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Kiwis borrowed easily the most ever for house purchases in a January month, with investors prominent in the frenzy

Kiwis borrowed easily the most ever for house purchases in a January month, with investors prominent in the frenzy

So, what did you do for your summer holiday?

Looks like a lot of Kiwis signed themselves up for a new mortgage.

Figures released by the Reserve Bank (late because of the data breach problems) show that banks advanced $6.36 billion for mortgages in January.

That's easily a record for a January month.

It beat the January 2020 figure of $4.714 billion by $1.646 billion (nearly 35%).

While the January 2021 total was well down on the stratospheric $9.652 billion borrowed in December, it's worth bearing in mind that until the last crazy four months of 2020 the record amount borrowed for any month during a year was just under $7.3 billion in May 2016.

And as has been the case in recent months, investors have been pushing their way to the front of the queue.

In January the investor grouping borrowed $1.651 billion, which made up just under 26% of the total amount borrowed. That percentage was a little higher than the 25.4% the investors grabbed in December.

While the investor share's been going up, the share for the first home buyers (FHBs) has been going down.

In January the FHBs borrowed just over $1 billion, which made up 16.2% of the total and was down from the 17.5% this grouping borrowed in December.

With the rise (again) of investors in recent months the share of borrowing going to FHBs has generally been dropping month by month.

In July 2020 the FHB grouping borrowed $1.344 billion, which was a record high 20.4% of the total amount advanced by the banks that month.

Since then the FHB overall share of the total amount borrowed has been falling, to 19.8%, in August, 19% in September, 17.9% in October and 17.2% in November. Then it picked up in December a little but fell again in January.

The Reserve Bank temporarily removed restrictions on high loan to value ratio (LVR) lending effective from May 1, 2020. Then in November it announced it would reintroduce them.

Investors particularly took advantage of the period in which the LVRs were removed.

While the LVR limits were officially restarted from March 1 this year (including 30% deposits for investors, rising to 40% from May 1, 2021) many banks started applying restrictions from the time of the November announcement.

In that regard it is of interest to look at the amounts of high LVR lending to investors (defined as loans for more than 70% of the value of the property) and what portion these made up of total lending to investors.

In January, of the $1.651 billion borrowed by investors $469 million of it was for high LVR mortgages. So, that $469 million represented 28.4% of the total borrowed by investors in January.

This compares with a percentage of 33.5% of high LVR borrowing by investors in December and 37.6% in November. In October, before the reintroduction of LVRs was announced, as much as 39.2% of the investor borrowing was on high LVRs. 

The RBNZ is still playing catch-up with the monthly figures and will be issuing the February mortgage figures next week.

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43 Comments

18
up

We cannot afford this as country, we must"go early and hard". Housing investment must be BANNED, yesterday was too late.

You are talking about THE Queen, who now with absolute power is on her own egoistic trip and have amnesia of all that she promised for votes.

Queen tooth tooth dines on millennial's brains for breakfast *sluurrp* washed down with a cup of hopes n dreams

One of FHB bought property last month for which he has borrow money from friends (for deposit) & sold his car, on suggestion of bank to reduce expense so that he can take mortgage till his eyeballs.
What else this morally corrupt govt. want, it's crazy now and still these guys are in denial mode.

At what point do mortgage brokers, bankers start to suggest prostitution or selling off organs. Tough times for les miserables thanks to Dear Leader and her band of merry men

10
up

"Oh yea, definitely no existential threat to the stability of NZ's financial system with massive amounts of future consumer income tied up in housing, rendering our own attempts to influence consumer spending through policy tweaks less effective because no one has any money to spend, no problems there at all"

- RBNZ, presumably.

And arguably the most disposable of all income; income from past endeavours - retireee savings - is being captured by the property monster as well.

That $500k that was accessible on T/D for a rainy day or interest to spend at Countdown? It's now locked up in the 'safe as houses' property machine.

We have a disaster on our doorstep.

I wouldn't call retiree savings "the most disposable of all incomes". It's something that needs to be preserved and turned into an income stream if at all possible.

Printing, printing, printing now,
Keep those yield going down,
Keep this printers printing,
More credit!,

Don't try to understand it,
Just enjoy it while we have it,
Soon we'll be living hand to mouth.

Adapted from the theme tune to Rawhide. :-)

FHBs who had bought had made a wise decision.

$9.652B in Dec and $6.36B in Jan combined borrowing are only 1.1% of the total private housing market value in NZ as of Dec 2020.

Bearing in mind that the Debt is a Fixed Amount, whereas the Market value could be anything next week! Maybe the same FHBs input will be seen at 2.2% then?

Lots of comments about disaster coming and crash is coming, but still we go on, no real evidence to support these comments just the thought of it must crash, something will pop soon, you wait and see.

10
up

When you see the evidence, I am pretty sure others will see it too. Then it's too late. The Japanese in 1990s had similar mindset with you, believe that housing price will never fall, everyone was trying to invest into property. See what happened after?

I'm not saying it's going either way, I don't have the credentials to make claim either way, I'm merely saying there is lots of talk but little evidence being presented to back up claims. If you say a car will crash at an intersection for years, one day you will be right I guess

Try opening your eyes. Evidence abounds. Do you work for a bank?

