REINZ wants loan-to-value restrictions lifted for first-home buyers

Winter weather, school holidays and lending restrictions have slowed real estate sales.
LIZ MCDONALD/STUFF

Winter weather, school holidays and lending restrictions have slowed real estate sales.

The Real Estate Institute is calling for mortgage lending restrictions to be reviewed as the number of house sales drops to one of its lowest levels for years.

But economists say the rules are helping first time buyers get into a home, by keeping investors at bay.

The number of New Zealand sales in July was a quarter less than the same time last year. In Christchurch, sales slumped by just over 20 per cent, while Auckland sales took a 30 per cent fall.

Real Estate Institute chief executive Bindi Norwell says LVR rules are stopping young people buying houses.
JOHN BISSET/STUFF

Real Estate Institute chief executive Bindi Norwell says LVR rules are stopping young people buying houses.

That was the lowest level of sales, apart from Christmas periods, since August 2014.

READ MORE:
* Property sales fall nationwide
* Christchurch house price growth lowest in years

A total of 689 homes sold in Canterbury in July, down from 802 a year ago. Christchurch's median (mid-point) price was $430,000, down 1.6 per cent, while nationally the median price was $518,000.

The institute's chief executive, Bindi Norwell, said the drop in sales nationally was significant. The institute represents the interests of real estate agents across the country.

Two key reasons were banks tightening lending restrictions, and Reserve Bank loan-to-value ratios (LVRs) restricting how much buyers could borrow, she said.

"This creates an intimidating barrier to entry to the real estate market, particularly for those saving for their first home," Norwell said. 

"No matter where we are in the country, agents tell us that there are a good number of buyers out there, but that these two issues are impacting both investors and first-time buyers alike." 

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Wet weather and school holidays were also likely contributors to the low sales figures.

LVR restrictions were introduced in 2013 for all buyers, limiting the amount of lending that banks can do to borrowers with a deposit of less than 20 per cent, to no more than 10 per cent of total lending.

Last year, new LVR rules were brought in for investors, removing their ability to borrow with less than 40 per cent equity.

Norwell said the restrictions had done their job but now seemed to be "acting as a handbrake" for young borrowers.

She said helping first-home buyers into a property was a good thing for the country. "So many people are renting and we've really got to start helping people into the market."

But Kiwibank chief economist Zoe Wallis said lending data did not back up the institute's stance.

"Recent changes to property investor lending LVR restrictions have instead opened up some opportunities for first-home buyers and other owner-occupiers," she said.

A year ago 33 per cent of all mortgages went to investors, now that was 24 per cent, she said. Over the same period the share of lending to first-home buyers rose from 11 per cent to 14 per cent.

She said more slower price rises, as the LVR rules were intended to achieve, should help first-time buyers.

Gareth Kiernan, chief forecaster at economic forecasting company Infometrics, agreed it was not so straightforward and other factors were involved.

"Blaming the drop-off entirely on the LVRs is it a bit harsh," he said.

"Suddenly relaxing the LVRs just because the market has softened doesn't make sense if the bank thinks that lots of buyers are still out there ready to drive the market back up again and add more risk to the banking sector."

The REINZ House Price Index, which measures the changing value of property in the market, showed that the value of dwellings in New Zealand overall increased by 1.2 per cent in the past year.  

 - Stuff

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