New Reserve Bank figures show the amount borrowed by first home buyers was up last month compared with a year ago - while investors borrowed $1 bln less than they did in July 2016

By David Hargreaves

Only one of the three major sub-groups of would-be house buyers borrowed more money last month than they did in July 2016 - the first home buyers.

The latest Reserve Bank figures for July 2017 show that the FHBs as a group borrowed $699 million from banks last month. That's up $10 million, or 1.5% on what this group borrowed in the same month a year ago.

The FHBs have recently been used by the real estate industry as a weapon to apply pressure indirectly on the Reserve Bank, with concerted calls to have FHBs exempt from the RBNZ high loan to value (LVR) lending limits.

Both the Government and the Labour Party have shown sympathy for the view and have put implicit pressure on the RBNZ to look at when it might lift the LVR limits.

However, the latest monthly borrowing figures show that it's the investors that continue to retreat - while first home buyers are being given more room to move in the market by the pull-back of the investors.

The amount borrowed by investors in July was $1.062 billion, which was down a whopping $1.033 billion - or 49.3% on the $2.095 billion borrowed by this group in July 2016.

July is a fairly significant month in terms of measurements - because the 40% deposit rule for investors was announced by the RBNZ on July 19 last year.

While technically the rule didn't apply till the start of October 2016, the banks started applying the 'spirit' of the rule in effect, immediately.

Since then the borrowing by investors has continued to shrink, seemingly at an increasing pace.

Owner occupiers as a group also borrowed less in July compared with the same month a year ago - but the reduction was nothing like as dramatic.

The total borrowed by owner occupiers fell by $472 million, or 13.7% to $2.985 billion in July compared with July 2016.

In terms of the overall amount borrowed last month, it was down 23.8% compared with a year ago at $4.802 billion.

Investors accounted for about two-thirds of the total $1.5 billion drop in borrowing.

While the figures point to a continuing picture of a much more restrained lending/borrowing market, the figures would be unlikely to convince the RBNZ that it should look at lifting the LVR limits any time soon.

The central bank has again recently reiterated its concerns that there "remains a risk" of a resurgence in house prices.

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22 Comments

GMO comes to their 7-Year Real Asset Return Forecast. One that is currently predicting a -4.20% annualized real return over the coming seven years. As in a loss of nearly 4% per year. If true, expect every $100,000 of your wealth to equal $70,945 seven years from now. GMO has posted its forecast for many years. It is updated monthly. The accuracy rate has been excellent. Meaning the correlation to what they predicted to what returns turned out to be is very high.

What is that going to do to today's FHBers? They certainly aren't going to turn into tomorrow's second home buyers.....

As a potential FHB today. I'm pretty happy to see that. Going to just keep waiting and saving until everything calms down. Affordability is increasing as it falls.

And vote for change

GMO must have superpowers

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Call me cynical but I simply don't believe that the real estate industry and Bill English have FHB's best interests at heart in calling for dropping LVRs for FHBs. I think they are both more worried about seeing the downside of the crisis Bill has ignored / exacerbated.

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If National cared about the under 40's they wouldn't have allowed this crisis to balloon as it has.

Rick - I know BE was the Finance Minister but I think history will attribute any damage caused by a looming housing crisis to the chief cheerleader and general do nothing boss - the PM of Parnell.

Doesn't this state just show that the LVRs aren't preventing FHB from buying houses, if they are actually borrowing more now, especially as house prices have dropped back and less houses are selling. So what the Real estate agents and BE basing their comments on about the LVRs preventing FHBs?

Dead right

Will anyone in the national party ever blow the whistle and reveal the decision making process that got us here

The question that should be raised sometime in the future is this :-

Will anyone in the national party blow the whistle, write a memoir, write an autobiography, write a biopsy of the reasoning, the decsion making, the united stand behind the National Party's blind belief that everything is fine, that JK did a great job, the Bill English was a great financial steward. The current state of affairs cant possibly be a result of a laissez faire let the market prevail. There has been a steadfast intransigent belief that house prices are good for new zealand, it has been a sign of success, and the gang of 4 have stood by that mantra throughout. There has been no sign of awareness of the damage that has been done to the peoples of new zealand or NZ society or our way of life.

Where we are today - is that by design, or intelligent design or intransigence and gross stupidity or a ruthless exercise of power of the gang of 4 over the rest of the party demanding obeisance and silence

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As a potential FHB - that last thing i want is the government to 'help me' by allowing me to borrow my lifetimes salary for a first step home.

Great comment CN. You are absolutely correct.

A pity more FHBs don't feel this way, because obviously a lot have gone down the route of getting a huge mortgage. Maybe that think wages are going to rise a lot in the future, even though we have almost no inflation to sustain big wage growth.

Or they didn't get a huge mortgage, they just got a great bargain, they may have saved $100k on a house 4 months ago, and this'll probably carry on and only get better, there simply isn't enough buyers anymore to satisfy the large and climbing sellers, specially the more expensive stuff, we had over the last 3 years heaps of buyers with mountain loads of money with banks doing there normal stupidly of the hour with limited houses, now that is the complete opposite and no reason not to stay looking at how we got here

Absolutely - nor do I want them to say - just use all your retirement saving to buy your first home.
You dont need anything to retire on anyway.... you'll have a 2 bed flat in New Lynn.

Agree much better to wait for stability. Also your deposit grows day by day with AKL dropping the way it is.

wait. all housing problems will be distant memory after Sept. Anyone and everyone who wants a house will be able to do so as they did in USA for about 5-6 years which brought about the great GFC.

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Our way of life has been changed forever - and not for the better
Will any national politician ever blow the whistle and reveal the decision making process that got us here

The question that should be raised sometime in the future is this :-

Will anyone in the national party blow the whistle, write a memoir, write an autobiography, write a biopsy of the reasoning, the decsion making, the united stand behind the National Party's blind belief that everything is fine, that JK did a great job, that Bill English was a great financial steward. The current state of affairs cant possibly be a result of a laissez faire expectation the market will prevail. There has been a steadfast intransigent belief that house prices are good for new zealand, it has been a sign of success, and the gang of 4 have stood by that mantra throughout. There has been no sign of awareness of the damage that has been done to the peoples of new zealand or NZ society or our way of life. Our way of life has been changed forever

Where we are today - is that by design, or intelligent design or intransigence and gross stupidity or a ruthless exercise of power of the gang of 4 over the rest of the party demanding obeisance and silence

So total lending ($4.802) compared to 1 year ago is down 24%. Now back at about the same as July 2014 ($4.685m). Can only see prices fall further from here.

OMG what a treat it's going to be if we can have these amazing DGZ homes for our FHB's!
https://youtu.be/31SQZIZvs6c
https://youtu.be/orumQXtd5C4