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David Hargreaves suggests the real estate industry is singling out the wrong target by urging exemptions from the RBNZ’s LVR rules for first home buyers

David Hargreaves suggests the real estate industry is singling out the wrong target by urging exemptions from the RBNZ’s LVR rules for first home buyers

By David Hargreaves

The real estate industry is firing off its guns in the wrong direction with calls for first home buyers (FHBs) to be exempt from the Reserve Bank restrictions on high loan to value ratio lending.

Talking about the plight of first home buyers in isolation now is fiddling while Rome burns. It’s an answer to the wrong question.

The ability of first home buyers to get into a home now is not – according to cold, hard, figures – as bad a problem as it has been in the recent past. The current RBNZ LVR settings have actually modestly improved the situation for the FHBs.

The real problem in the housing market is that the current LVR measures are too heavy-handed across the whole market. The limits of LVRs to control the market have seemingly been reached. The RBNZ as a matter of some urgency needs to be able to apply alternative measures that arguably could keep the market under control – without suffocating it.

The RBNZ cannot and will not relent on its LVR rules at the moment – because it simply doesn’t have a back-up plan if the housing market takes off again.

Back-up plan

The RBNZ's chosen back-up plan was debt-to-income ratios. And it is true, not everybody agrees with those - though I think they would be worth trying and certainly should be available for the RBNZ to use..

Just on Monday former RBNZ staffer Ian Harrison of Tailrisk economics issued a paper saying  the RBNZ's justifications for possibly imposing DTI limits on housing lending, "shows that that they are deeply flawed", with the main problem that the "DTI is a crude tool".

But the fact is the Government, by pushing back on the RBNZ's chosen plan - but not coming up with any viable alternatives - has left the RBNZ currently without sufficient back-up for the LVRs.

The issue has become complex. It is worth looking at how we got here:

The RBNZ introduced LVR ‘speed limits’ in 2013. These were part of the new ‘macro-prudential toolkit’ signed off in a memorandum of understanding between the RBNZ and then Finance Minister Bill English. In a decision it must seriously regret, the RBNZ didn’t then push to include DTIs in that toolkit.

While there were justifiable complaints that the new LVR rules were tough on first home buyers, they worked, and the house market eased back. But the first home buyers retreated, becoming unfortunate collateral damage in the bigger scheme of things.

Roaring again

By 2015 the Auckland housing market was roaring again. The RBNZ, which had resisted calls to specially target the Auckland market, now changed its mind and introduced Auckland-specific LVR measures in late 2015.

It just didn’t work. Such cooling impact as there was only lasted a couple of months. The RBNZ must have been very surprised how ineffective it was. The central bank’s earlier misgivings about Auckland-centric LVRs possibly producing distortions in the marketplace proved entirely justified.

What happened was that cashed-up Auckland investors moved further afield and out into the rest of the country looking for bargains. The Auckland LVRs arguably helped to set fire to the housing market in the rest of the country as Auckland money poured into the regions. It was a classic case of unintended consequences; of a policy designed to help actually spreading the problem.

Such a spectacular failure were the Auckland LVRs that by the middle of last year the RBNZ was completely caught out and running short on ammunition to fight a housing market that was again a raging inferno – but now right across the country.

By this stage the RBNZ was seeing DTIs as an ideal solution to the hot house market.

Problem was it didn’t have them available. It didn’t seek to get them put in the macro-pru toolkit when that was approved in 2013.

Bring out the blunderbuss

So, what it did as an immediate band aid solution was bring out the blunderbuss, and aim 40% deposit limits against housing investors.

Then it went to the Government looking for permission to add DTIs to the macro-pru toolkit.

The Government pushed back and finally came up with the delaying tactic of getting the RBNZ to consult on the issue. DTIs in my view are now unlikely to be approved in the foreseeable future as potential macro-pru tools. But the point is, the Government in stripping the RBNZ of its chosen choice of action, didn't suggest any alternatives.

This Government has simply been super-reluctant to address demand-side issues on housing, even when the RBNZ at times has implored it for help.

So, the RBNZ has often been left out on a limb, trying to do the Government’s job.

Make a difference

That’s not fair. It is the Government that could and should have been making the difference here.

The current LVR regime is too heavy-handed, I have no doubt. But, it is also worth bearing in mind the LVRs are most certainly not the whole reason for the cooling market. Mortgage interest rates have been lifted somewhat and the banks have been ‘rationing’ credit due to their own funding pressures stemming from a shortfall of depositor funds. The banks have clearly used the RBNZ as ‘cover’ for tightening up lending criteria.

The tightening up is across the market. It is not an issue specifically related to FHBs.

For the sake of clarity, it is worth looking at where the FHBs currently stand in all this. The reality is that the real estate industry is calling for action on a problem that has alleviated in recent times (though nobody should pretend that the current situation is ideal).

FHBs with more room to move

The proof of this comes through the excellent monthly mortgages by borrower type figures that the RBNZ collate from the banks and has been publishing since August 2014. It’s terrific information.

What that information says is that FHBs have had more room to move in the housing market since the 40% deposit rules were clamped on investors, effectively from late July last year (though not officially till October).

