RBNZ: Investors will require 40% deposit from September

[Kbkiwi]

Boom:

http://www.stuff.co.nz/business/82240315/reserve-bank-launches-plan-for-tighter-rules-on-property-investors

[Nick G]

Yep, property caught up with historical growth rates in a hurry. I think second tier lenders, peer-to-peer etc will be back in force very soon.

[BigDreamer]

Just to be clear this is 40% LVR restriction nationwide. Therefore, this is not limited to investments properties in Auckland region only.

This is a much larger restriction than I imagined. Interested to see how this will play out now ...

[Grads]

I'd say the market (NZ wide) will be very active in August!!

[JBM]

Glad I'm looking to spec build a new house ...and not buying a rental

[Halfway To Paradise]

My thoughts are that we will be in for a busy 6 weeks as property investors who can buy do buy.
Then property investors will go into lock-down holding their rentals as they will not be able to buy again if they sell.
Property investors will then take advantage of lower interest rates which will soon follow and start to pay down debt.

[propNZ]

if it affects the property prices (could affect, isnt it?) whatever you buy in the coming month could fall into negative equity quite easily.
what is your view on this guys?

[Nick G]

Well the OCR is tipped to drop.

Thinking out loud. If a house costs $500,000 and you pay a deposit of 20%...

20% LVR: $400K lending at 4.5% = 18K per year

New rules:
- $300K lending at 4% = $12K
- $100K lending at 7% = $7K (secondary lender, this is a guesstimate rate, I've asked a couple of brokers what they think)
- Total $19K per year

So, $20 per week difference. You can still buy your house, it'll just cost you a few coffees more.

I might be (usually am) wrong and the 2nd mortgages are way higher, I just assumed a spread of 3%.

[donna]

Yep now on NZH too with JK on video.

What I find quite frustrating is RBNZ are supposedly independent of Govt and said.....

Reserve Bank deputy governor Grant Spencer on July 7 said that the bank was considering new LVR restrictions, but would not introduce them before the end of the year.

Yet they've flip flopped - hard not to believe they caved in aye and it's not the end of the restrictions the DTI is also a measure making progress -

source

cheers,

Donna

[propNZ]

one more thing: can banks retrospectively enforce this LVR?
if lets say property prices drop by 10% or so?

(we are literally removing close to 45% of the buying power nationwide of the market with this decision)

[Rosco]

I'd say the market (NZ wide) will be very active in August!!

I think most of the banks will take this on board straight away, so it will probably change lending to investors straight away.

Pre-approvals might stay, but any new lending will be under the new rules.

Ross

[Don't believe the Hype]

Well the OCR is tipped to drop.

Thinking out loud. If a house costs $500,000 and you pay a deposit of 20%...

20% LVR: $400K lending at 4.5% = 18K per year

New rules:
- $300K lending at 4% = $12K
- $100K lending at 7% = $7K (secondary lender, this is a guesstimate rate, I've asked a couple of brokers what they think)
- Total $19K per year

So, $20 per week difference. You can still buy your house, it'll just cost you a few coffees more.

I might be (usually am) wrong and the 2nd mortgages are way higher, I just assumed a spread of 3%.

the numbers might be off but your point is still valid... These rules just make things more complicated but won't stop investors who think there is a dollar to be made from investing... With complication comes control risk making the whole system more unstable... Instability drives higher peaks leading to bigger troughs... Exactly the opposite of what the intervention is designed to do...

Watch out for the unintended consequences of this intervention...

[ChrisD]

(we are literally removing close to 45% of the buying power nationwide of the market with this decision)

Where exactly are you pulling this number from? Somewhere warm and dark I assume.

[BigDreamer]

Where exactly are you pulling this number from? Somewhere warm and dark I assume.

Ha - this is an amusing comment

No idea what propNZ was referring to but I, too, am curious to know where this number came from.

[donna]

I read it to mean if there's a 10 % drop in property value you need to make up the difference - so if you borrowed with a 40% deposit then 10% was wiped off the property's value you will need to cough up more.

cheers,

Donna