Is Further Action To Curb Investors Required?

nzhousesIncreases in property sales prices have flatlined and property types preferred by investors are taking the biggest hit.  Trade Me Sales Price Index reports sales prices are down for units and apartments while large homes of five beds or more are very strong particularly in Wellington.  Does the RBNZ or Government need to take further action to curb property investors appetite?

The current LVR restriction on investors which requires a 40% deposit has put many investors on the back foot and data from sources like Trade Me Sales Price Index proves there are less new rentals coming online.   Long time investors say the restriction is hurting and demand for more rental properties will just push up rents.

This week a PropertyTalk.com regular posted a summary of main the speakers points from NZPIF Conference held at New Plymouth over the weekend and it included thoughts on the RBNZ’s focus and next move.

“The RB is trying to get inflation up, household debt down, asset prices to stabilize, and to prevent the NZ dollar from getting too high. A complex balancing act. The short answer is that we can expect more restrictions from the RB including debt-to-income ratio limits and interest rates to move independently from the OCR.”

Also at the NZPIF Conference sociologist Kay Saville-Smith spoke of the movement in the residential property market.  Less than fifty percent of all residential homes are now owner-occupied therefore more people are renting and renting for longer.  She went on to say if a person has reached the age of 40 and doesn’t own their home they are less likely to do so at all.  They will be renters for the rest of their lives.

Further restrictions on investors may seem a smart move.  However it’s not going to end well, it’s likely to do more harm than good. Prospective first home buyers are saving for their deposit while renting. The LVR restrictions and further measures like the much talked about Debt to Income ratio will see push up rents.  Cash flow will be squeezed as rents rise and prospective first home buyers will remain renting for longer putting more supply pressure on the rental market.

The smart move would surely be to hold off on further action on investors.


This blog article was written for PropertyBlogs by Mobilize Mail.

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