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At the end of April, the Reserve Bank scrapped loan-to-value ratio restrictions for owner-occupiers and investors for one year, removing previous LVR "speed limits" on what the banks could lend.
The decision, along with the official cash rate cut in March and vast quantitative easing programme, have boosted the housing market through 2020 in spite of the global pandemic.
Latest REINZ data reveals that 8,377 properties sold nationwide in September – which was a 37.1% year-on-year increase.
Investors have dived back into the market in recent months, borrowing more at high LVRs.
As the housing market continues to heat up, leading economist Tony Alexander believes the central bank will reintroduce LVRs for investors come May next year.
"I think that the chances of the 30% deposit requirement coming back for investors are fairly high given the strength in the residential real estate market," Alexander told TMM Online.
The outlook may be different for owner-occupiers and first home buyers.
Recent comments from the Reserve Bank indicate it views the recent surge in house prices as helpful to the economy. Officials recently said falling house prices would be the "worst-case scenario" for our economy as it recovers from the Covid recession.
Alexander said the RBNZ may be more inclined to extend the LVR-free period for owner-occupiers.
"Given the bias which the Reserve Bank has toward generating as much momentum as possible in the economy, they may hold off reimposing those requirements for a few months after May. But this far out, it's still fairly much a guessing game," he said.
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With interest rates been so low now it was obvious to anyone with half a brain that investors would rush back in to buy properties wanting to secure a better return. The Reserve Bank not been able to foresee this scenario happening is very troubling. The taxpayer is certainly getting good value for money for all the supposed economic experts employed up at 2 The Terrace Wellington.
Phil - it would be great if yourself or a fellow journalist could directly ask Governor Orr and his cohorts what they were thinking when this decision was made back in April? This mistake by the Reserve Bank needs to be corrected now - not next year!
Owner-occupiers are currently having a hard enough time as it is trying to secure a property with so few homes been listed for sale. It's an unfair playing field with owner-occupiers not having the same access to cash or equity that most investors do. This isn't rocket science but seems to be too complex for the Reserve Bank to understand (sigh).