RBNZ to rein in housing boom with investor lending restrictions

(Bloomberg) -- New Zealand’s central bank is moving to quell the country’s housing boom with restrictions on property investors to be imposed in six weeks.

The Reserve Bank will require investors across New Zealand to have a deposit of at least 40 percent, it said in a statement Tuesday in Wellington. The new rule, which tightens an existing requirement that investors in Auckland have at least a 30 percent deposit, will be introduced Sept. 1, the RBNZ said.

“A sharp correction in house prices is a key risk to the financial system, and there are clear signs that this risk is increasing across the country,” Governor Graeme Wheeler said in the statement.

“A severe fall in house prices could have major implications for the functioning of the banking system and cause long-lasting damage to households and the broader economy.”

The move may pave the way for Wheeler to cut interest rates next month to tackle weak inflation, something he’s been reticent to do for fear of stoking housing demand. The New Zealand dollar fell to 70.52 U.S. cents at 9:30 a.m. in Wellington from 71.17 before today’s announcement.

The RBNZ issued a consultation paper and is seeking feedback by Aug. 10, it said.