House builders fear LVR rules will hit construction
Builders are predicting a drop in building consents from March next year as the Reserve Bank's controls on low-deposit mortgages begin to bite.
But a leading economist, BNZ's Tony Alexander, believes a shortage of building workers created by the Christchurch rebuild means the industry would struggle to keep up at its current pace.
The Registered Master Builders Federation has released a survey confirming its initial thoughts that many new-home builders were "low deposit" buyers.
It estimates that up to 300 "new builds" a month were subject to the new lending changes, since "low deposit" buyers made up 15 to 20 per cent of all residential construction.
Builders hope the data will shore up their call for an exemption from the new rules for those building new homes, arguing it will worsen the already-short housing supply.
A spokesman said the Reserve Bank had been meeting the builders and was open to their data.
Last month's measures, which were aimed at curbing house prices, mean low-equity borrowers - who have deposits lower than 20 per cent - must comprise no more than 10 per cent of new loans.
Federation chief executive Warwick Quinn said the survey also showed that building work had tailed off since the changes.
Inquiries from potential clients had fallen 27 per cent, and the number of cancelled orders had risen 10 per cent.
Quinn said another group was affected by LVR controls - those with enough equity but who were worried that extra costs during construction might push them back into a low-equity situation.
Alexander agreed that the LVR moves appeared to be having a savage effect on first-home buyers.
But he did not think their absence from the market would have much effect until the Christchurch rebuild was past its peak.
"The binding constraint for the New Zealand construction sector over the next four years is going to be a shortage of staff, not a shortage of people wanting to get their houses built."
Alexander said it was clear from Reserve Bank loan data that first-home loan approvals were now 10-12 per cent below average.
A recent BNZ survey also reported a net 78 per cent of real estate agents felt there were fewer first-home buyers in the market.
However, there was nothing to say they would stay away for long, Alexander said.
"They're a bit scared and if they're uncertain they'll pull back. I think many of them will re-engage with the real estate market at some stage in the first half of next year."