ON THIS WEEK’S ACROSS THE DITCH bulletin to Australia’s FiveAA radio Selwyn Manning and Peter Godfrey discuss how the New Zealand Reserve Bank has intervened in an over-cooked Auckland housing market. But will it make a difference? Also, NZ’s sheep population is falling! ITEM ONE: (Ref. EveningReport.nz) [caption id="attachment_1205" align="alignleft" width="300"] Peter Godfrey and Selwyn Manning.[/caption] The Reserve Bank of New Zealand has decided to intervene in the over cooked Auckland housing market. On Wednesday, the Reserve Bank Governor Graeme Wheeler announced banks and lenders will be required to apply a loan-to-value ratio to those seeking to finance investment properties in the Auckland housing market. What this means in real terms is people and businesses that intend to purchase housing stock in Auckland will need a 30% deposit before a loan can be approved by a bank or lender. The Reserve Bank also intervened to prevent banks from lending more than 10% of total loans to housing investors. The restrictions apply only to finance on properties within the Auckland Council territorial boundaries. The Reserve Bank Governor said:
- “Auckland’s median house price is 60 percent above its 2008 level, and house prices in Auckland have been rising rapidly since late last year. This reflects ongoing supply constraints and increased demand, driven by record net immigration, low interest rates and increasing investor activity. Prices in the Auckland region have become very stretched, increasing the risk of financial instability from a sharp correction in prices.”
- “We are proposing these adjustments to the LVR policy to more directly target investor activity in the Auckland region, where house prices relative to incomes and rent are far more elevated than elsewhere in New Zealand.