Since then, FHBS have made up a significantly bigger portion of the overall borrowing amounts. In dollar terms the amount borrowed by FHBs has been at or above the levels seen before the 40% rule came in. The retreat of the investors has been giving them more of a fighting chance.

The latest figures available are to June and it is worth crunching them a little.

In nine of the 12 months since the July 2016 announcement of the 40% deposit rule for investors the amount borrowed by FHBS has actually increased when compared with the same month a year previously.

And this is in an overall environment where total borrowing is hugely down month by on what it was before the LVR rule changes.

Borrowing more

For example in June 2017, FHBs borrowed $713 million, slightly down on the $738 million this group borrowed in June 2016. But the overall amount borrowed dropped by a quarter – which in dollar terms was a thumping $1.7 billion – compared with the same month a year earlier. Most of the drop came from investors, who borrowed less than half (at $1.2 billion) what they had in June 2016.

So, the very latest LVR measures, have indirectly actually helped the FHBs. Things are not ideal for FHBs, but the retreat of the investors is giving them more of a chance.

The RBNZ would therefore argue that to this point the LVR measures (introduced as they may have been in a mood of something approaching desperation) have worked.

But clearly they were a sledgehammer to crack a walnut.

The real estate industry is therefore rightly concerned. But it is applying the wrong solution to something that isn’t even the real problem today. Putting a distortion into the mix now – such as exempting a class of buyers – would muddy the picture.

Government should step up

It is the Government that should have been stepping up and ensuring that the path for the housing market in the future is smooth.

And that’s where the pressure from the real estate industry and all interested parties should be applied.

Make it clear that whoever is in Government after September 23 should stop playing politics with people’s livelihoods and where they live and would like to live.

Whatever the consensus views on DTIs, the RBNZ should have a sensible, practical range of macro-pru tools available. I don't have a problem with putting DTIs into the range of available tools. Why not have as broad a range as possible? But if there's another measure that might work, let's have that too.

By hobbling the RBNZ and forcing it into measures that are not as well or specifically targeted as they could be, this Government has made matters worse.

Whoever is in Government after September 23 needs to take proper responsibility for the housing issue. It is simply not something that can and should be left to the RBNZ to deal with alone.

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Let's also not forget about the plight of poor 'ol Barfoots and co also.
So altruistic of them to be advocating on the FHB's behalf.

I especially like the phrase.
"We've got young couples in Auckland earning a quarter of a million dollars between them who could easily service a mortgage but because of high rents and living costs, they struggle to save a big deposit. It's over $200,000 in deposit just to buy the average Auckland home,"
If that doesn't perfectly outline the huge structural issues in the market and the genuine dreamworld that RE (and some people here) live in, I have no idea.

How many rentals do you think Peter Thompson owns?

Yeah and how does it help ANYONE borrowing all of the value of a house then paying even higher weekly payments, The problem isn't the LVR,s , people need to pay a small deposit and more so when prices are dropping, It's cheaper houses that people need, FHBers should not be pushed into buying now to save the people trying to getting out, they made there decisions, let the market go down because its unaffordable , trying to save a super high market will be impossible, at best the market would go nowhere and go down in the end

I'm sorry but the Real Estate Agents are out of their tiny little minds if they think that young couples have quarter of a million annual income in Auckland.

Even in higher paying industries such as IT the most annual income they have is around $85k.


I think he means couples that earn $250k but can't be bothered saving for a deposit (there is no way you can tell me they can't save for a deposit). I don't really have that much sympathy.

Human nature! It's surprising how when you earn a good salary, you don't seem to realise it! Somehow your lifestyle adjusts to meet your salary, ( and I agree with your underlying sentiment) when it could be the reverse......
"The only thing worse than having no money is having had a lot, and lost it!"


Yea, exactly.
I too have no sympathy for people who are in the top 2-3% of earners (likely well within the 1% for their demographic) and cannot save/invest for a deposit of just over their total take home pay p.a.

My point was if these rich (unicorns; really - how many are there of this $250k p.a. predicament are there?) can't buy then god help the median family earning ~$90k at best.
Everyone with skin in the game is fighting tooth and nail to project some fake deceitful image that we are doing so well - Everyone is rich, the gravy train is never going to stop, etc.


My household income was over $200k when we lived in Auckland and yet we did not want to buy. Not because of the deposit requirement but because of the amount of debt required and the time to pay it off. Working until 65 just to pay a mortgage does not appeal. Instead, we have moved to Chch, built a great house for half the cost and will be mortgage-free in 5 years.

We have a similar situation. We now live in a great house in the South Island with a five figure mortgage, and give ourselves a very healthy spending allowance after paying that mortgage.


We don't earn as much but my partner and I have worked really really bloody hard over many years to save a deposit (while flatting with others, etc), and we now have a pretty sizeable amount – but the mortgage repayments for an average home make me want to faint. I'd rather not be a prisoner to the bank!

We're still renting and waiting while prices keep sliding downward.

Fingers crossed prices get to where you want them.

That sux when you save quite a bit of money get close, but then house prices rise so fast the hope of a house in the area you want is taken away from you. Hopefully things start moving closer to your savings.

Thanks swapacrate :) fingers crossed indeed.


