Bach owners deemed ‘property investors’

Bach and holiday home-owners may be caught up in the Reserve Bank’s new definition of ‘‘property investors’’, as it moves to crack down on the sector.

The central bank has been consulting on what exactly defines an investor since September 2013.

On Friday afternoon it finally released its decision, defining the new class in the broadest way possible as any property which is not owner-occupied.

It also forged ahead with plans to force banks to hold more capital against investor loans, a move which bank bosses say will push up interest rates.

The capital rules are in addition to Auckland-specific restrictions announced earlier this month, which will force investors to have a deposit of at least 30 per cent.

Most submissions the Reserve Bank received supported the broad definition for investor loans.

Banks said the simplicity would make the rules easier to implement, but still expected to spend anywhere from $250,000 to $5 million changing their systems and training staff.

However, they pointed out that those who owned baches or holiday homes would also be defined as investors. In response, the bank said some allowance could be made for second properties ‘‘from which only a small rental income is derived’’.

It said an example might be a bach that was only rented out for a few weeks of the year, but did not give further details.

Documents also reveal banks lobbied hard to try and get the Reserve Bank to change its mind.

The majority of submitters did not support its rationale for creating a separate asset class, which was that investment loans were riskier than normal mortgages.