Far from it, anyway, I for sure see a correction/easing of the market, potentially lasting a few years, but a wreck, nope, its to big now and It simply won't fall how some pridict. Too many factors driving it now to let it fail stupidly. But I'm no body in this game so just my humble opinion.

Luke you are absolutely right about lack of evidence supporting a house crash. Surprisingly for a website whose motto is "helping you make financial decisions" the comments are overwhelmingly written by people with little life experience in finance and owning a house but with plenty of opinions, anger and desperation.
Don't listen to them! I am yet to meet a FHB who has listened to the crash predictions and posted "I'm so happy I listened to the people warning me not to buy last year, 2 years ago, 5 years ago, 10 years ago, 20 years ago…"

The comments have deteriorated dramatically, I have lost interest (excuse the pun). Plenty of personal insults and immaturity, it kind of makes sense. We were right Yvil, we can drink to that!

Name me one housing crash where the evidence supported its imminent occurrence BEFORE it happened?

Sure, but that's just the game of probability.

What people here are saying is if someone is driving too fast, the chances of them crashing are much higher. If a car's brakes are worn out, again more chances of crashing. Some people drive recklessly and keep boasting about how they've never crashed. But I'd be scared if everyone started driving recklessly - one day that intersection will witness a major crash between multiple reckless drivers.

Equally I'd suggest there's no real evidence/income to support the house prices, but they rice just the same.

Disaster have you not heard The Queen that come what may will do everything to avoid even a slight fall in house price. Ponzi has to continue to support the Pyramid and so everyone can go borrow as much as as you are protected by the Queen of any risk.

Actually can't see too many comments about a crash as you mention, but I do see lately a lot of comments about the unlikeliness of having one, maybe a sign of concern about the other?

In Japan land prices jumped 51% in 5 years. 18 months after the overpriced stockmarket corrected, land prices did too, resulting in over 20 years of zero price inflation, broken finally by a 0.1% increase. Causes of the asset bubble included:
- a significant drop in interest rates
- distortionary tax settings
-strong tenant and lessee protections
-funding squeezes for banks as depositors shifted their savings to capital markets and land
-aggressive monetary easing by the Bank of Japan.

I'm seeing some correlations here

21
up

RBNZ were total mugs removing LVRs. Everyone told them not to, commentators, treasury, pretty much everyone. Except maybe the real estate investors of New Zealand.

They did it anyway, outside of their mandate of financial stability, then refused to put them back on when it was clear it needed it to go straight back on, by claiming it was impossible (then the banks proved that they were lying when they did it themselves). They are so arrogant, they won't admit it was a mistake.

Heads should roll, Bascand at least, Orr should go with him.

There is zero accountability. If I were a betting man I would say they are amused by what they have done.

The removal was intentional to inject new money. Mr Orr said there’s no point in QE if there is no way to get it into the economy, hence dropping of LVRs. Now the stimulus is in, they’ll ratchet lending restrictions up.

13
up

bw. Ardern's advisers must by now realise your 'doorstep disaster' is bearing down on us. Her 'nuclear moment' is approaching but not in the way she hoped. It'll be more a Hiroshima type demolition of her political fortunes unless her govt makes some emphatic statements in the upcoming Robertson housing chronicles. Journos love to pitch the proposition that middle NZ is selfishly invested in continuing house price rises but this simplistically glib assessment downplays the genuine anguish that large numbers of boomers, grandparents and siblings experience over the housing struggles their younger ones are having.

If there will be no substantial action from current Govt. this time than nothing will change and average working class kiwi will keep on waiting for next 2 years (long period), after that still there is no surety that we have Govt. who take any action.

We all should never forget the act of deceiving and cowardness showed by this Govt.

Investor interest only mortgages as a percentage , remained at 39 percent for the January month in line with December, up from 32 percent in January 2020 and 29 percent in January 2019.

Are they confirming that speculators being prominent....sorry so called investors.

Stage is set for Government to go for a kill as strong evidence and support good enough reason for petrified government to act as will not lose vote if act and fast Or As Favourite PM always says ACT FAST AND HARD

Bring on policy to kill the ponzi as important to send a message that if flipping properties do at own risk instead our PM announces that come what may will never allow house price to fall supported by that #@%$ deputy governor of reserve bank

How is it a ponzi if rental yields are better than bank term deposits?

Who cares about rental yield when can make $25000 per week and that too risk freeze as is protected by the Queen.

In the link below you see the Queen Smiling with you if you own a house and at you if you are a FHB.

https://www.stuff.co.nz/life-style/homed/real-estate/300254963/landlords...

STILL think about rental yield.....you are in NZ

Lots of buyers using up pre-approval before LVRs move. Wait a month.

1 million mortgage at 2% is only $384 a week, so borrowing is quite cheap.

You don't get it, that million must be paid in full, that 2% will not last for the whole duration of the mortgage.

A million is not what it was.

When do you have to pay it back?! 30 years time? A million will be worth $100k by then in relative/property terms.

Not really, you don't start paying in 30 years as your comment may suggest, you actually need to pay during the period that goes from today until 30 years from now. So if the rates go up in lets say 5 years you are still under a lot of pressure, that is not an unrealistic scenario and very likely indeed.

b21,,,5 years? I would say in the next 1 or 2 years is more likely. And they might rise a lot faster than what many think.

Yes, that could happen too.

"The residential property bubble has yet to burst, therefore it never will."