Will easing of LVR lift property prices to recovery?
RBNZ to ease loan to value ratio (LVR) restrictions
Having better access to credit helps home buyers to get started on the property ladder
The risks posed by high-LVR lending have reduced, so the current restrictions may be reducing efficiency.
Owner-occupiers will be able to borrow on a loan to value ratio of more than 80% with banks advancing up to 15%.
Hawkesby said national house prices have fallen towards a level more consistent with medium-term fundamentals, and lending conditions have tightened significantly.
According to the latest RBNZ figures, mortgage borrowing has dried up, with March 2021 seeing a record high of nearly $10.5 billion borrowed.
The RBNZ is involved in a long, drawn-out process to add a debt-to-income restriction to its 'macro-prudential toolkit'. It says the housing market is currently in a downturn, so there's no immediate need to implement DTI restrictions.
The RBNZ had wanted a DTI tool since at least 2016 but struggled to secure government support. It finally gained support in June 2021.
My Thoughts:
Improving home ownership has always been the NZ government’s agenda. Ensuring first time home buyers have access to credit make it easier for kiwis to get started on the property ladder. With the potential easing of LVR, it helps to draw greater demand back into the housing market and we could potentially see a beginning of a long term recovery. For investors, this is a good time to position your portfolio for growth.
