The Reserve Bank’s relaxation of LVR restrictions will breathe life back into the real estate market as we approach summer and will be welcomed by budding first-home buyers, according to Century 21 New Zealand’s national manager Ryan Mitchell.
Restrictions to high-LVR lending were initiated in 2013 to cool a soaring property market, and according to Mitchell, they have since largely had their desired effect.
“Reviewing and relaxing the lending restrictions is something many in the industry, including the Real Estate Institute (REINZ) and Century 21 New Zealand, have been calling for over the past year,” he stated.
“In terms of the deposit amount required, it will make a big difference – especially for first-home buyers. It’s been difficult for a long time to try and secure that deposit amount, so this makes it a lot more feasible for many people to buy. Even from an investment point of view, the changes there will definitely create more activity.”
Mitchell says the Reserve Bank will nonetheless keep a ‘tight rein’ on credit conditions, as the relaxed restrictions could well lead to another influx in price. With mainstream banks being allowed to open their doors wider, he says the new rules may also mean buyers stepping back from the second-tier lending market.
“The majority of the banks now are able to offer more affordable lending,” Mitchell said.
“Previously, they may have been able to jump through certain hoops and allow borrowing to take place – but this new change is going to allow for a lot less risk for people compared to second-tier lenders, which many people have looked at in the past when they were out of options. This should really make things a lot easier for them, and allow them to get onto the property marketplace a little more affordably.”
What do you think of the LVR restrictions? Should they be eased further? Let us know via our main page poll.