RBNZ: Investors will require 40% deposit from September

[investorak]

Do you think Banks will bring this in before 1 Sept? Hope not!

[FASATRIX]

How one can possibly get 100K from a different lender ?? I could be wrong here, but I am under the impression that one can only have one registered mortgagee as creditor on the same asset?

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%.

[pooky]

40% deposit on investors could be phase 1. Depending on house price reaction, they may throw in the debt/income ratio as well. The timing is odd..suspect this is to try and balance the Interest rate drop coming in August. Slow house price rises and drop the NZ dollar value. 2 wins for the Reserve Bank. More interesting times for Investors.

[propNZ]

Ha, indeed great comment. I'm not as much engaged in "colonial" activities than Chris, I have taken the number from the article saying g 45% of purchase made by investors.

That is indeed bold to assume all will stop buying but even other commenter suggested people will just sit back for a while.
So let's assume 30% stops buying, that is still a huge activity pulled out of the market.

Happy to be challenged on my view!

[Monsterbishi]

Not wanting to point out the obvious here, but these measures will only work to stop first time investors getting into the game, anyone with even a mild amount of equity available in their portfolio will simply smile as they realise the banks have just done them a huge favour by taking competitors out of the market.

The icing on the cake will be if the banks drop the interest rates too!

[Davo36]

Not wanting to point out the obvious here, but these measures will only work to stop first time investors getting into the game, anyone with even a mild amount of equity available in their portfolio will simply smile as they realise the banks have just done them a huge favour by taking competitors out of the market.

The icing on the cake will be if the banks drop the interest rates too!

This is exactly what I was thinking.

I could go out and buy now. I'm not going to because the prices are too high, but I could.

I tend to think it will also just make property more desirable.

They really just need to get out of the way, let it go pop and be done with it. But they keep propping up the market.

[Davo36]

Yep now on NZH too with JK on video.

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



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

Yeah I thought this too!

A week ago they're saying nothing till the end of the year, then JK gets miffed and it's done...

Independent my arse.

[GeordieKiwi]

Do you think Banks will bring this in before 1 Sept? Hope not!

If it's like last time the Banks (well Westpac) will pretty much start honoring it from today if it's a new application, pre-approvals should be fine I believe.

[CHCBW]

If it's like last time the Banks (well Westpac) will pretty much start honoring it from today if it's a new application, pre-approvals should be fine I believe.

From The Herald - The new loan-to-value ratios (LVRs) would take effect on September 1, but the Reserve Bank wants banks to "observe the spirit of the new restrictions" in the lead-up to the new policy.

[Viking]

What a disgraceful act.
Not justified by any information so therefore caused by political pressure.

Applying a bandage to a sore is not a solution to the problem.


Just fixed at BNZ for 4.15 for the next 12 months. No drama at all By then things will have settled down.
Election will be around the corner and property investors will be ganging up on English as we should.

[propNZ]

Not wanting to point out the obvious here, but these measures will only work to stop first time investors getting into the game, anyone with even a mild amount of equity available in their portfolio will simply smile as they realise the banks have just done them a huge favour by taking competitors out of the market.

The icing on the cake will be if the banks drop the interest rates too!

will they really smile? you can literally buy half of the number of properties (or half the value) you could buy before, so it limits you right there.
also limits many investors had just about enough equity to buy a property but now they can not.

[marknfs]

It's still for 'consultation' for 3 weeks and then comes into effect 1st of September.
I'd say there is a 2 week window until the last major bank will apply the new restrictions - time to rush through a pre-approval if that is your thing!
They will honor existing pre-approvals like last time.

Interesting effects I see this having is on the surrounds of Auckland - the changes disproportionately effect outside of Auckland (80% -> 60%), making Auckland more appealing in relative terms than it has been for the last year.
Why invest in Huntly if the same LVR restriction as Auckland applies?
It will also create even more demand for vacant sections/subdivisable property as new builds are more advantaged in relative terms, especially for investment properties.

I think these restrictions are better than a clumsy rushed-through LTI restriction. Politically something had to happen - the end of the year was too late. Also it tips things in favor of First home buyers/owner occupiers which should keep the media driven plebs from lynching us investors for a while longer. No restrictions on new-builds is good for supply too (even though more supply is not in our financial interests it is quite necessary to house NZ's growing shortage).

[BigDreamer]

Appears that I might be one of the few who foresee that this will drastically slow down house price increases outside of Auckland region. For example, most investors investing in Hamilton were borrowing up to 80%, this surely is a big change for them.

[jamesnz]

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

The governor has requested that although the restrictions will officially be applicable from 1st September, RBNZ hopes that the banks will implement it with immediate effect.
i read it as , only those investors who have taken pre approval before submitting purchase bids should be given at the lower LVR and no fresh approvals should be given
so I think for all practical purposes the LVR of 40% is already implemented

[Monsterbishi]

will they really smile? you can literally buy half of the number of properties (or half the value) you could buy before, so it limits you right there.
also limits many investors had just about enough equity to buy a property but now they can not.

You've just said my post but using slightly different words - Yes, it has halved the number of properties that other people can buy, but personally - extra equity aside, which I have plenty of, it hasn't limited my business model at all and is now helping because there will now be less hands in the pot at dinnertime.