Iagree with you. Anecdotes from REs about the plight of high-earning young couples tell us nothing about the real structural issues.. How many of these couples are there-a handful or hundreds? What is 'young'? My younger son and his wife-both in their 40s-are in that income bracket and are looking to buy. Are they young?

People love personal anecdotes,but they are often highly msleading as a way of illuminating major issues.

I dont think its that these people cant save for a deposit, but believe me it is soul destroying when you want to buy a home and as fast as you save the market is running away faster. And who the hell wants to owe anyone, particularly a bank, 800k ?

This is a pleasant fiction folk are telling themselves to avoid addressing the elephant in the room.

In reality, the younger generation today is saving at a higher rate than previous generations.

Yes, High rents , high deposits, high mortgages, high living costs and most importantly high sales commissions are all a function of high house prices


Do these people really exist? I know many people in the opposite position. People with huge deposits, who could technically buy a house, but are not keen to service such a ridiculous and crippling mortgage for lets be honest, what is probably a piece of shit house.

It's disgusting that Barfoots and the Herald are trying to pretend they care for FHB by suggesting saddling us with extra debt, in attempts to maintain this insane bubble, and fill their pockets. Both low and desperate.

Looks like all the buyers have disappeared, boo hoo.

I have to agree I also know people with large sums of cash that could be used for a deposit but these ridiculously large mortgages scare them. Even when I purchased a few years ago the size of the mortgage was very intimidating. Why buy a house and take on the risk of a mortgage when you can invest and rent?

Not just that, but everyone I know in this position took a long time to save these amounts – YEARS – and that's without paying interest to borrow on it.

If you have 200k in your 30s and you buy a 1million dollar house... that's an 800k mortgage. And that, is insanity.


I am one of these people, actually my wife and I earn more than $250k p.a. between us.

We have saved the deposit but I can't think of anything stupider than taking on an $800k+ mortgage at the top of the cycle, a cycle that has been fuelled by muppets over-extending themselves.

We know lots of other professional couples in Auckland that are the same. They are relatively frugal, smart with their money and just don't buy into the ridiculous fear-of-missing-out BS.

This sort of thing might just terrify the RE industry - and even some investors. If we see a rise of nationalism in NZ - or at the very least, resistance to National's importing as many people as possible as fast as possible - combined with a wide-scale rejection of commonly perceived value of Auckland houses, it could really bring about some rocky times.

I'll give it 2 months after the election hype and there'll be near on 20000 homes for sale on trademe, just like after the GFC 2008, for decades New Zealand has been having 10 year booms and bust, normally 6 of boom and 4 of bust, and weirdly the boom end around a 7, This low is just at the beginning of its minimum 4 years,

The REINZ are just a bunch of self serving hypocrites.
When the housing market was booming they did not give a toss about first home buyers in NZ
They were more interested in making a "killing" selling to investors and overseas speculators.
Now most will not be making a million dollars a year now they are running to the Government and the RB and using first home buyers as an excuse for the rules to be changed so they can be on the highest income again
If the REINZ were serious, let them reduce their massive commissions first for first home buyers. That will never happen!!
Most real estate agents will of course be voting National as National have been in their pockets making big money for them.

Is this altruistic or blatant self -interest on the part of the real estate industry ?

Do banks actually lend to any buyer, let alone first home buyers, without a 20% deposit?

Would banks actually lend to a first home buyer with less than 20% deposit in the absence of RBNZ's LVR restrictions?

Yes they do. I have a 3 month pre-approval from ANZ for 83.57% LVR

yes, currently about 7% is lent to owner occupiers without 20% deposits. Prior to the speed limits, it was about 25%.

The Auckland LVRs arguably helped to set fire to the housing market in the rest of the country as Auckland money poured into the regions.

Yeah right. Costs in Auckland are much higher (thanks Phil Goff) and people can make more money investing elsewhere.

The big issue is that the REINZ is trying to support real estate agents at the cost of FHB. The reality is that house prices in Auckland will drop a further 10%, that a FHB couple who buys in the current market will see that deposit disappear over the next few months. The only ones to gain would be vendors too late out of the market and real estate agents keeping their fees ticking over

They are trying help the plight of the real estate agents whose commission is falling.

Vested interest and trying to protect/help themselves in the name of FHB. How pathetic.

All people related to estate agency or property should issue a whip to all it's member to vote for National - their Saviour and the rest should vote for anyone but National.


The sudden rush of altruism by Barfoots et al is so very cynical.

The overseas buyers have left the building, the banks are nervous, sentiment is changing and the market is responding accordingly.

Instead of self-interested bleating about LVRs while trying to get the sheeple to load up on even more debt, maybe they should be encouraging sellers to adopt more realistic asking prices.

The last thing Auckland needs is another debt fueled house price boom.

Right on cue! OffSets the next tightening of the property market.

"Reserve Bank of Australia assistant governor Christopher Kent has warned that the relatively high use of offset accounts by interest-only mortgage borrowers shouldn't be cause for complacency..."

Very few countries allow OffSets, and it will be no surprise if we fall into line with International practice....

