"Something in the order of about 50% of investor activity that involves borrowing from the banking system takes place at LVRs of greater than 70%. Most of that is concentrated at LVRs of between 70% and 80%. There's very little currently happening at LVRs greater than 80%," added Hodgetts.
Source
50% or so between 70-80% LVR (assuming 'very little' = close to zero at LVR greater than 80%). Thats a lot. Shows how most investors like to keep equity at or close to 20% to be using their equity 'efficiently', so as pirces in auck rise, and their equity gets too far above 20%, they buy another to bring it back down. Now the level is 30%, they'll have to wait until equity gets to say 40% in current portfolio before buying another to bring it down to 30% again. And every new purchase 'absorbs' an additional portion of equity so takes longer to recover or 'recycle' the deposit in order to buy the next.
E.g buy at 500k with 100k dep, reno to recycle deposit so can buy again at 500k in Auck Vs region:
More than double the value needed from reno before equity is recycled in Auckland Vs. outside Auckland in this example. Ouch.
Source
50% or so between 70-80% LVR (assuming 'very little' = close to zero at LVR greater than 80%). Thats a lot. Shows how most investors like to keep equity at or close to 20% to be using their equity 'efficiently', so as pirces in auck rise, and their equity gets too far above 20%, they buy another to bring it back down. Now the level is 30%, they'll have to wait until equity gets to say 40% in current portfolio before buying another to bring it down to 30% again. And every new purchase 'absorbs' an additional portion of equity so takes longer to recover or 'recycle' the deposit in order to buy the next.
E.g buy at 500k with 100k dep, reno to recycle deposit so can buy again at 500k in Auck Vs region:
Loan | Value | equity | LVR | % equity | Added value required by reno before can buy again | |
$900k | $1125k | $225k | 0.8 | 0.2 | $125k | |
$900k | $1286k | $386k | 0.699 | 0.3001 | $286k |
More than double the value needed from reno before equity is recycled in Auckland Vs. outside Auckland in this example. Ouch.
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