New Reserve Bank figures show borrowing by investors for house purchases last month made up just 22% of the total, compared with about 35% in the months before tighter LVR rules were applied

New Reserve Bank figures show borrowing by investors for house purchases last month made up just 22% of the total, compared with about 35% in the months before tighter LVR rules were applied

By David Hargreaves

Housing investors remain for now relatively sidelined, while first home buyers continue to enjoy the extra space being given to them in the market place, new Reserve Bank figures for August indicate.

The figures show that in the past month the amount borrowed by investors, at $1.125 billion, made up just 22% of the $5.105 billion total borrowed. FHBs accounted for 14.5% - and the FHB figures have remained pretty consistent, while those for investors have slumped.

The August figures of of some particular interest because it is now over a year since the introduction of tougher lending requirements for investors.

On July 19, 2016 the Reserve Bank announced new 40% deposit requirements for investors.

While technically this rule didn't come into force till October 2016 the banks were invited to follow the 'spirit' of the new rule immediately - and the statistics show they did.

In other words from July 2016 and then more particularly August 2016 onward the monthly borrowing figures measured an impact from the new rules. So now we are a year on from that and year-on-year comparisons therefore now can be made on, if you will, a like-for-like basis.

Going back to June 2016 the monthly borrowing figures showed that there was a total of $6.803 billion advanced in mortgages for house purchases. Of this, investors borrowed $2.368 billion, representing a tick under 35% of the total. Investors had been tending to get a bigger and bigger share of the amount borrowed in the build up to the announcement by the RBNZ of the new rules.

First home buyers, on the other hand, had appeared to be getting squeezed out of the market.

In June 2016, for example, as a group the FHBs borrowed $738 million, which made up just 10.8% of the total.

In July 2016, the month in which announcement of the new deposit rules for investors was made, there was a total of $6.305 billion borrowed. Of this, the investors' share shrank to a little over 33% ($2.095 billion), while the FHBs share edged up to 10.9% ($689 million).

By August 2016 the pattern was becoming clearer, with $6.107 billion borrowed, of which investors borrowed $1.759 billion - under 29% of the total. FHBs borrowed $760 million that month - which represented well over 12% of the total.

So, move on a year and this pattern has very much continued.

Borrowing in total is generally at lower levels than before the 40% deposit rule for investors was introduced. But the vast majority of the reduction is stemming from the much lower levels of participation by investors.

The 22% share of borrowing in August is in fact the lowest percentage for investors since the 40% deposit rule came in.

The FHB group in the meantime have recorded figures mostly similar to before the investors' rule came in - and therefore have been enjoying a much bigger share of the total in percentage terms.

The $740 million borrowed by FHBs in August was down slightly on the $760 million borrowed by this group in August 2016, but in the latest month FHB borrowing accounted for 14.5% of the total, against a little under 12.5% a year ago.

In total about $1 billion less was borrowed in August this year compared with a year ago as the country moved into the shadow of the election. The September figures could therefore be expected to be similarly constrained.

The Reserve Bank has expressed satisfaction with how the borrowing figures have been tracking, but has kept warning about the possibility of a resurgence of housing pressures.

While the 40% deposit rule has clearly had an impact, other factors have been at play including some rises in mortgage interest rates and tighter lending criteria being employed by the banks.

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Specuvestors of yesteryear are a bit like Flatulence. For the good of all they are better out than in. The more fresh air the better. It's better for us all in the longer term.

So investor and total borrowing is down

YAY! payday lending is booming! This is not good....


As the best Property Investors' Seminars told us "Let inflation and the taxman pay off your investment". Without either one, the market slows. Without both, it stops.....

Im not sure if thats aimed at the math I present here to show how housing investment works but id note that there usually is rent gains above inflation and so there is some real long term gain in value above inflation and tax.

IF, there is a rent-gain! Now, of course, it's based on historical purchase price and current rent, but I'd suggest that for some time now, rent-gain has been missing from the equation - ie: That's why we have Negative Gearing, in effect. But let's reflect on Mervyn King's words ( ex-Governor BoE) in an opinion piece published in the Wall Street Journal this week

"Until now", he said, "ultra-low interest rates have allowed borrowers to keep servicing their debts, even when they had little prospect of ever repaying the full value of the loan. Unsustainably low-interest rates over a long period have led to a significant imbalance in economies around the world. Whether excess capacity in the export sectors of Germany and China, or excess investment in residential and commercial real estate in the US and UK, much misplaced investment remains to be written off", he warned.

'Rising interest rates will reveal the true state of balance sheets that has been concealed by accounting rules that allow loans to be valued at their full value, provided those loans are currently being serviced."


Even at 22%, we still have a problem of investors gobbling up the housing stock. To increase home ownership rates we have to be building more houses than investors are buying. Anything else, and home ownership will continue to fall.

Yes, it is of concern that we have (for quite some time) had investor purchases being a greater percentage of the borrowings than FHBs. I wonder how we compare to other overseas housing markets.

If housing investors are 22% of mortgages then they are not "sidelined". They may be reduced in number but they are still participating in the game. The title of this piece on the main page states "sidelined" yet the text says "relatively sidelined" however they make up considerably more than the FHBs who are 14.5%.

Was thinking about this on my daily commute. The title confused me somewhat as alas appears investors are still active and anticipating gains.

If someone takes a percentage of the market every year - year on year, and does not release that back into the market eventually they own the whole thing - except for a small percentage of a percentage of whats left.
President of Property
PS: Think of it as compounding interest - but compounding ownership....and if you're on the wrong side of it a very bad thing....

Sounds like a good reason for inheritance tax to force the sale of these investment properties back onto the market rather than being handed down through the generations to the property owning few.

If you are going to ‘force’ people to sell things then why wait until they are dead? Maybe TOP can adopt that policy next election and we can see how much support it gets. 97.8% voted against TOP this election. I think we can get to over 99% with more of these ideas.

No one will need to force any sales to rebalance this market. At some point the tide will turn. It always does. And the market will rebalance. The longer this goes on, the more ugly that cycle will be.

We can agree on that much. The market cycle will favour buyers at some stage, even if no more actions are undertaken. When and at what price are the unknowns.

It's not forcing them to sell if they no longer exist

TOP policy on domestic cats turned off voters I guess ?
Has Garth given away ALL his fortune yet to charity like he said he would ?
The problem was the messenger not TOP

Kakapo good article
As if burdening NZers with a $20Billion leaking homes catastrophe wasn’t enough
Engineers are now finding major structural faults with multi storey buildings built prior to 2005
Thanks to deregulation of the building code from prescription based to anything goes.
Nobody mentions loss & debt burden the leaky homes are still causing
The story has moved on to unaffordability