ASB has raised the minimum deposit required for investors up to 40%, in a bid to address “the rapid growth in home lending volumes.”
ASB is the second bank to move its investor deposit requirement up from the previous 30%, with ANZ having made the move back in December. The other main banks - ASB, Westpac, Kiwibank and BNZ - had indicated at the time that they would not be matching the requirement.
ASB chief executive officer Vittoria Shortt expressed concern over the “unsustainable” demand for investment properties, and said that ASB had to “play its part” in trying to promote a sustainable housing market.
Read more: ANZ lifts deposit requirements for property investors
“We’re concerned the continued high levels of investor demand are unsustainable, so effective immediately we are increasing the deposit required from investors to 40% from the current 30%,” Shortt said.
“We are very focused on being a prudent and responsible lender. We all have to play our part, and this decision to immediately increase the deposit required from investors is about ensuring a balanced and sustainable housing market, which is in the best interests of all New Zealanders.”
Shortt noted that this is the second time in three months that ASB has adjusted its LVR restrictions, having reinstated a 30% LVR limit back in November when the Reserve Bank announced its intentions to restore LVR limits in March of this year.
She says pre-approvals that have already been completed will not be affected, and that the change will only apply to applications which have not yet been conditionally or fully approved.
Read more: ANZ economists doubt sustainability of housing market strength
Commenting on the potential impact of LVR limits on the housing market, research analyst Kelvin Davidson noted that while setting the bar at 30% may have a limited impact, the Reserve Bank may look at lifting the requirement to 40% - something which would raise the bar significantly for potential investors.
“I don’t think the Reserve Bank reinstating LVR restrictions in March is going to be a major change, and certainly not in terms of housing affordability,” Davidson said.
“But my hunch is that the Reserve Bank could get to 40% sooner rather than later - they’ll start with 30%, but it may not be too long before we see them going up to 40%. That’s a move that’s certainly made a difference to the investor share of the market before, so that might be what needs to happen.”