Call to review loan rules to help people buy homes in South Canterbury
A regulatory tool used to cool the heated city property market must be reassessed to help prevent first home buyers being disadvantaged as they eye houses in South Canterbury, it has been claimed.
The Real Estate Institute of New Zealand wants the Reserve Bank to have another look at the loan to value ratio rules imposed to limit bank mortgage lending and so slow rapid price growth in cities such as Auckland.
The institute says property sales across the country had dropped significantly. The biggest hurdles were the LVR requirements and access to finance as the banks tightened their criteria.
This created an intimidating barrier to entry to the real estate market, particularly for those saving for their first home, REINZ national chief executive Bindi Norwell said.
In Timaru, REINZ district forum leader Julian Blanchard said some potential property buyers struggled to afford the 40 per cent deposit needed for an investment property and the 20 per cent needed for a home.
Buyers from outside the district saw it as a relatively affordable place in which to invest but the LVRs needed to be reassessed to ensure all buyers, including first home buyers, were not unnecessarily hindered.
The ratio rules were slowing the market across the country and, even while there had been a noticeable increase in interest from buyers outside the region, the overall slowdown would have a knock-on effect on the regions, Blanchard said.
"We don't want to lock out first-home buyers in the market in Timaru because the reserve bank are trying to slow down the market in Auckland."
The Reserve Bank introduced LVRs in October 2013 in response to rapid house price growth, especially in Auckland, accompanied by a sharp increase in the use of low-deposit loans.
The bank and the government have since been under pressure to ensure the regulatory response does not stop people from being able to buy homes.
Real estate agent and Opportunities Party Rangitata candidate Olly Wilson said there was no need to drop the LVR to improve affordability in South Canterbury or in the rest of the country.
House prices could be controlled with an annual tax levy on assets "equivalent to the tax you pay on bank deposits, to make it an fair playing field".
That would control house prices in the long term, and would allow taxes on wages to be slashed. This would help more first home buyers into homes, he said.
National Party candidate for Rangitata Andrew Falloon said the LVR was stricter on investors, so the investor share of lending had declined this year. The share for first home buyers had held up, he said.
"REINZ are correct that LVRs have taken some of the heat out of the housing market, along with the Government's programme to build a record number of new houses."
The risk of removing LVRs was that the housing market would take off again. That was what the banks themselves were saying could happen, he said.
"That might suit a few real estate agents, but would be a disaster for first home buyers."
Labour Party Rangitata candidate Jo Luxton said the Reserve Bank had been pushed into an unwinnable position by government inaction.
Demand was being reigned in but at the expense of first home buyers. This hurt areas such as Timaru "even though we don't have the same demand issues", she said.
"Whilst the market has quietened, this is only likely to be temporary."
The answer was housing policies that reigned in speculators and that reformed planning rules, she said.
The Mackenzie district has had some of the largest median price gains in the country over successive months. Quotable Value figures show residential house values rose 32.2 per cent in the year to July.
Waitaki MP Jacqui Dean said the call for a review was a matter for the Reserve Bank but said there were a number of factors affecting the Mackenzie housing market.
"One of them is land supply and supply of housing available for sale. This is an issue of group and we have it in Mackenzie.
There were a number of "direct government initiatives" that needed to be seen alongside the impact of the LVR.
"I know a number of young New Zealanders have been able to use their Kiwisaver balance to get into their first home."
Every market was different but pressures on housing were a sign of a successful economy, she said.
The LVR's original purpose was to quell the Auckland housing market so it had done its job, she said.
Norwell said REINZ agents reported plenty of buyers but that access to finance and LVR restrictions were impacting investors and first-time buyers.
"The LVR restrictions have done their job of slowing the market, but now it seems they are acting as a handbrake which is why REINZ is calling for LVRs to be reviewed for first time buyers.
"There are very few genuine investors and even fewer first time buyers in the Canterbury market at the moment."