Will restricting LVR’s have any impact?

restrictionsThis is short discussion article really as I’d like other peoples views. My take is a real concern at the proposed intervention by the Reserve Bank on high LVR mortgages.

The whole premise is flawed as Auckland house prices have nothing to do with demand and everything to do with supply.

Less than 10% of all purchases this year have been as a result of 90% plus lending. The main factors affecting demand (apart from a cronic lack of supply) are an increasing population and local and overseas investors. The Government have in a way compounded this by announcing large infrastructure projects which will make Auckland even more desirable.

By even mentioning these proposals all that’s happened is a panic amongst ordinary Kiwi first home buyers who are calling me and I guess others, scrambling to ‘get in’ before the restrictions take place. Whether they do or don’t doesn’t matter, it’s the threat that counts. All this does is push prices further and more dangerously, makes first home buyers take huge risks in bidding at Auctions when they really should not. I have had to dig more than one out of a hole, the RE industry has a lot to answer for when promoting Auctions as a way to sell the ordinary property. With some exceptions the only ‘winner’ at an Auction is the Agent.

As far as the National Party are concerned I am convinced that this will blow up in their face. Ordinary Kiwis being told they cannot buy their own home whilst they watch others, both local and overseas, purchase will rankle and going back to my first point. It just won’t work because supply is the issue, not the demand.

Thoughts?

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