Category Archives: Market Updates

Bank Lending in August

Figures out from the Reserve Bank show Bank lending in August has declined from $6.1Billion in August 2016 to $5.1Billion in the same month this year.  Therein a major reason why price growth and the number of sales have stalled in Auckland.

At its meeting last week the RBNZ left the cash rate on hold.

Sales in the Auckland Property Market Slump

Sales figures  for April and May showed sales fell by 2,381 to 5,736, a fall of near 30% on the same period a year ago.

Today Barfoot and Thompson revealed their numbers for June which showed the average price fell 3.1 percent to $913,606

This is up a meagre 0.6% on June a year ago when their average price recorded was $908,343.

Property Market Gets A Yank On The Handbrake

The government has introduced a capital gains tax on residential property holdings for buy and sells within 2 years. Exemptions mean owner occupied housing is unlikely to be affected but the eye opener is that all non resident tax payers will now have to register with IRD and open an NZ bank account. Non resident purchasing of property here just became distinctly less attractive i’d imagine.

The odds of a OCR reduction next month have shortened considerably as result of the 2 big recent property announcements.

ANZ Bank has cut fixed interest rates today. 1,2 and 3 years fixed now @ 5.59%.

Reserve Bank announces proposed changes to the loan-to-value ratio (LVR) policy.

The policy changes, proposed to take effect from 1 October, will:

  • Require residential property investors in the Auckland Council area using bank loans to have a deposit of at least 30 percent.
  • Increase the existing speed limit for high LVR borrowing outside of Auckland from 10 to 15 percent, to reflect the more subdued housing market conditions outside of Auckland.
  • Retain the existing 10 percent speed limit for loans to owner-occupiers in Auckland at LVRs of greater than 80 percent.

The changes also come with an expectation that Banks are to hold more capital against loans in the category of residential property investors.

At street level this may mean fee’s and / or an interest rate  margin being applied to property investor lending.

We shall wait and see. A summary of a consultation process will be released at the end of the month.

Reserve Bank looks for a definition of “Property Investor”

The Reserve Bank, in looking to have some control over the Auckland property market without using interest rates, is consulting with market participants on a definition of “Property Investor”.

Its providing 3 options for comment on.

  • if the mortgaged property is not owner-occupied; or
  • if servicing of the mortgage loan is primarily reliant on rental income; or
  • if servicing of the mortgage loan is at all reliant on rental income.

By requiring the Banks to section off all loans in this yet to be defined category, it will be able to target specific action, rather than raising or lowering the cash rate which affects all borrowers to some extent.

Bottom line: The ground work is being laid for higher interest rates and / or an Application Fee to apply to property investment loans.

LVR Restrictions Slow Sales of Cheaper Homes

The Loan to Value restrictions introduced in October last year seem to have at least partly met the Reserve Banks goal of ensuring financial stability in the event of a sharp correction in house prices. Perhaps at the lower end of the market anyway.

The restrictions have hit sales of cheaper homes the hardest, as highlighted by the RBNZ in a report today.

Sales of properties for less than $NZ400,000 fell 23 per cent between October and March. In addition, First-Home buyers share of the total home sales fell to 17 per cent in February from an average 20 per cent in the past two years, it said.

In relation to when the restrictions may be eased the comment was..“However, we will need to be confident that immigration pressures will not cause a resurgence of house price inflation. We consider that the earliest date for beginning to remove the LVR restrictions is likely to be late in the year.”

At the other end of the market it was interesting today to watch 3 bidders have a gentle tussle over a substantial luxury home of 4 bedrooms @ 1 Canterbury Place in Parnell.  Knocked down eventually under the hammer @ $3,255,000.