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  • 5+ Property Rule

    I have just stumbled across this topic from last month in NZ Herald archives and I am curious how this is going to impact overall market and obviously me being a newbie.

    This re-classification if eventuates, what would be its impact to;
    1. LVR requirement? 30%? 50%?
    2. Interest rate to landlord? same or 1-2% higher than residential loans?
    3. overall property market? no impact or negligible or slowdown?
    4. Timeline to its implementation? & govt is going to approve it?
    5. Any other impact?

    I hope to get a better understanding from our expert of IP panel here.
    Looking forward to any comments which are greatly appreciated.
    Thanking you in advanced for reading and leaving your comments.

    Charlie.

  • #2
    The 5+ rule is dead in the water.
    No longer up for consideration.

    Comment


    • #3
      Originally posted by speights boy View Post
      The 5+ rule is dead in the water.
      No longer up for consideration.
      Can you elaborate Speights boy?

      Comment


      • #4
        The RBNZ has ditched the idea of counting the number of mortgages as the criteria for any future investors restrictions.
        They are consulting on other definitions for an investor category.
        EG: Rental income dependency.

        Comment


        • #5
          I don't understand the rationale of using rental income dependency. Can someone please explain? Wouldn't that have a lot more effects on cities where the yield is high and little effects on cities with low yield - such as Auckland? Since in Auckland, many people are having yields of net yield of 2-3%, it means that many of them are not relying on rental income to service the mortgage?

          Also, if someone keep paying off the mortgage to a point where the rent is start to become significant, are they suddenly considered to be an investor?

          Thanks.

          Comment


          • #6
            I think it may be more just to create a separate classification of loan.
            IE: If rent is used to calculate borrowings then it is an investor class.

            Then, if future macro tools are used, eg: loan / income ratio limits; the RBNZ can target this classification more specifically.

            Comment


            • #7
              Like most stuff the Muldoonists did and still do it will fail.
              Have faith in the capitalist banking system to protect its income.

              Comment


              • #8
                the following excerpt from today's Sunday Herald ...

                Auckland's housing market is now an issue for the Reserve Bank in financial stability terms, it's a fiscal problem for the Government and it's an affordability problem for first-home buyers and renters.

                What can be done short term?
                The Government is expected to announce within a few weeks it will ramp up its Tamaki Redevelopment project of Housing NZ land in Glen Innes into a $1 billion scheme with hundreds of new affordable homes.
                It is also, with the Auckland Council, looking at how to free up Government land for housing.
                But the Government and Auckland Council will have to consider more aggressive measures.
                Prime Minister John Key has left open the option of tweaking immigration settings if the pressure becomes too much. Auckland's housing pressure cooker is getting close to that point.
                The Reserve Bank is likely to force banks to hold more capital to back rental property mortgages within a few months, which could push up interest rates for landlords. It is also expected to keep agitating behind the scenes for Government action to reduce the tax advantages for property investors. A brave Reserve Bank would be much louder.
                The bigger fixes on the supply side will take much longer. They could include introducing new leasehold agreements and long-term tenancies that make long-term rentals more attractive for tenants and institutional investors.
                They could include removing some restrictions around building heights, parking and view shafts that reduce the housing density in suburbs around central Auckland.

                Comment


                • #9
                  Originally posted by Viking View Post
                  Like most stuff the Muldoonists did and still do it will fail.
                  Have faith in the capitalist banking system to protect its income.
                  But this is the point! Banks are not allowed to fail! They are propped up and made whole by taxpayers...

                  So then the government tries to stop them going bust in the first place...

                  Get it?
                  Squadly dinky do!

                  Comment


                  • #10
                    New mortgages to Australian landlords dropped the most in three years in February, signalling an easing in the speculator demand for housing that had concerned the Reserve Bank of Australia.

                    The value of new investor mortgages dropped 3.4 per cent in February from a month earlier, the sharpest fall since January 2012

                    Slowing demand from investors may give the central bank greater flexibility to cut interest rates later in the year

                    Australia's banking regulator in December urged lenders to limit investor mortgage growth to 10 per cent a year and maintain sound lending standards.

                    It said last month that it would determine this month whether it needed to take additional supervisory action against any bank

                    http://www.nzherald.co.nz/business/n...ectid=11431586
                    have you defeated them?
                    your demons

                    Comment


                    • #11
                      Yep.
                      Australian landlords are giving up....they can no longer compete with foreign funds.

                      Now it's our turn.

                      Comment


                      • #12
                        The 5+ rule was always going to be a silly one - number of mortgages is not an indicator of portfolio size or portfolio risk!!!

                        Comment


                        • #13
                          Lets see what comes 1/7 as I have read everything there is to read on this.
                          They are working on several fronts and the 5 plus rule is still probably in the mix somewhere.
                          We dont know what they are doing, but they are very keen to get property investors classified seperately so they know who they are and can target them with specific rules.
                          I am certainly structuring around this and getting my loans fixed longer term and revolving credit and mortgages set in place.
                          Just in case.

                          As their is no doubt in my mind, and the minds of many others, that with their only tool the OCR being taken off them.
                          They are rapidly searching for other weapons they can use.

                          Of course, they can only control NZ reg. banks.
                          So my pick is Resimac will be licking their lips and they are already expanding operations.
                          They are and will be having a field day I assume and can afford to hold standard rates and not discount.
                          As they know anyone coming to them has no where else to go.

                          Comment


                          • #14
                            RBNZ is fighting a lost cause, because the mad house price increases are not primarily as a result of intermediate to advance investors buying big (5+ property investors).

                            The biggest problem is the immigrants (or returning kiwis) buying their homes, and mum/dad investors buying their 1st or 2nd rental.

                            Also some overseas investors too but a lot of these will become local investors once they get their residency.

                            50k+ immigrants per year is going to cause a lot of housing problems.

                            If RBNZ/government/locals are worried that prices in Auckland are mad, the prices will be worst to come.

                            Immigrants who have arrived since 2000 immigration boom will have bought property already. Soon it will be their parents buying because a lot of these are young professionals staying in NZ, and since there is no Centre-of-Gravity anymore in Family Category for residency (biggest benefactor is Indians who have lot more kids than Chinese), a lot of these immigrants will bring their parents over now, and in the future.

                            These parents will later sell up their homes in their home countries (majority are China & India) and bring their money over to NZ. Where will they park their money? Rental properties.
                            Last edited by PTILoveYou; 14-04-2015, 10:45 AM.

                            Comment


                            • #15
                              I recall seeing alot of elderly asian parents lined up at the Salvation Army at the back of Glenfield Rd waiting on a handout of food parcels. Kid you not, elderly asians. Not sure where their millions were parked??

                              Comment

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