You buy for the long term. It doesnt matter what house values do in the short term as long as you can cover your mortgage expenses in the longer term.

But what if I can get the same / similar property for $100k less? Or even $200k? Or more? I could be saving thousands of dollars a month over a 30 year period by observing what happens to house values in the short term. Logically, with house prices decreasing, it is telling me that it would be better to wait rather than buy now.

Agree - that's why I'm impartial to a housing crash in NZ. If the market tanks by 50% and as a result I lose my job in the recession that goes with it - at least I will have saved myself $500,000 in the cost of buying the average house - and in the time I'm out of employment I'll go and study/up-skill if I have to. There's no way I can save that amount of money (or pay it off in the form of debt) in a decade or more....

Thats the view I took as well. Never earned over $65K in my life and paid off the mortgage at age 48 on my own. Simply cannot believe that a couple with a combined income of over $250K for some reason, cannot buy a house, its just a laugh. Its all about lifestyle choices, they must be spending it all on flash cars and overseas holidays like there is no tomorrow.If I was on that sort of money I would own a house and two rentals and have retired already

How much were your household income, house price etc. at the time?

Chances are you benefited from much more affordable housing stemming from NZ's long history of government fostering of affordable housing via a raft of measures including public-private partnerships, builds, cheap Housing Corp loans, cheap Housing Corp leasehold land and homestart grants etc. - if not directly, at least from the increased stock and consequent affordable housing prices.

In actual fact, young Kiwis today are saving at a higher rate than your generation did.


The lie that the young are spendthrifts eases any need to think of the fact that there's a major crisis in housing (as John Key identified in 2007). Because once that's acknowledged, it raises the fact that maybe politicians' taking their eye off the housing ball hasn't been the best thing for the country, and maybe house prices DO need to come which point some of that free paper wealth those born earlier currently hold would reduce.

I think hes telling porkies.

But if you had $65K, could you pay off a house that is the Auckland average of $900,000K.

Im assuming your 2 people with kids, so need a whole house. Because thats me. I work and have 2 kids, wife is at home with little ones.

Now not sure what average rent is, that could be $500 a week. So you would need a deposit of $90K if 10% was allowed.

On 65K your take home is $51,576 annually. Rent is $26,000 Annually. So $25,576 left over.

Weekly you would have $491. Food is $100 - $250 if lucky. So $391 on the generous side, food costs us well over $200 and thats for hardly anything.

Then you have clothes, petrol, bills etc. Lets say $150, a week being generous again. So you have $241 left over to save. You cant do anything else like meet friends, go on holidays, which is fine for these purposes.

So lets see how long that takes to save $90K, which was increasing out of site until this year.

It will take you approximately 31 years, to save $90K. So by time you got that $90K, you would probably need $180K or more for a 10% deposit, as house prices will more then likely increase, ask some of the RE on this site.

Auckland needs people who dont earn over 100K, they need people to collect rubbish, police, gardeners, teachers, nurses, cafe workers. Is this really what we want. A city where people cant afford to buy a house, and probably wont be able to afford rent as prices go through the roof and landlords try to get their money back.

You probably wont be able to afford to service the $800K you will owe the bank on $65K

I was struck when reading the good primer 'Home Truths' from BWB Books how much understanding formerly existed in NZ re these equations, and how much it was recognised that affordable housing would need to be carefully fostered to work with NZ incomes.

It used to be well-acknowledged that supply of affordable housing would not be achieved if left solely to the market (or wasn't being), but that getting average Kiwis access to affordable housing was important.

So many who are older now worked average jobs and had access to affordable housing because of these earlier efforts. It's tragic that so many don't realise how much assistance they received in this regard, and that it's important we once again work to encourage and foster a supply of affordable housing.

It was never until the last few decades left up solely to one's own two feet.

I'm in your camp Carlos. I also bought on my own, raised an amazing daughter and I am debt free too. But this time I am giving up my vote and voting for CHANGE. I want my daughter to have the same opportunities that I had on a single income with a career that pays well and rewards her efforts.


The problem for the housing market, is that the sector that was responsible for sending prices through the roof have gone back home, now prices will have to return to numbers more suited to the earnings of people in this country.
And yes, the government is front and centre for blame, they should have listened years ago and stopped the whole circus from coming to town in the first place.
And do not discount the possibility of the government of China demanding that money invested outside of China is repatriated.


They will ask for it to be returned. I expect they will be building up cases for a crack down to send a message. You don't have 400,000 people working in that department and not expect results.

This is very true - we ain't seen nothing yet.

All they have done so far is cut off the supply of money going out. And within months we've seen the effects. Now Phase 2 would very much be to get those 400,000 people to "ask" for the money back.

50% of something is better than 100% of nothing

Watch all these houses purchase by NZ-based Chinese (on behalf of the rich "investors" from China) in the North Shore and around Botany / Flat Bush / Dannemora all go on sale ALL at the same time.

If Chinese are known for anything, it's that they're not afraid to cut their losses and act en masse:

50% of something is better than 100% of nothing

If stemming the outflow does not deliver sufficient result, it is the next logical step for them, isn't it?

When I was in China in 2014 it was evident that there's a lack of productive investment. If they invested in farms there wouldn't be guys spraying fields with equipment suited for a domestic garden. Instead the money is still going into constructing empty buildings.

