New Reserve Bank figures show the new LVR restrictions have been having an impact on borrowing patterns

New Reserve Bank figures show the new LVR restrictions have been having an impact on borrowing patterns

By David Hargreaves

Even before officially taking effect, the Reserve Bank's new lending restrictions were having an impact on housing investors, new RBNZ figures for September, and released today (Thursday), show.

The new nationwide 40% deposit rule for investors didn't officially kick in till October 1. But the thing to note is that banks effectively applied the new rules virtually from when they were first announced on July 19 - so any dampening impact could be expected to show up in the figures from late July onwards. And it certainly is.

The RBNZ's lending by borrower type figures for September show that the overall share of new mortgage lending money going to investors in the month dropped to under 30%.

This was the lowest share of mortgage lending for investors in a month since October 2015. Last October of course saw the introduction of Auckland-specific investor rules. Those rules weren't applied early by the banks and so therefore the impact showed up from October - but it proved to be short-lived.

As of now the drop in investor share has been marked. In August it fell to just under 33%, from 37% in July and nearly 38% in June.

Individual investor numbers slump

This is of course lending in dollar terms. One argument would be that if you are limiting investors to only being able to borrow 60% then the amount of money borrowed WILL fall.

So, in that respect it is interesting to look at the figures by number of borrower, rather than amounts borrowed.

In September 2016 there were 4961 investor borrowers. That's down some 23.8% on the 6511 seen in July.

However, since the July announcement of the new LVR rules, while the investor numbers have retreated, the numbers of owner-occupiers and first home buyers have stayed pretty much where they were.

In the latest month there were 19,395 owner occupier borrowers - compared with 18,298 in July.

As for first home buyers there were 1909 borrowers compared with 1826 in July.

This would tend to clearly indicate that the buying of investors has been dampened.

Auckland investors dampened

Separately, the lending by LVR figures for September, also just released, show that in Auckland the percentage of new mortgage lending (by monetary amount) that's going to investors dropped to 40.2% from 41.3% in August and nearly 46% in July.

And in a further sign of the potential impact of the LVR move, September figures on lending by payment type show that the percentage of those (in monetary terms) taking up new mortgages on interest-only terms has further dropped – although previously released figures have been extensively revised. But the latest figures show that in September the portion of interest-only loans had shrunk to 37.6% of the total, from 38.1%  in August and 40.2% in July.

Among those on interest-only, investors dropped to just 43.2% of the total, down from over 50% in July and higher than that earlier in the year.

The Reserve Bank, which has noted that the measures appear to be having an impact, will be hoping the impact is longer-lasting than that of the Auckland LVR measures of last year, which quickly lost impact into this year.

BNZ CEO Anthony Healy has already said he thinks the new LVR measures will only have a short term effect.

The RBNZ is of course hoping to follow up the latest measures with debt-to-income ratios and has approached the Government about adding DTIs to its macro-prudential toolkit.

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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Tipping point...?

Loan approvals continue to fall and Auckland housing inventory is increasing rapidly. There is not going to be enough credit available to mop up all of this stock so many vendors will probably have take listings back off the market. I don't think we're at the stage where sellers will take lower offers but that will come.

BNZ have clearly not done much housing bubble study if they think higher interest rates or a recession is needed for a downturn. ANZs warning is much closer to the mark...

It all comes down to whether demand dries up or not. But demand is easy for the government to control, they just turn on or off the migration tap. The problem is whether migrants can afford them, or prices will need to come down. Too many people have interests in house prices not falling.

Tipping point for what ?

For that 70% price drop for Auckland houses...

The "cry wolf club" are about to have their 10 year anniversery and a 70% price drop will be the only thing that will make them happy. Get ready to snap up those $300,000 3 beddies on the North Shore that will be advertised in the next week... or so?....

No , its not the tipping point , the tipper-truck actually slowly started tipping months ago .

Don't say we were not warned , if you look at reports and articles on this site for the past year , the warning signs have been ever-present ................ and simply ignored by clueless fools

Jumping the gun again... You can't call owners fools until the prices have actually dropped.

Over the last 5 years Auckland house prices have increased by:
May 2016 $956,000 2015 $829,000 2014 $714,000 2013 $631,000 2012 $562,000
(see http://www.enz.org/house-prices-auckland.html)

So if someone followed your advice a year ago the would be $127k worse off (does that make you a fool?).

So this big crash you are picking... obviously it has to go below $829k as that is the point when you started calling it (although I seem to remember you calling it for several years now but lets run with that date).

How low will prices have to get when the "foolish buyer" call will be made?

$800k avg?... $700k?...

Enlighten us.

Yes so all the vendors in Auckland are eagerly waiting for their house prices to drop 70% so that they can sell their properties to the cry wolf club members. All happy now?

