Zealand citizens first and apply a 15% stamp duty on foreign buyers (39%) and investors (46%) ...... so we don't need to talk about FABs and can talk about FHB's.

'Put New Zealand citizens first' ....???? now there's a novel concept for a government!!!!

I still think restricting investors and hence rentals available in Auckland will push rents through the roof. Then where is a person on minimum wage going to live? Here's hoping the rezoning will be effective for allowing reasonably priced sections and getting building numbers up.

the houses are not going anywhere, if you take out a section of demand either foreign owners or investors then there is less pressure to force the prices up they may even decline

And many, many more people would be able to buy, thereby reducing the demand for rentals, and with property not being so expensive, the rentals that would still be required (preferably new builds) would be affordable for people. It would require foreigners being completely taken out of the market as well.

Investors buying existing homes are not creating new supply. All it is doing is changing the ownership structure. Perhaps if investors had to pay 15% stamp duty there FHBs could afford to BUY instead of renting. How is that for an idea?

What is this need that many on here think that people who provide housing for others should have to pay additional taxes.
Do you really think that will reduce prices?
It is not all "Beer and Skittles" being a landlord.

Bit confused there MAN. Landlords inhibit the ability for the less off to purchase their own homes by competing with them, using favorable tax rules, and outbidding them at auctions.

Gentleman's work really...

Not everyone needs to live in Auckland.
I accept that it must be very difficult for the low income earners to get on the ladder in Auckland with the price of property up there.
The truth is that it is still very achievable in Chch to get on the ladder and with effort to build a positively geared property portfolio that will enable you to retire early.
Interest rates have never really been lower except for the old state advances loans.
The many that just go on and on about prices in Auckland could have achieved a lot more by getting on the band wagon.
The rents in Christchurch have dropped a bit in the past year or so but then again the interest rates have dropped by 20 per cent or so.
You also have to remember that there are that many "as is where is" properties that have been sold and with the interest rates so low and the prices for these so low, the rents that need to be asked to show a 10 per cent return is not very much, so the figures are skewed.
We currently have no rental vacancies and recently purchased properties have also filled quickly.

As I have said previously it won't be investors in Auckland buying property up,there when the returns are negative.
They are clearly buying for capital gain and therefore speculating that prices are going to continue to climb.
Some say don't allow interest to be tax deductable or losses ring fenced.
If they did bring in the interest not being deductable that would certainly stuff all the negatively geared owners but if they did that then they couldn't tAx the positively geared owners if they weren't allowed to claim the interest costs. Can't have it both ways!
The overseas buyers are moving to Chch now as the returns are far better than Auckland.

Seeing a lot of overseas buyers throughout the south island actually.

What we've seen in Auckland was only the start of it....

Was at the supermarket tonight getting the groceries and in the process of chatting away to the check out team (couple of ladies in their late 20's, early 30's) - I thought to myself, these are decent Kiwis working hard, and yet they have absolutely no chance of making ends meet in Auckland. They'll never be able to afford their own home and unless something radical changes over the coming decades, will never be able to retire comfortably. I felt a real concern for them and their future prospects. It's a pretty grim reality for them - and they seemed like down to earth, good people. This is all a real shame.

Its a real problem world wide, I recently visited a cousin in LA, she is s medical researcher post DR while he an advertising producer who in their early 40s will never be able to buy a home there and actually pay it off in time to retire. Their rental which is attached three bedroom, downstairs is round 1.3 million USD. They have a deposit given their sale of a house in the mid-west however they cannot see how they could ever pay it off and invest for retirement. All their cohort are in the same boat. Its actually worse than here...given their higher salaries the yields are much better than NZ for landlords.

This fraud is a worldwide problem., nothing new.... It has been building for generations. Sorry, it has not been building for generations, it has been withholding building so that desperate people will offer just about anything to get on the property.....ladder. That the Stocking has a ladder, built in is how gullible the people are.

If you think that this is all about Growth for everyone, it is not...it is all about Capital Gains and shifty money. Any home will do...a bank is run by Politicians for their gain, not yours.

Please ask yourself why Interest Rates have declined ad-nauseum, it is because we have a sick, sick Economics, since 2008....and it is getting sicker.

When debt is free as a bird and thrown up into the air. Just ask yourself why...Am I the one percent gaining, or the 99% paying.

Are you leveraged, beyond all means.. or are they.

Tis why we have EX-bwankers running us and Aussie into the ground and want us to be the Switzerland of the gone South .......Pacific.

They get a cut. They always skimmed their bit...now they want the lot.

I will use a simple example, British Home Stores.

Where did the money go, always follow the money. It went to Monaco. Home of the rich and infamous. A safe Haven.....or is it Greener pastures..but no Saving .....Grace.

(Which some now aspire to...for NZ....and yes another EX-bwanker., is Leading us astray....as quick as he damn-well can).

And some at BHS get knighted and the Pensioners and Employees, get the pain in the neck. 11,000 sacked, screwed and plundered, all for the sake of one mans greed..

Lucky they have a safe harbour in Monaco...for Luxury Yachts....for his deal beloved, partner in crime.

A bit like all the Pensioners and idiots who believed that Finance Companies were the safest bet, because a knight Told em so.....How many went to the wall...how many will go to the Wall this time.

And the wall was empty, beyond all recognition. People lost everything...including their homes. Lots even died a pauper, through believing A knight and an ex-Finance Minister knows it all.

Sound familiar.

No names.....Yes Sir...three bags full....SIR.

If you have an owner occupied home LVR 80% and investment anything over 60% LVR and you need to do any maintenance etc you will not be able to borrow to do this. Potential for the banks to have security over homes that go into disrepair.....and lose value. 60% LVR restrictions should not apply to existing security and lending.

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