The measures imposed last year by the RBNZ and the Government worked albeit for just a couple of months. Property prices dropped and we all took a breather from October through to February this year. The property data for March presented a rebound in both property sales and prices in Auckland and many other regions and this month is also buoyant. Therefore it’s likely more restrictions aimed at limiting demand for Auckland property will come into play soon.
The proposed restrictions tabled so far are: a possible land tax on foreigners buying property, rising the deposit required by investors and increasing the capital held by banks. While we all know increasing the supply of homes is the overriding solution to Auckland’s housing crisis, it’s a long term one therefore what’s left to work with right now is demand and implementing measures that will take some buyers out of the market to free up property for those who really need it.
Banks holding more capital makes sense as it provides more of a financial buffer during a falling market. Paul Glass’s article on NZHerald stated banks only need to hold $3 of equity for every $100 they lend. That’s just 3%. Banks operating in New Zealand may hold a higher equity stake and increasing it further is a likely measure along with setting higher deposits requirements for property investors.
BNZ Economist, Tony Alexander’s article on NZHerald predicts property investors may soon need a 50% deposit for Auckland property and a 30% deposit for other regions. This would be a very interesting development and it would hurt the economy, and potentially impact on many jobs.
Finally a land tax on foreigners purchasing property in New Zealand has been proposed, however some experts say it may also catch non-resident New Zealanders. Tony says it’s unlikely to work as offshore investors consider property in New Zealand cheap compared to other leading cities.
Watch this space.
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This blog article was written for PropertyBlogs by Mobilize Mail.