They have stopped most of the outflow of cash. I expect they'll be tracking anyone who has broken the rules. Once they have finished with them they'll move onto those who will be breaking the new rules they create about international investment.

We are so vulnerable to changes in China we should be treating it as a national security risk. Rather than having National behave like a pet.

I live in the eastern suburbs and I have two neighbours - both mainland Chinese - who have bought the big houses and properties in the last 18 months. The values of each property must be in excess of $1.5 million.
I'm puzzled, because they seem to live like paupers, poor quality cars etc.
I don't want to assume too much - maybe they are just very frugal, or poured almost all their money into buying the houses. But something just feels fishy about it.

Or maybe they were just a money conduit

Quite possibly.

more like it

Have seen the same thing myself on the North Shore numerous times. One doesn't like to generalise but I spent 17 years working in Asia and if there is one observation I have about people with money in Asia it is that they tend to be "flashier" than your average Kiwi. I can't get my head around some of the Chinese buying million dollar plus houses on the North Shore who are dressed rather shabby, drive old cars, don't appear to go to work nor run a business from home and who seem to live *very* frugally...all while living in a house that someone paid well in excess of a million dollars for.

I call them placeholders

I think it's all more evidence, if even anecdotal, that kiwis are getting taken to the cleaners.
Btw, in my neighbours' case both have elderly parents with them.

New Zealand's perfect fox-trap. Good records, even if it's in a trust or under somebody else's name, no state borders to worry about, small market, spineless government who'll roll over meekly and supply whatever the Chinese government demand.

The problem with the housing market is there are too many demand shocks -foreign investors coming from China a few years ago and NZ's current fastest growth in population ever, due to huge swings in immigration. Unfortunately our housing supply response has been too inelastic meaning the result is price rises not increases in quantity supplied.

Monetary policy is another demand side boom/bust factor -interest rates have fallen dramatically compared to 10 years ago, and then from 2013 credit was tightened for homebuyers (FHB in general, then Aucklanders, then investors) with the Macro-prudential tools.

Unfortunately the Reserve Bank does not have a accurate model of the housing market. It doesn't understand the drivers of price bubbles. So it flounders around attacking the symptoms..... This means it is increasingly being isolated -for instance Graeme Wheeler has not been reappointed .....NZ has the stupid situation of having a temporary governor over the election period.

Much of this is discussed in my article -Successful cities understand spatial economics

I offered this article to to get some public discussion and help work through these issues, so we could get some clarity on how to move forward, but unfortunately my offer was declined.

very insightful article.

Seems to me that Graeme Wheeler has been an unwilling puppet for the Government. The Government kept a hands off approach, leaving the RBNZ to take the blame while not allowing their toolkit to be enhanced. Wheelers comments about immigration numbers a while back would have angered the Nats.

Wheeler is a willing, if naive, puppet. I remember when the first tranche of LVR's were announced. You could almost feel Wheeler's desperation at the government's inaction. The problem is he decided the RBNZ would act unilaterally possibly to shame the government into doing something meaningful. The only problem was that

(a) macro-pru tools aren't powerful enough to deal with a serious speculative bubble; and
(b) nothing could shame English, Smith and Bennett into action

There's that horrible sinking feeling in your stomach when you charge out crying "Follow me" only to look behind and realise you are all alone. But, in classic public service fashion, rather than admit a mistake and unwind it Wheeler preferred to double down.

Re: "There's that horrible sinking feeling in your stomach when you charge out crying "Follow me" only to look behind and realise you are all alone. But, in classic public service fashion, rather than admit a mistake and unwind it Wheeler preferred to double down." Brilliant analogy Donald : )

Get a ticket out while you're still young !
As for NZers mostly living on a small part of the overall landmass that is common elsewhere too
Elsewhere also makes mistakes allocating resources It's not purely a kiwi problem!
However the current dilemma in Auckland is a compounded problem brought on by government immigration policy and government failure to instigate sufficient regulation on foreigners buying up kiwi homes as spec investments

Northern Lights I am doing my best to start a debate so that NZ supports environments where bright, innovative and creative young kiwis do not have do not have to get a ticket out......

Our housing supply is inelastic, because Auckland land and infrastructure costs are both absurdly high.

In the wider world there is the SMART school of urban design which espouses the merits of low infrastructure cost. And there is the expansive mode of development that extolls the virtues of lowering land costs. These philosophies are thought of as being opposing schools. However Auckland somehow does the opposite of both of them.

Auckland planning is completely nuts. You have a figure D showing urban village conceptual planning philosophy, that is as close to a coherent philosophy as Auckland achieves.

The problem now exists that due to the LVR at 40 per cent most parents are not able to borrow extra money to assist their kids into their first home.
The Banks lent borrowers 80 per cent on previous borrowings and now to borrow any more they want that previous 80 per cent to be 60 per cent.
Not sure that this is what the Reserve Bank was intending but this is what the Banks are running with.
Basically on say 2 million of assets they would previously lend $1.6 m and now only $1.2m.
Therefore before they can borrow a cent more they need to come up with 400k and this is affecting the whole system.
Not affecting us but from investors I know they aren't bothering and sticking to what they already have.
Improvements have been put on the back burner with most.


