REINZ issues warning that LVR causing problems
Hamilton property agents are supporting calls for a review of mortgage restrictions but are sounding a warning - if it's done wrong, it will trigger a flood of sales.
Lodge Real Estate managing director Jeremy O'Rourke said loan-to-value ratio restrictions have done the job in slowing the market, but Hamilton has been left scrambling for rental houses.
He's backing calls from the Real Estate Institute of New Zealand (REINZ) for a review of LVRs for first-home buyers, who currently must have a 20 per cent deposit.
That would get first-home buyers out of rentals, freeing up that market.
On Friday, REINZ chief executive Bindi Norwell called for the Reserve Bank to review lending restrictions.
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Tightening lending criteria from cautious banks and the LVR restrictions are impeding the market, she said.
"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.
"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."
The LVRs have "clogged the arteries", O'Rourke said, but added that investor ratios should also be relaxed, though not at the same time.
First-home buyers can't get into the market because of cautious lenders and since equity for investors is set 40 per cent of the value of a home, they are staying out of the market, too.
"Given the number of rental properties we don't have available - our occupancies are at an all-time high and our vacancies are at an all-time low - we need to find accommodation for people and we need investors back in the market."
But he sounds a warning.
Easing first-home buyers back into the market will give renters much needed relief, but allowing investors back at the same time would cause a surge in sales.
A more prudent method would be a staggered approach to relaxing the ratios.
"If they release investors, we'll have this pent-up demand from the sidelines of people wanting to get into the market but couldn't because of the LVRs and if you lifted it on investors and home buyers, it would create an untenable surge."
And it has become a social issue, O'Rourke said.
In July, Waikato Women's Refuge chief executive Ruahine Albert said women are returning to abusive relationships because of Hamilton's housing shortage.
"It has unintended consequences at the moment."
Harcourts general manager Brian King agreed LVRs need to be reviewed.
"They took a while to put them on and if they take a while to take them off it's going to work against the market. If they don't move fairly soon we might see a negative type of market," King said.
However, Lugton Real Estate managing director Simon Lugton said Hamilton's first-home buyers are coming back into the market on their own, bucking the national trend.
"First-home buyers have stepped up to fill the vacuum after finding the market too competitive in 2016," Lugton said.
"This is not necessarily the case throughout the rest of the country where there is commentary that first-home buyers are finding it too tough due to the unaffordability of housing and tightening of lending conditions."
Hamilton's supply of houses remains restricted to less than 12 weeks and there were just 252 sales in July.
But the 31 per cent drop in sales was compared to July 2016 - the tail end of Hamilton's boom months.
After that, the market flattened to normal levels.
"The second handbrake to sales now that wasn't a factor last year is the imminent general election which always influences some of the population to defer major decisions," Lugton said.
The number of properties sold across New Zealand in July fell by a quarter when compared with the same time last year, and the number of properties sold in Waikato fell by 32.2 per cent, the institute's latest data shows.
REINZ July data show the number of properties sold across New Zealand in July fell by a quarter when compared with the same time last year.
It's the lowest level of turnover in a non-Christmas period since 2014.