Kiwi property investors could face tougher credit rules

Adam Smith 19 July 2016

house squeezeAussie property investors aren’t the only ones facing tighter lending, with our neighbours across the ditch seeing credit restricted.

The Reserve Bank of New Zealand (RBNZ) plans to introduce tougher restrictions from September to curb rapid house price growth, the AAP has reported. According to the AAP, the RBNZ has proposed changes under which no more than 5% of total bank lending would be allowed to residential property investors with a deposit of less than 40%. The country’s central bank is also looking to restore a 10% limit for owner-occupiers with a deposit of less than 20%.

Australia's tougher investor rules.

In a consultation paper, the RBNZ argued for an extension of existing loan-to-value ration (LVR) restrictions in place in Auckland, which currently has a deposit threshold of 30%, the AAP said.

"LVR restrictions to date have improved the resilience of bank balance sheets by reducing banks' exposure to riskier mortgages, This policy initiative is intended to further improve the resilience of bank balance sheets, and it will assist in restraining credit and housing demand,” RBNZ governor Graeme Wheeler said.

The RBNZ anticipates that the new restrictions will put a lid on house price appreciation, cutting growth by 2-5% and sales by 5-15%. The Bank is due to give an economic update on Thursday, which investors believe might pave the way for a rate cut in August.

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