Reserve Bank delays start of new LVR rules

The Reserve Bank has delayed the start of changes to investor loan-to-value restrictions (LVRs) nationwide from 1 September to 1 October 2016, after talking to the banks about time required to honour pre-approved loans.

“Banks have indicated through their submissions that more time is required to enable them to meet the new restrictions that apply to investor loans nationwide, given the pipeline of loan pre-approvals made prior to our announcement in July,” Deputy Governor, Grant Spencer said today.

Reserve Bank delays start of new LVR rules
“We understand that banks have been applying the new LVR restrictions to new loan applications since the LVR changes were announced. On that basis we will defer the formal introduction of the changes to 1 October in order to accommodate the backlog of pre-approvals.”

Last month the central bank announced plans to introduce new bank conditions requiring most loans to residential property investors to have a minimum 40 per cent deposit.

Most lending to owner occupiers would also require a 20 per cent minimum deposit with both changes rolled out across New Zealand.

Rules requiring Auckland investors to hold a minimum 30 per cent deposit, and Auckland residential buyers to hold 20 per cent, are already in place.

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Auckland home values head south

by NZ Adviser 10th Feb 2016

The last month has seen home values fall in parts of Auckland and the three monthly and annual rates of growth slow down significantly compared to over the last year, the latest monthly QV House Price Index show.

Nationwide, residential property values for January have decreased by 0.3% over the past month, which is the result of a 0.5% decrease in the Auckland region in the month since December 2015.

However, over the past year nationwide values have risen 12.6% and 0.7% over the past three months. They are now 34.2% above the previous market peak of late 2007. The average value nationwide is now $556,206. The average value in the Auckland region is now $928,921.

“The QV House Price Index shows home values continue to rise in outer fringe Auckland areas of Rodney, Papakura and Franklin, as well as in most other parts of the New Zealand,” QV National Spokesperson Andrea Rush said.

“However, for the first time in more than a year values have decreased over the past month in the former Auckland City Council suburbs as well as on the North Shore, in Manukau and Waitakere.

“The value decreases in parts of Auckland could be in part due to the seasonal impact of the holiday period and the housing market may pick up in the usually busiest months of the year, February and March.

But Rush says it’s more likely a continuation of the softening in the market seen after the government and the Reserve Bank introduced new rules to slow down investor activity in Auckland.

“It’s possible the easing in values in Auckland may be short-lived as the under lying factors driving house prices up remain: record high net migration, record low interest rates and a lack of housing supply.”

“The previous two months had already shown a marked slowdown from the increases we have become used to seeing in Auckland,” says CoreLogic NZ Director of Research Jonno Ingerson said in a report .

“This is therefore not a one-month anomaly, which we do see from time to time. This is a genuine drop in values.

“Back in 2011 we saw a couple of months when Auckland values dropped slightly, but values at that time were almost flat so a drop wasn’t as notable. You have to go back to the beginning of the Global Financial Crises in early 2008 to see this sort of turnaround in Auckland values.”

QV Homevalue Registered Valuer, James Wilson said the lifestyle market is still getting stronger, as buyers seek lifestyle property further from the city centre to get more for their money.

“QVhomevalue Auckland is seeing an increase in people re-financing against their homes or property portfolios to purchase additional property, complete capital upgrades or free up cash for personal use,” Wilson says.

2014 was a year of mixed sentiment in the residential property market

It was a stop start year for residential property values with some flat periods due to uncertainty associated with the LVR speed limits, interest rate hikes and an election, along with periods of rapid value increases in some areas and decreasing values in others.

Overall the nationwide average shows residential property values increased 4.9% or $22,652 during 2014 from $466,022 in December 2013 to $488,674 in December 2014, according to the latest statistics from Quotable Value (QV) powered by CoreLogic.

The average national value increased 1.5% over the final three months of 2014 and nationwide values overall are now 17.9% higher than the previous market peak reached in late 2007.

Values in the Auckland region increased 9.8% or $68,309 from $693,549 at December 2013 to $761,858 at December 2014. They rose 4.2% over the past three months and are now 39.4% higher than the previous peak of 2007.

Sales volumes were also down on 2013 for every month despite picking up towards the end of the year however they remain at historically low levels and CoreLogic research shows there were changes in who was buying property during 2014.

QV National Spokesperson, Andrea Rush, “After a slow start to the year following the introduction of the LVR speed limits, values picked up in February and March but then following four interest rate hikes during March and July value increases plateau-ed.”

“The prospect of further interest rate rises in the lead up to the election seemed to cause some uncertainty as to whether the market had peaked and this led to a slowdown in the market during the middle of the year.”

“For Auckland and Christchurch value increases slowed while in some other centres such as Wellington, Hamilton and Dunedin saw a decrease in values during this period.”

“However, once the election was over and interest rates rises were put on hold, there was a surge of new listings and activity with the coming of spring and values began to tick upwards again in most of the main centres.”

“The return of relatively low interest rates offered by the banks with cash incentives coupled with record migration levels has since led to a strong reacceleration of values in the Auckland.”

Read the full artical and view graphs here.