Latest report from Westpac says LVR restrictions could be loosened further
New Zealand can expect the current market upturn – that is the rise in the number of house sales in seasonally adjusted terms at 3.4% up in October and 4.1% up in November – to persist for a few more months, according to the latest Westpac’s Home Truths report.
Westpac chief economist Dominick Stephens said one driver of the pickup has been fixed mortgage rates, which have been trickling lower in recent weeks and could fall a little further in the short term.
“We may also experience a bit of a rush to beat looming regulatory changes such as the ban of foreign buyers and the extension to five years of the ‘bright line test’ for taxing capital gains on investors who resell a property,” Stephens said.
According to the report, the RBNZ’s recent decision to loosen its loan-to-value ratios (LVRs) mortgage lending restrictions will also have a modest short-term impact. Property investors will be able to leverage up a little more, and a few more owner occupiers will be able to borrow more than 80% of a house’s value.
Stephens went on to say that Westpac remains firm on the view “that the good times will not last long.”
“Almost every factor we can think of is lined up against the housing market,” he said. “Net migration is dropping away sharply; fixed mortgage rates are likely to rise next year; foreign buyers will be banned; property investors’ tax treatment will deteriorate; and sentiment will take a knock because people know that further deleterious tax change is likely, including the possibility of a capital gains tax which would reduce house prices significantly.”
The only positive driver seen is the RBNZ’s LVR restrictions, which could be loosened further, Stephens said.
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Westpac chief economist Dominick Stephens said one driver of the pickup has been fixed mortgage rates, which have been trickling lower in recent weeks and could fall a little further in the short term.
“We may also experience a bit of a rush to beat looming regulatory changes such as the ban of foreign buyers and the extension to five years of the ‘bright line test’ for taxing capital gains on investors who resell a property,” Stephens said.
According to the report, the RBNZ’s recent decision to loosen its loan-to-value ratios (LVRs) mortgage lending restrictions will also have a modest short-term impact. Property investors will be able to leverage up a little more, and a few more owner occupiers will be able to borrow more than 80% of a house’s value.
Stephens went on to say that Westpac remains firm on the view “that the good times will not last long.”
“Almost every factor we can think of is lined up against the housing market,” he said. “Net migration is dropping away sharply; fixed mortgage rates are likely to rise next year; foreign buyers will be banned; property investors’ tax treatment will deteriorate; and sentiment will take a knock because people know that further deleterious tax change is likely, including the possibility of a capital gains tax which would reduce house prices significantly.”
The only positive driver seen is the RBNZ’s LVR restrictions, which could be loosened further, Stephens said.
Related stories:
TSB to repay customers after miscalculating break fees
Australian brokers to reveal lending data under reforms