So to summarise

September
Investor Borrowers 4,961 19%
Owner Occupiers 19,395 74%
FHB 1,909 7%

July
Investor Borrowers 6,511 24%
Owner Occupiers 18,928 69%
FHB 1,826 7%

So no move in FHB and just a swing between owner occupiers and investors. Percentage of homes brought by investors dropping 5%.

Bring on the Debt to Income rules !!!

DTI wont happen as National voters tend to be property investors and Labour voters...well you know...

10
up

Assumption. DTI needs to happen. As a business owner we are seeing the impact of staff leaving town due to extreme stress of debt loading. Wont be voting to maintain zombie ponzi where the only winner is the banks. Hope National wakes up to that fact and make play in this area. Their status quo option will see them relocated to the other side of the house, and the loony left in charge.

About as much choice as Trump or Hillary...

I don't think the Left can do worse than Key and National

Lets recall that in 2007 Key called it a housing Crisis. Prices in Auckland were 500k.

Now Auckland averages are 1m .... and the crisis is now a National Emergency

http://www.scoop.co.nz/stories/PA0708/S00336.htm
https://thestandard.org.nz/keys-powerful-speech-on-the-urgent-housing-cr...
Great Comment Ant
"it really is a good and powerful speech, but in terms of implementation qualifies as as the gold standard of hot air."

Most people think things are pretty good in NZ though. I think you get a skewed view of things reading these comment threads.

My wild guess says that you do not associate with "most people"

Most people don't post in here whinging about housing crisis coz they're happy in their lives.

19
up

So giving a darn about the wider community and future of the next generation is "whinging" huh?

Maybe some of us, despite being financially comfortable in our own lives look wider then a myopic greed based view?

Maybe some of us are smart enough to know the social divide being created will come home to roost on our children's and grandchildren's watch?

Maybe some of us born in NZ and with a rounded values system aren't consumed by "wealth" at any cost and remember what made this country different to many others?

Maybe some of us wont sell out our kids or our countrymen's kids out at any cost and want them to share in the future?

Maybe some of us realize capitalists can still have a conscience and know when enough is enough?

Maybe you don't......

well said mvgsmf.

Can kicking is however exactly what the last two previous generations have done, but now on our watch its coming home to roost. Ppersonally with Peak oil being now I think this will come home to roost within a decade at most.

"capitalists can still have a conscience and know when enough is enough" nope dont agree most dont, they have to be stopped or they will just continue.

Well said, when my boy grows up and starts looking at houses they will be nothing more than a life sentence of debt.
Ever increasing house prices only benefit a handful of people: Banks (bigger loans, Councils (more rates), Government (more tax). It doesn't benefit NZ Families.

Jeez it sounds bad up there!!!You can still get a great start out home for under 400 k down here!!!Thats four bedrooms too.Move south guy's its awesome down here!!!

Most people must not have children I guess if they are happy with the state of the housing crisis.

Or they have bought homes for their children already by working hard and providing for their family and not crying on the internet how the Government should steal off others and dole it out to the lazy.

Here's a thought, pull finger and show your kids how to earn a living.

Not sure of your pt here HG. Will buying a house for your children "show them how to earn a living"?

Good luck with that.

Things are fantastic in NZ, you're right. Doesn't mean things can't be even better.

try talking to someone else besides your wife.

It's the impression I get from talking to neighbours, workmates, observing how busy the shopping malls are and perusing the statistics on how many overseas holidays Kiwis go on. Yes things could be better but they could be a lot worse and moving further to the Left is likely to make things worse. My contention is that things need to move further Right. People need to take more personal responsibility for their lives and individually strive to make the country a more beautiful place.

And I would bet the house on 60%++ of that spending happening on credit. That isn't a sign of a healthy economy. That's a sign of over consumption.
Things can always get worse, sure, but I would rather rate the country on how clean, green and family friendly we are. Using those 3 metrics we would be well down on 20 years ago. That's just my opinion, not everyone's. I guess I care more about the overall health of NZ than the price of my house, how shiny my car is that I borrowed for or the holiday to Thailand I put on a Q Card.

To make the country beautiful and have a long term future.

1. Stop at least 50% of all farming and other land intensive/altering practises (or enough so we can feed ourselves)
2. Return land to native bush through planting and Natural regeneration
3. This will take a couple of generations minimum, there will be pain
4. become the most natural eco tourist-centric country anywhere in the world. Beautiful.

Your Great grandchildren will benefit hugely.

All the things you mention are on the back of a mountain of debt, I dont really see that as longterm success and happiness.

Nice idea - but you do realise the ramifications of this type of scenario ? It necessitates a lot less debt .. which system wide means no Oil supply (debt is what gets Oil out of the ground) .. which means local communities only, no cities, local food only, limited trade or travel, probably no electricity grid.
Overall its the only sustainable future, but try convincing people to make this transition.

"People need to take more personal responsibility for their lives and individually strive.."

