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Mortgage Rates Daily Commentary
Friday 6 December 2019  Add your comment
[Opinion] Putting the RBNZ's new capital rules into perspective

There's been a lot written about the Reserve Bank's new capital rules for banks and some of it seems to miss the mark. Here's my take after hearing from the governor yesterday.

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The NZ Property Investor Magazine is running its annual survey to see what fellow investors are thinking. Please take a few minutes to complete the survey.

In return, you go in the draw to win some Placemakers vouchers and also get a copy of the issue with all the results [TAKE PART HERE]

 

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Investors increasing Auckland price pressure – RBNZ

Growing investor demand for Auckland property has exacerbated the price pressures arising from the underlying supply shortage, the Reserve Bank says.

Monday, August 24th 2015, 3:03PM

by Miriam Bell

Reserve Bank Deputy Governor Grant Spencer said CoreLogic data showed that investors accounted for 41% of all Auckland market sales in June 2015.

This was an increase of 8% since late 2013.

In a speech in Auckland this morning, Spencer said this increase has largely been driven by smaller investors, with two to four properties, as opposed to investors with larger property portfolios.

“Consistent with the increased share of investor sales, there has been a disproportionate expansion in mortgage credit to residential investors.”

In the year to June 2015, new lending to investors increased by 40% nationally.

In comparison, over the same period new lending for all borrowers grew by 28% nationally.

More than half of the investor lending currently being written is at high LVRs of more than 70%, Spencer said.

“This trend is increasing the risk inherent in the Auckland market. The increasing investor presence is likely to amplify the housing cycle and worsen the potential damage from a downturn, both to the financial system and the broader economy.”

The RBNZ is concerned that a sharp fall in house prices could accentuate weakness in the country’s macro-economy. 

The situation would be heightened if banks then tightened their lending conditions markedly as it would result in greater declines in asset markets and larger loan losses for the banks.

Population growth combined with low interest rates has created strong demand and is driving up Auckland prices.

But Spencer said investor demand can contribute significantly to house price pressures.

“If investors wish to expand their housing portfolios at a greater rate than the growth in demand for rental accommodation, this can push up prices even though the underlying housing shortage remains unchanged.”

It is for this reason the RBNZ is targeting Auckland investors with the 70% LVR restriction, which is now scheduled to come into effect on 1 November.

Spencer said the RBNZ expects that the new lending limits for Auckland property investors will reduce heightened financial system risk and help moderate the Auckland housing market cycle.

However, he said the macro-prudential policy is just one of many measures aimed at reducing the imbalances in the Auckland housing market.

“Tax policy is also an important driver, and we welcome the changes – including the two year bright-line test - announced in the 2015 Budget.”

Much more rapid progress in producing new housing is needed in order to get on top of the issue, Spencer added.

To achieve this, more needs to be done about the limited supply of land ready for building; restrictive planning processes, and the lack of coordinated planning in infrastructure development.

“High-rise apartment construction and other high-density options will be a crucial part of increasing construction and reducing the supply shortage.

“But, at 18% in the year to June, the apartment share of consents remains well below levels seen in the mid-2000s and significantly below what we see in other major centres.”

Westpac senior economist Michael Gordon said the Deputy Governor's speech had no significant implications for markets and did not signal any new measures, on the part of the RBNZ, beyond those already announced.

Tags: banks Commentary Mortgage Advisers property investment RBNZ

« LVR restrictions tweakedOCR reviewed less often »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 ▲4.05 4.49
ANZ Special - 3.55 ▲3.55 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
BNZ - Classic - 3.49 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide ▼5.65 ▼4.75 ▼4.75 -
Credit Union North 6.45 - - -
Credit Union South ▼5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.54 3.54 3.69
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 4.14 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.39 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - ▼3.39 3.45 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.39 3.45 3.99
Median 5.34 4.04 4.09 4.39

Last updated: 4 December 2019 9:11am

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