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LVR restrictions 'could provide wealthy buyers with cheap properties'

Wealthier overseas buyers would benefit from the introduction of loan-to-value restrictions on property, says the president of the Auckland Property Investors Association.

Wednesday, February 20th 2013, 12:00AM 1 Comment

by The Landlord

LVR restrictions are one of the tools the Reserve Bank is said to be considering to tame the housing market, particularly in the Auckland.

But David Whitburn said governor Graeme Wheeler should not think of it as a magic bullet. “LVR restrictions will make it harder for first-home owners and investors to buy properties in Auckland as they will need to contribute more equity, and many will be unable to do this.”

He said LVR restrictions would slow growth in prices but would help wealthy overseas and New Zealand buyers to purchase properties at good prices.

Andrew King, president of the New Zealand Property Investors’ Federation said LVR restrictions could protect buyers from themselves to an extent.

“In the four or so years up to 2008, banks were aggressively promoting home loans, often without requiring any deposit from the purchaser. This definitely had an effect on increasing demand, but it was also very risky for the banks and the home buyers.”

King said loose lending policies might have lured people into property investment who could not afford it.

“The NZPIF thinks that restricting the LVR ratios will restrict risky investment decisions providing an element of consumer protection, even if it is protecting them from themselves. It may also slow down property price growth, but it will not eliminate it completely.”

King said many investors had enough equity in their own home that increasing LVR requirements wold not stop them effectively borrowing 100% of their new purchases.

 

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Comments from our readers

On 23 February 2013 at 9:34 am Michael D said:
Yes, LVR's are featured in a 100% NZ website (Free Service)which claims the obvious for investors.
This "Obvious" is in relation to low-risk investing.
Banks never ask for their name to be on your title, they naturally prefer to have the ultimate in security...being, their name on the "mortgage".

The site (live but not actively promoted)therefore allows willing lenders to match themselves with willing borrowers, and importantly, allows the lenders (investors) to choose their preferred LVR.

With property prices having been "trimmed back" to more realistic values in recent years, an LVR of even 90% in many cases could be assumed as rather prudent.
The typical "borrowers" may be the likes of those who have difficulty acquiring a bank loan due to maybe a Baycorp glitch for something as small as a previous 'lapse of memory' to pay off a Farmers Card for $20, maybe due to a misunderstanding with a broken marriage??

The lenders (investors) can now take advantage of this and "help " these borrowers (quite often nice Kiwi's who can honour their mortgage repayments) to obtain a mortgage and build a good track record over the ensuing 6 or 12 months, and then re-finance at a lower interest rate with their bank.

This "interim" mortgage finance is a true "Win-Win".
(A) The lender (investor) can enjoy the ultimate in security (a registered 1st mortgage) PLUS double-digit returns on their money...sometimes up to 12% or more..!
And we all know that 12% for 6 months equates to 24% pa (annualised), so who is it that claims "HIGH RETURNS ARE ALWAYS HIGH RISK?"
(B) The borrower can regain their 'usually' deserved good reputation and rid themselves of the "curse" which was previously so easily placed by Baycorp, and which precluded them (borrowers) from taking on an alternative curse (a mortgage)!

Maybe some of these overseas investors (and Kiwi investors) could "check it out"...and it doesn't even need a financial planner to try and encourage some volatile sharemarket or property-ownership investments??
Michael

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 7.09 6.95
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.84 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.24 6.75 6.39
Median 8.64 7.19 7.17 6.65

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