First-home buyers in Manawatu are already suffering amid the Reserve Bank's changes to loan rules, the real estate industry has warned.
Changes coming into force today are designed to cool the Auckland and Christchurch housing markets, but critics say provincial areas such as Manawatu are being hurt needlessly.
REINZ spokesman Andy Stewart said it would be "shattering" for first-home buyers that they may now need to have twice the deposit they had previously required.
Mr Stewart was aware of one prospective buyer whose bank had pre-approved finance for them, only to take it away as a result of the new rules.
The Reserve Bank changes restrict the ability of banks to issue higher-risk loans - no more than 10 per cent of their new housing lending can be for mortgages where the loan-to-value ratio (LVR) is more than 80 per cent.
The rules reduce the amount of high-LVR loans the banks can write, making it harder for people to get a mortgage with a deposit of less than 20 per cent.
Mr Stewart said the changes were hard on first-home buyers but would have little impact on property speculators.
"First-home buyers are trying to get out of renting and buy their first home, which is the Kiwi dream.
"To save 20 per cent in the current economic times is very difficult," he said.
Labour leader David Cunliffe railed against the changes yesterday, saying the Government had pulled out the rug from under the feet of first-home buyers.
"It's going to be harder to get a house."
The move was designed to rein in house prices, Mr Cunliffe said, but they weren't a problem in Manawatu, so he wondered why home buyers here were being hit.
"In the last year, house prices were stagnant in Manawatu but went up 13 per cent in Auckland."
The Reserve Bank could have targeted the changes to exempt first-home buyers or restrict the new rules to Auckland, he said.
"What's the point in putting a move like this on Palmerston North where house prices have been flat, or other regions down south where they've actually been falling? It makes no sense at all."
Prime Minister John Key said that the changes were being made by the Reserve Bank and it called the shots.
"Our preference was for less impact on first-home buyers but in the end we didn't want to ride over the top of the Reserve Bank," he said. "The Reserve Bank has its independence."
Mr Key said the bank believed first-home buyers made up between 30 and 40 per cent of the new lending market, and that was too big a group to exempt from the new rules.
Labour's plan to build 10,000 modern, affordable homes annually for a decade, as well as imposing a capital gains tax limiting the profits on property speculation, were among alternative ways to change Auckland's housing situation, Mr Cunliffe said.
- © Fairfax NZ News
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