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Summary
- The NZ government is set to lay out a range of measures to help first-time home buyers and increase housing supply.
- A range of monetary and fiscal measures have led to soaring property prices in NZ.
- RBNZ reintroduced LVR restrictions, which can limit some house price growth.
NZ is set to announce measures to combat a relentless increase in property prices on Tuesday. Housing prices in NZ have surged to record rates amid super-low interest rates and a faster-than-expected economic recovery.
Median prices for residential property across New Zealand rose by 22.8% to NZ$780,000 in the last month compared to the same month in 2020, as per the REINZ data released on 11 March. The number of residential properties sold in February rose by about 35% YOY in Auckland.
Finance Minister Grant Robertson has stated that he was considering measures to limit investor loans and reduce potential returns while promoting other kinds of investments. However, market analysts have cautioned that there was no simple solution to the soaring property values.
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Ardern on Monday announced that the government would lay out a series of immediate and long-term measures to help first-time home buyers and increase housing supply. Some of the proposed amendments include limitations on high debt-to-income and interest-only mortgage loans to investors, as well as increasing the holding time of investment properties from 5 to 10 years to earn tax offsets and lower tax rate.
Reinstating of LVR and addition of housing to RBNZ policy settings
Bindi Norwell, Chief Executive at REINZ, stated that some of the rise in house prices could be due to the fact that more investors and owner-occupiers were looking to buy ahead of the LVR restrictions coming back into effect in March and a slight boost in listings in the last 2 months.
RBNZ re-introduced LVR restrictions on home loans in March. Banks are now not allowed to lend more than a 20% of total new lending to owner-occupier borrowers with less than a 20% deposit. The laws will be tightened again in May, and banks will be prohibited from lending more than 5% of their loans to investors with less than a 40% deposit, despite being told to do so immediately.
The NZ government also asked RBNZ to consider housing in its policy settings. However, Adrian Orr, RBNZ Governor, stated that the monetary policy alone couldn’t fix the housing problem.
Norwell expects increased sales volume to continue over next 2 months despite LVR restrictions but the rise will partly be contingent on a stable flow of new listings coming onto the market.