You clearly have no idea you are in the middle of a Ponzi. Left or right is still in the Ponzi. You will get your wish though but not initially. First Govts everywhere will churn out more free money, before it all collapses.
At this point, without central state control, you will really learn to understand what personal responsibility looks like.

ALT right eh? Some kind of fascist state? ALT - absolutely loony tunes right.
No extreme can work well for long without force, you can bin that stupid idea.
Moving further to the right, that will be the day, that way lies jingoism and probably war.

Singapore with their <7% tax on the first 80,000 and top tax rate of 20% (for income over $320,000) is an excellent example of the centre right. Monaco exemplifies the far right, neither is at war as far as I am aware.

The Singaporean dollar is stronger than ours, their rate of drug abuse is lower and their healthcare superior to ours. Just goes to show what would happen if we wandered slightly to the right.

@Joe Public ...........LOL dont kid yourself , if the clowns on the looney left took over the circus , it would be a coalition of GREENLABOURFIRST .......... a combination of the clueless and the deaf leading the blind.

And that said with no disrespect to people with disabilities

How is it any different from now?

Okay maybe no different , but the fact remains the property market is not somehow miraculously under the control of the Government .

Govt has some control over immigration , but little control over interest rates , little control over Auckland Council , and no control over Kiwis wanting to own a home .

Government can control non residence / overseas buyer / money laundering tax..........

.

Id rather suffer the loony left than watch the increasing debt based enslavement of my staff, and consider the potential for my kids to get the same treatment. Current tax policy has twisted investment in this country for far to long, and simply it needs to changed to a more economic fundamental.

One cant help but notice the increase in listings at the moment. Investors are locking up their remaining potential out of Auckland, Asians are advertising that they are pulling back, and fhb are all prepared to sit on their hands to avoid becoming underwater. As fixed loans come up, and banks request additional capital to meet DE thresholds, who will be there to bail out the ponzi...tipping point indeed.

They talk about the looney left, as I did many years ago - even when that lunatic Muldoon nearly crashed the economy. Then we had Roger Douglas, who some call looney, but who certainly cleaned up the tax system. Then we had Cullen with KiwiSaver, kiwi bank....did they turn out looney? wff perhaps has. But looking back, I don't see the left being any loonier then the right. What's left, what's right?

Problem is with right wing ideology is its about rich people who would sell their grannies . Things i like about New Zealand is that the people still own and have some control over their assets . Lets se more of it and kick some of those foreign banks and corporates back to where they came from.

This is for all the Grannies and Grandads who had a few dollars in the bank, gaining little interest.

GRANDDAD & GRANDMA ...A SWEET TALE FOR FRIDAY.

The names have been changed to protect the disaffected.
:
The other day Granny and I went up to our local bank and saw a honk if you love Bankers bumper sticker, they were giving away for free.

How could I resist a freebie from a Banker.

I was feeling particularly sassy that day because I had just come from a thrilling choir performance, followed by a thunderous prayer meeting, along with the other oldies, praying for interest rates to rise, so I got the sticker and put it on my bumper.
I was stopped at a red light at a busy intersection, just lost in thought about the Local Banker and how good He is to us in our old age and I didn't notice that the light had changed.
It is a good thing someone else loves Bankers because if he hadn't honked, I'd never have noticed.

I found that LOTS of people love Bankers. Why, while I was sitting there, the guy behind started honking like crazy, and when he leaned out of his window and screamed, "for the love of God, you effing Bwanker...GO! GO!"

What an exuberant cheerleader he was for Bankers in general, even if he couldn't pronounce it properly.

Everyone started honking! I just leaned out of my window and started waving and smiling at all these loving people.

I even honked my horn a few times to share in the love.

There must have been a man from a Florida Bank back there because I heard him yelling something about a sunny beach to Granny...though what that had to do with Banking locally, heaven knows.

I saw another guy waving in a funny way with only his middle finger stuck up in the air.

When I asked my teenage grandson in the back seat what that meant, he said that it was probably a Hawaiian Banking good luck sign or something.

Well, I've never met anyone from Hawaii,, never mind a Banking lover, so I leaned out the window and gave him the good luck sign back.

My grandson burst out laughing, why even he was enjoying this valuable experience. I had given him a kick-start savings account, so probably why.

A couple of the people were so caught up in the joy of the moment that they got out of their cars and started walking towards us.

I bet they wanted to get a loan or ask what Bank I attended, but this is when I noticed the light had changed.

So, I waved to all my onlookers and banking lovers, grinning, and drove on through the intersection.

I noticed I was the only car that got through the intersection before the light changed again and I felt kind of sad that I had to leave them after all the love we had shared, so I slowed the car down, leaned out of the window and gave them all the Hawaiian Banking good luck sign one last time as I drove away.

High Praise for the Bwanking fraternity for being such wonderful folks!

Love and best wishes...

Grandad...

I kid you.....NOT.

An oldie, but a goodie...........and remember...it is Friday.