Little effect from new restriction

WELLINGTON: Increased restrictions on lending to investors will not do much to take the steam out of the roaring housing market, experts say.

The Reserve Bank yesterday announced that most investors would need a 30% deposit from March and 40% by May but that banks should respect the 40% requirement immediately for all new investor lending.

The 30% restriction was wellsignalled and while an announcement on the 40% restriction was not expected yesterday, most of the banks had already moved to this requirement.

ANZ was the first to do so in December but last week BNZ, Kiwibank and ASB also joined it in requiring investors to have a 40% deposit or equity.

Bruce Patten, a mortgage broker with Loan Market, said only Westpac and some of the smaller banks had yet to clamp down on investor lending.

‘‘I reckon the banks thought ‘Gee, we will get in first because otherwise what happens is they just get hammered by people applying for funding trying to beat the change’.’’

Mr Patten said it had not slowed anything down, even with last week’s announcement from ASB, BNZ and Kiwibank.

‘‘The inquiry levels are just through the roof.’’

He said only those who had bought property in the past year would feel the impact from the investor rule change, as they had only seen their property rise by 15% in value.

‘‘There are a lot of people out there with equity and it is certainly equity greater than 40% across their properties. I think it is going to have an impact. I don’t think that it is going to be substantial, because there is just a lack of property and people have nothing else to do with their money at the moment.

‘‘They are not spending it on big trips away, they are stuck in the country and they see property as a safe haven for putting their funds.’’

He said it might take a few percentage points off the growth in house prices.

‘‘It is only a single factor in the scheme of things.’’

He said it needed to be much cheaper and easier to subdivide to help boost supply.

Sharon Cullwick, NZ Property Investors Federation executive officer, said she was concerned about a doublewhammy effect and how people desperately saving to buy their first home would be hit just as much as people who were already landlords or planning to become landlords.

‘‘It’s not just investors but also firsthome buyers because many of them have low deposits and soon they might require a much higher deposit,’’ she said.

Ms Cullwick said she had no doubt demand for properties would decrease when the new rules came in.

A spokeswoman for ANZ said it was a good move by the Reserve Bank, which it hoped would bring balance to the housing market.

‘‘We’re concerned that escalating property prices are putting home ownership out of reach for many Kiwis, particularly firsthome buyers.

‘‘It’s in everyone’s interests for residential property prices to be sustainable long term, and for home ownership to be accessible to as many people as possible.’’

A Kiwibank spokeswoman confirmed it started requiring a 40% deposit on new home loan applications from property investors on Wednesday last week.

A BNZ spokesman confirmed it had increased the investor requirement to 40% on Tuesday last week but that was only though its broker channel.

Westpac chief economist Dominick Stephens said the increase to 40% was not a complete surprise, but it would only have a modest effect on house price growth. — The New Zealand Herald

❛ I don’t think that it is going to be substantial because there is just a lack of property and people have nothing else to do with their money at the moment