More debt is not the solution to a problem caused by debt....

Unfortunately this is the logic of the current house buyer, though.
TM2, I would say, represents a pretty standard investor/occupier.

"TM2, I would say, represents a pretty standard halfwit that doesn't understand economic fundamentals"

There, fixed it for you.

Cmat, if I don't understand economic fundamentals, then I would suggest that most on here shoulld adopt the same mentality and that will put them in a far better financial position.
I always speak from personal experience and I can assure you that it has worked and will continue into the future.
The negative thought patterns of many that comment on shows me why they do not achieve happiness or their financial goals.
This site I felt was to help people achieve financial betterment rather than just being a blatant whinging and moaning site for negative people.

Problem is TM2 is that you and your darklord mates financial goals (which seem to be to own every house in the country) is interfering with normal peoples lives who just want to buy one house to live in and to raise their children without the stress of having a massive mortgage relative to their income. They don't want to own 5, 10 or 15 properties either. One is enough. And they don't want to create a debt bubble that puts the entire economy at risk....

Houses should be homes first, not speculative investment assets. Darklords don't appear to appreciate that you its all about the money and you miss the impact its having on other peoples lives..

Why care about other peoples lives.

I care about about the label on my Pinot it has to be the highest quality, fancy labels make it taste better. Better still I buy them and store them so I can show people how great I am.

Putting your housing portfolio in a quake ridden town where values and rents are dropping and you try and tell others to do the same thing.

Gordon, rubbish as usual.
Meet my challenge or can it!

It must be hard The Boy to see your little portfolio performing so bad as it's value drops by the day and rental returns reduce. Now that you are staring down the barrel at a possible change in government it must be very scary. You went on about how you were in control of your destiny compared with shares. Bricks and mortar. You cannot miss. I told you to take a profit and to diversify. But no you knew better. You are so angry over LTI's you started to comment again on this site.
You should take advice from time to time.

Gordon, If you think my financial situation is dire and getting worse then take up my challenge to you or stop talking crap.
All of our properties are rented and prices not dropping at all, but we don't sell So prices irrelevant.
End of storey!!

The Boy you certainly are angry these days. I suppose fear brings the worst out of us all. And disappointment that you have put all your eggs in the wrong basket. Housing has always been pretty average. Easy to buy especially in a little city like Christchurch where prices are cheap. Returns reflect the risk and you chose a low risk investment. Shares have been the area to be in since 2009. Just keep buying those as is where is properties in Christchurch.

It's as if house prices will need to fall to become affordable. It's as if that was the purpose of the investor 40% LVR.


Fantastic, a situation where parents need to take on further debt to allow their children to take on more debt than they are able to obtain on there own doesn't sound like a healthy society to me.

Christchurch landlords would be well advised not to skimp on the improvements at the moment, the market seems quite competitive and the renters I know who have looked recently / are looking now are very much looking for quality. Not being forced into taking the older, run down, single glazed places any more out of desperation.

TM2 ,Why do parents have to help there kids by way of a rental, if you have $200k why not just borrow it to them at low interest, if the house is in there name there wouldn't be a problem, but I do see a need for rentals for retirement, the thing is do we need one or 10 which pushes the market up, do we need to retire getting $1000 per week with the pension or $3000 or sell 10 houses when we turn 65 for 10 or 15 million, I'm for low LVR,s definitely on the 1st investment property but above that?

I agree that the LVRs cant be changed without DTI being implemented. Especially in a falling market, deposits can be eroded quickly on paper and I suspect we are going to see a bit of a recession shortly which will effect jobs.

You dont want your deposit eroded due to falling values and to lose your job and have to sell!

People need saving from themselves...


Thank you David for your article. The call by the REINZ to adjust LVR ratio's reflects an industry that enjoys feeding at the trough. Surely the REINZ and those that it represents,when simplified the primary function is to obtain the highest price for a vendor at any given time.. Given that almost all agents work for the vendor, the press release simply avoided or at best skirted around the issue of housing turnover, which is what provides this industry and associated trough feeders , mortgage brokers et al with excessive income for very little effort. As stated above ,using FHB to alter the LVR is simply the REINZ promoting turnover, promoting its own interests. Most healthy international housing markets operate on housing turnover of between 4-5 percent of housing stock, such that every 20-25 years stock mathematically would be turned over. In 2003/4 Auckland's turnover was approaching 9 percent, In 2015 it again surged to 7.5 percent. Nationally 2003 was the big year. With increased turnover goes higher prices. For two decades we have persevered with the glamourisation of this sad industry, adjusting LVR limits simply to promote selling houses to one another not for the benefit of FHB, but every real estate "consultant" whose income has been compromised should not be considered. Even though turnover in Auckland has dropped below 4 percent this year, and its percentage of the national market has hovered,for the first extended period, below 30 percent over the past 7 months changing the LVRs is simply the Auckland real estate cartel wishing to hang onto their incomes and undoubted portfolio's of rental properties . Over the weekend I read an interesting 2016 article from the RBA, the relationship between turnover ,wealth effects, building consents,credit growth and pricing . With Barfoots sales continuing to fall to historic (yet perfectly acceptable ) levels, the RBNZ should hold firm . Interestingly, the increase in number of sections( for urgent sale) becoming available over the past couple of months, is reflective of the speculation/increased turnover of 2015. I note also that interest only loans by amount also fell last month. What the FHB figures do not show, is the regional volumes/values . Hopefully the RBNZ can add these to the series of such improved data.

