An Auckland mortgage broker says the new high loan-to-value lending limits imposed by the Reserve Bank might force changes on how the real estate industry sells houses.
John Bolton, principal of Squirrel Mortgages, operating in central Auckland, said the fact that many buyers would now not be able to go unconditional straight away on house offers was likely to have a significant impact on the auction process.
Auctions have become increasingly popular as a form of selling houses, particularly in the the Auckland market.
The Real Estate Institute says about 40% of houses sold in Auckland during August were done through auctions.
Auckland's largest real estate firm Barfoot & Thompson actually estimates about 55%-60% of its sales are currently conducted through auctions.
Bolton told TVNZ that all borrowers seeking over 80% of the money to buy a house were now "going to have a whole lot more hoops to jump through".
"I think the big implication for that is with auctions because an auction is an unconditional purchase and the reality is that all of these people are going to be heavily conditioned now so I think you are going to see a lot less auctions and a lot more price by negotiation."
Bolton said a lot of would-be first home buyers in Auckland had already given up. He has previously told interest.co.nz that first home buyers have become very dispirited.
He is expecting that in the early stages of the LVR limits there will be a drop off in people seeking mortgages.
"I guess in terms of our business we are thinking it might drop it by about 30%. That’s pretty significant.
"With that sort of drop it has to have some impact on the housing market and I think we are already seeing anecdotal evidence of that already.
"Apparently the open homes this weekend were a lot lighter and there were a lot less offers put on properties. Particularly in the areas you would expect. In the Auckland market places like West Auckland and maybe south Auckland and the top of the North Shore."
Bolton said that the anecdotal suggest was that potentially about 30% or 40% of would-be home buyers would now be unable to buy.
"The reality is I think it’s going to be a lot higher than that early on – probably as much as 60% as the banks sort of wrestle with how they make this work because they are going to be conservative to start with."