West­pac chief says LRV level will re­main

Waiheke Marketplace - - Out & About - HAMISH RUTHERFORD

New Zealand’s hous­ing mar­ket is slow­ing, but calls for a swift lift­ing of lend­ing re­stric­tions seem likely to go un­heeded.

A sharp drop in sales and early signs of fall­ing prices have prompted some in the real es­tate sec­tor to claim it is time for loan to value ra­tio (LVR) lend­ing re­stric­tions, which con­strain the amount of lend­ing banks can make to those with small de­posits, to be lifted.

Na­tional leader Bill English called for the Re­serve Bank to out­line when the rules could be re­laxed, al­though the cen­tral bank has not made its plans clear.

West­pac chief econ­o­mist Do­minick Stephens said the hous­ing mar­ket had slowed markedly, much more quickly than the Re­serve Bank had an­tic­i­pated, and was likely to be ‘‘pretty sub­dued’’ for much of the next 12 months.

While part of the slow­down was re­lated to the elec­tion, Stephens said the mar­ket be­gan slow­ing in late 2016, driven by higher in­ter­est rates and ‘‘a lit­tle more dif­fi­culty ac­cess­ing credit’’.

But Stephens said the re­stric­tions, de­signed to re­duce the threat to bank­ing sys­tem from risky lend­ing, were un­likely to be re­laxed in the short term as the risks the hous­ing mar­ket posed to the bank­ing sys­tem was not af­fected by a slow­ing mar­ket.

‘‘The de­gree of risk in the sys­tem is not chang­ing at a rapid rate,’’ Stephens said.

‘‘It’s far too sim­plis­tic to say there’s a drop in turnover in the hous­ing mar­ket and house prices have flat­tened or fallen a wee bit and so there­fore we need to whole­sale re­move the LVR re­stric­tions. That’s to­tally off base.’’

Stephens was con­fi­dent the LVRS would re­main in place in the cur­rent form for at least the next nine months.

In­fo­met­rics econ­o­mist Mieke Wel­vaert said the Re­serve Bank ap­peared to be ‘‘nowhere near’’ the re­moval of LVRS.

If the cen­tral bank was minded to con­sider the LVRS it would signal a plan to do so in one of its six­monthly fi­nan­cial sta­bil­ity reports, the next of which is due in Novem­ber, be­fore en­ter­ing a pe­riod of con­sul­ta­tion.

The bank would likely ‘‘look through’’ short term changes in the hous­ing mar­ket, Wel­vaert said. Even if LVRS were re­moved, it did not nec­es­sar­ily mean lend­ing would be­come eas­ier, with the Aus­tralian banks tak­ing ac­tion af­ter rat­ings agen­cies Moody’s and Stan­dard & Poors down­graded the sec­tor.

The en­trance to the Re­serve Bank in Welling­ton. MAARTEN HOLL

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