I think the RBNZ should do nothing about the LVR's now and see through the self serving interest of RE Agents. What a load of carap, I don't think any of them are interested in FHB they just want another sucker to buy up crap houses now that some investors are beating a hasty retreat. I actually think falling prices are a good thing for FHB, if they wait another 6 months and prices keep falling at this pace they would have saved themselves a tidy sum on the purchase price and total interest paid to the bank on the mortgage. If they don't they would have the most to lose if all the equity in their house vanishes due to falling prices. With more supply coming on the market and immigration numbers falling so will prices, its not rocket science. You may also get a free TV, holiday, car thrown in heard some of those offers being made by desperate agents/vendors now:).

Maybe they should be asking their sellers they represent to reduce their prices, so first home buyers can afford the 20% down payment.

It's not fair to lay the blame at the feet of the government of the day. Just because it has the ability to pass laws that will benefit all New Zealanders, that does not mean it should. The consequences of making the world a better place could be far reaching, and it would be a brave group of politicians who would dare to do such a thing.

Don't the vast majority of these agents work for the seller? So do they really care about first home buyers?

Maybe the media should be contacting some 'buyers agents' to see if they think that LVRs should be removed for first home buyers. But the fact is these rules are here to protect first home buyers. If someone getting a loan for a million dollar average home hasn't saves a 20% down payment, then that is probably an indication that either the price of the house is too high for them, or the houses they are looking at buying are too over priced. The other solution is for house prices to drop back, so the first home buyer can then afford the down-payment.

Does anyone actually agree that LVRs should be removed (apart from real estate agents, sellers, and investors of course)

Its also important to remember that houses in the Auckland area are so overvalued that in a normal situation the could be valued at up to 50% lower than current values.

Take for instance a 60 year old house in Avondale for instance. The land it sits on has a value of $500K and the house in well worn condition has a real indemnity value of < $100K but it sells at the moment for $1mil. The house is effectively overvalued by 40%. The additional value is intangible.

lowering LVRs exposes the lowest income earners to properties that have the most to fall in an overpriced market

. .. in a cracking sized global crisis ... a war with North Korea for instance ... or a repeat of the GFC ... that " intangible " value will disappear faster than Metiria Turei's political career ....

THUNK ! .... gluck .... glurgle glurgle ....


We have a lazy government ... these bone idle bozos have had 9 years to attack the multitude of problems effecting the housing market , the low building rates , high compliance costs , material costs , immigration , cheap foreign money flooding the market .... yadda yadda ...

... enough's enough ... it's time to boot them out .... they're suddenly coming up with all sorts of hare-brained solutions ( build boot camps ! ) just weeks away from an election ...

9 years , Wild Bill ... you and the Jolly Kid had 9 long years to get stuck in ... and you chose to swing in the hammock and suck on a Speights instead ... heck , that's my job , not yours ... lazy prats !

Well you know the expression, drink Speights, lose your mates

It the surplus silly ...

Dont you worry about those other things, look at the surplus Bill has built


I have saved 150k deposit on a single income in seven years but jokes on them im not buying a ranui shitbox in this current market. Haha!

Good effort, seven more and you could buy something pretty decent for cash in the provinces.

National has sat and fiddled for nine years while watching average kiwis dreams burn. If were correcting, lets make it a decent one. Bring in DTI, compulsory capital gains, ban foreign buyers, curb immigration, better tenancy protection, empty house tax, anti land banking rules, and ring fence tax loss. Looking at the election promise sheet there is only one easy check box to achieve that.

Vote to reset the stupid house prices for all tax paying kiwis. Note that's a vote against record bank profits and smug specuvestors gains and tax offset.

As others have alluded to, disingenuous and desperate from the RE agents!

I fully agree with David Hargreaves.

The market needs a reasonable period to cool down after the frenzied activity of 2014-16. If real estate agents go through a lean time, then that would counterbalance the incomes many of them have enjoyed over the last few years.

My only hope is that the cooling down period will be long enough for me to get a deposit on a house........

Something in Ponsonby would be nice - then I wouldn't have to travel for miles (and hours!) getting into the CBD.

Nope the LVR is a red herring David and you know it, although its taken 9 months for you to realise, it is credit rationing that has stopped FHB and all buyers who need finance at the moment, DTI is in already at a very high level as banks only have limited funds to give to only the very best clients.

My view is that no one Govt is to blame.. This slow train-wreak of affordability has been brewing for 40rs and is a global issue.
As far as I can see it is an effect of the growth of the FIRE economy .( Jane Kelsey wrote an interesting book, ) At the city scale, Sassen has done a lot of researches of the FIRE influences to the Global Cities, such New York, London and Tokyo, since 1984.[16] She and a group of scholars like Feistein, argued that FIRE aggravated social inequality and polarization of these cities.

i also think the incessant growth of the public sector ( includes local bodies ) ..has lead to an overhang of regulations and costs, which can be seen in the Construction sectors' slow response to supply/demand forces..

