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LVR restrictions will dampen Auckland market

Smaller investors are driving the Auckland market which means the impending LVR changes will have a noticeable impact, according to a new Reserve Bank analysis.

Tuesday, October 20th 2015, 2:32PM

by Miriam Bell

CoreLogic data shows that, since October 2013, there has been an increase in purchases by smaller investors (two to four properties) – particularly in Auckland.

This suggests that smaller investors have been leveraging up in pursuit of capital gains, the Reserve Bank analysis states.

“Given that the LVR policy is likely to be more binding within this relatively overrepresented group, the incoming changes to the LVR restrictions might be expected to have a significant dampening effect on Auckland housing market activity and house price inflation.”

The Reserve Bank analysis provides a detailed overview of recent trends and market conditions.

It finds that the increased housing market activity of recent months has been driven by strong investor demand, both within and outside of Auckland.

This is reflected in increased investor purchases and significant growth in investor-related mortgage credit.

“Investors are disproportionately represented at both ends of the price spectrum, contrary to popular opinion that investors predominantly buy relatively cheap properties for use as rentals,” it states.

Much of the increase in investor purchase shares coincided with a fall in the share of movers – although the analysis notes the categories could be fluid.

The analysis also finds no evidence of an increase in cash buyers in response to LVR policies.

Rather, cash buyer shares are falling in Auckland and remain flat around the rest of New Zealand.

This could indicate that decreasing affordability in Auckland has reduced the ability of potential buyers to fund their house purchases out of equity, the analysis states.

However, the largest decline in cash buyers was among those with relatively large portfolios who should have benefitted most from price growth.

“This suggests there are other factors at play over and above decreasing affordability.

“For example, this pattern would be expected if multiple property owners were becoming increasingly levered on the expectation that prices will continue to rise rapidly going forward.”

However, the analysis emphasises that the RBNZ’s new LVR restrictions should have a significant impact on credit-dependent Auckland investors.

The LVR rules, which are due to come into force on November 1, will impose a 30% deposit on investor mortgage loans in Auckland.

« Auckland juggernaut powers onAuckland still driving national values up »

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
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 - 7.24 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 7.84 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 - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 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 6.69 6.45 6.19
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 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
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 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

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