Mortgage brakes pack harder punch
Mortgage restrictions put in place by the Reserve Bank may have packed a harder punch than it has publicly admitted.
The central bank has previously said house prices would have been 2.5 per cent higher in the March year without the loan-to-value ratio (LVR) limits on low-deposit loans that were introduced last October.
But a spreadsheet released on the central bank's website suggests that figure was actually as high as 3.8 per cent in February, on a three-month moving-average basis.
On the same measure, house prices would probably have reached double-digit growth without the Reserve Bank's intervention.
The last time the property market grew so rapidly was more than six years ago, before the global financial crisis and credit crunch.
The spreadsheet shows annual house price growth was 8.8 per cent in March, and suggests it would have topped 12 per cent without the rules.
If the Reserve Bank's modelling is right, its handbrake has knocked house-price inflation back by more than 25 per cent.
Its initial estimates were that the tool would cool house price inflation by 1 to 4 percentage points over the first year.
Banks have been careful to toe the line, with their collective loans making up just 5.6 per cent of total lending in the first six months, almost half the 10 per cent limit.
Last week, Reserve Bank governor Graeme Wheeler was asked if the lending limits had been "too effective".
He said New Zealand's house prices had risen faster than any other OECD country in the five years before the global financial crisis, and had not fallen much from there.
The limits had worked "very well" to cool house prices, Wheeler said.
The central bank has also conceded the limits had had an unexpectedly strong impact on the number of houses being sold.
Sales dropped 11 per cent between October and March, well over the initially estimated 3 per cent to 8 per cent over the first year.
New data released last week showed only 5670 dwellings were sold in April, a further slump from March, and down 20 per cent year-on-year.
The Reserve Bank's financial stability report said the restrictions would be removed when there was "a better balance of supply and demand in the housing market".
While the LVR policy might not achieve that by itself, the bank expected it to be reinforced by rising interest rates and supply improvements in the longer-term.
The LVR limits would remain in place until late this year at the earliest, the bank said.