Sunday had a great episode about housing affordability issues around the world

Clearly the construction sector is suffering from a lack of regulation. If only council could get more involved.

Roelof, Yes since 2002 anyway but even under labour immigration was high 2002 to 2008 but mining in Ozzie was good then and the world was doing ok, After the GFC under national it hasn't helped at all with the overseas investors rules and high immigration , Letting nz housing rise such a stupid amount over affordability and not putting things in place ages ago like LVR and DTI and maybe lifting interest rates COULD be the worst thing ever

Message to all First Time Buyers; DO NOT BUY NOW! WAIT for at least six months. The Auckland market is falling and has far further to fall. If you buy now you'll be at very high risk of negative equity and could lose your home.

Let the Auckland market bottom out and then buy at an affordable realistic price.

And yes National are very much to blame for ignoring you and leaving you in this mess!

Yes the desperation coming from the RE agents suggest further falls of significance are likely

Hi CJ099,

Whatever course of action entails risk.

You need to be careful giving the sort of advice you offer above......

It's not impossible at all that house prices could trend up again before 6 months is up.

Potential buyers (like me) might all be hoping that houses prices will go on falling indefinitely - but if we're honest with ourselves, none of us can assume that's necessarily going to happen.

The reality is that when the market turns, things can happen very quickly.......

^^ I'm so confused tothepoint^^^

In the past you were describing yourself as an investor and now you are just a hardworking potential home buyer, struggling to save a deposit? Which one is true?

Messages to all FHB, I 100% agree with CJ099, wait, you don't have anything to lose by waiting and the gains of a lot less dept, also if you couldn't afford a house with a loan of $800k how could you afford $900 or 1 million if they changed the LVRs , don't save the day at high prices, WAIT and get a smaller mortgage and even smaller with a GOOD deposit, your goal in Auckland should be around a $500k loan with $200k deposit maximum for a great house, GO FOR IT KIDS

Dream on! Yes prices are coming down slightly but this is normal for the real estate cycle,(Linked to the credit cycle and a few other minor cycles churning within the economy). Prices will rebound in 2020 as they have done for the last umpteen years since Adam was a boy. This time it is no different. I have seen this rhetoric time and time again over the last 4 cycles. Same stuff.

You really aren't seeing the bigger picture are you Pkchew. Do you really think prices are going to magically bounce back in a few years when we're already in property prices recorrection mode? With what a magic wand perhaps??

Or are you just praying in vain for the return of Asian foreign buyers because that's not going to happen.
In fact if you haven't noticed there opposite is far more likely to happen. Foreign Buyers extracting their capital on mass. This is already starting to happen in the other gateway cities.

Yes, we have. BH's doom saying would have cost me $1,240,000 if I had followed it. Truth is that I was scared as hell to buy in 2009 when no one else was and I doubt most here have the cojones to buy if/when prices come off. If they come off enough and someone brings in a FHB advantage I will help each of my children purchase a house.

Exactly right. Not sure how many people have lost their millions listening to BH back in 2009 when deciding to buy in 1071. Thankfully I have not haha! ^^

This is a global phenomena, that is coming to an abrupt end! Its all down hill from here. If we stop immigration we are doomed, just look at what's happening in Toronto.

Sounds like Auckland last year, all the same issues, Tax, Visa's and laundered money. Why would we do this to our younger people? Its a bloody shame, and good on RBNZ essentially stopping our younger generation from buying into this inflated bubble.

Hello, potential FHB here. Don't need any help or advise from REINZ thanks!

Just busy saving $6000-8000 per month by working hard and not eating too many smashed avocados. (Despite the terrible reputation us under 40s have for frivolous spending and poor savings behaviour which is patently untrue)

Houses already being reduced in my neighbourhood (Wellington) and very much looking forward to buying when the market has come to its senses.

Not interested in advise from people who want to tell me that I should buy NOW NOW NOW because any house will double in value in 7-10 years so I will never regret it..... because I will regret it. If house prices come down, my debt will be lower, I will pay off my mortgage quicker, my children will have a better quality of life. Why wouldn't I want to pay $995k instead of $1.1million? (this is the reduction of one house that I was looking at just this week).

Even the bulls are now saying that the market is going to flatten for a long time, so I have absolutely nothing to lose by waiting a bit longer. Well actually, I do have something to lose.... future potential mortgage debt!!!

Why buy in Wellington at all? I was brought up there so know it well. Far better weather, lifestyle and value up the Coast, where a lot of Wellingtonians go eventually in any case.

I don't care about the weather and lifestyle and value is entirely subjective.

I went to an art gallery opening this weekend, fabulous talks from artists, had an amazing day. Since moving to Wellington 9 months ago, I've been to the opera, theatre, rock gigs, the observatory, the zoo, talks, lectures etc. And travelling a lot as we do, an International Airport close by is an extra bonus. Wellington is the best city I've ever lived in. I also really love Wellingtonians.

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