Wait for new rules frustrates
A lack of information surrounding the altering of home-loan rules is causing ire among Manawatu property investors.
New rules around home loans were expected to be introduced by the Reserve Bank this month but pressure from the banks for further clarification has put the rules on the back burner until December.
Manawatu Property Investors' Association president Pauline Beissel said investors were frustrated as they didn't know what to expect from the new rules and any implications it could have on them and their tenants.
"We just don't know what to do really, there's nothing we can do."
The Reserve Bank's new rules, as part of its review of regulations around banks' capital requirements, would see landlords with mortgages on five or more properties classed as small businesses or corporate borrowers.
Banks would be forced to set aside more money to cover the higher "risk weighting" on business loans.
Beissel, whose own portfolio has more than five properties, said the switch could have serious repercussions for the industry.
"On the surface, if they are saying that we are going to be treated as commercial property owners, then on a business level we may very well be paying up to 2 per cent in borrowing and our interest repayments. That is going to make an impact on property investors who are actually providing homes for people.
"As far as the tenants go, it may very well impact on the amount of rent the tenant is going to be paying.
"Obviously a landlord must get his cost from somewhere. If it's going to cost that landlord another 2 per cent in interest then, as things go, it's got to be passed on to the user and the user will be the tenant."
Beissel said there had been talk among property investors about whether it would still be financially viable to invest.
She said these rules could result in new investors shying away.
Manawatu Tenants' Union boss Kevin Reilly expects rental prices to go up regardless of what the rules do to interest rates.
"It's just another stab in the back for tenants.
"Rents are high enough; affordability is a huge issue."
The Reserve Bank said the extension to the time frame was necessary to allow for some of the technical detail of the requirements to be further clarified with banks.
The Reserve Bank initially started regulating capital for residential mortgage loans in 2008.
"Our current focus on bank lending to the residential property market is because of the impact that residential property has on financial stability and the financial system," a spokesperson for the bank said.