The property market has been running hot since lock down finished, in May 2020. The introduction of very low interest rates has made it a prime market for investors and existing homeowners.
But, it hasn’t been great for everyone. First home buyers have been finding it hard to compete with the investors in the market. There has been a lot of speculation about ways to combat this massive issue and help New Zealanders to buy their first homes. Low interest rates, lots of competition and limited supply of houses are all driving the market.
The Reserve Bank is using Loan-to-Value (LVR) rules to help take some heat out of the market and has indicated it will raise the LVR requirements for investors and homeowners. Investors are going to need a 40% deposit when purchasing an investment property, with the exception of new builds where a 20% deposit will still be sufficient.
The main banks have responded quickly and increased the limits in anticipation of the new rules coming in. The main banks started implementing increased restrictions in December and have increased the LVRs again over the last two weeks to 40% for investors.
Clearly the primary issue is still a lack of supply of properties – both for homeowners and as rentals – and the government needs to encourage the building of more houses. On Thursday the Finance Minister will be announcing other initiatives in an attempt to further cool the market for investors, the aim being to give homeowners (in particular first home buyers) a chance to purchase a property.
To sum it up – the main banks will be limited by these new LVR rules and bigger deposits will be required when purchasing investment properties. Some second-tier lenders who provide their own funding will still be able to offer higher LVR lending to investors. So, there are options for investors – you just need to know who to talk to. Start by talking to us.