Sentiment on PropertyTalk is investors will carry on despite their initial shock at the sudden announcement that come 1st September they’ll need a 40 percent deposit to purchase an investment property nationwide.
A discussion commenced online a few minutes after the RBNZ announcement with replies from property investors showing many of the signs of grief. Shock and anger then acceptance and hope are evident in many of the replies.
Where there’s a will there’s a way and property investors are used to finding solutions to curly challenges so this is considered just another challenge they’ll overcome and the answer maybe with second tier and peer-to-peer lending which does not come under the RBNZ LVR restrictions.
The RBNZ say the latest restriction is to buffer against possible financial instability due to house price increases and the increased risk a sharp drop in property prices would have on the financial system, the functioning of the banking system and the economy.
The LVR restriction is targeted at investors due to the higher risks associated with investor funding which makes up 55 percent of banking system assets and it will take effect from 1 September 2016 – but banks have been urged by the RBNZ Governor to abide by it immediately.
According to the RBNZ news release evidence suggests LVR restrictions improve bank balance sheets by reducing the risk associated with riskier mortgages and they also dampen housing demand.
What are the new LVR restriction rules?
- No more than 5 percent of bank lending to residential property investors across New Zealand would be permitted with an LVR of greater than 60 percent (i.e. a deposit of less than 40 percent).
- No more than 10 percent of lending to owner-occupiers across New Zealand would be permitted with an LVR of greater than 80 percent (i.e. a deposit of less than 20 percent).
- Loans that are exempt from the existing LVR restrictions, including loans to construct new dwellings, would continue to be exempt.
As from 1 September it will be trickier for new investors to get onto the rental property ladder and the revised LVR restriction also hurts first home buyers whom now need to cough up a twenty percent deposit. Seasoned investors however will carry on and property traders especially PropertyTutors investors must be thinking all their Christmases have come at once now they’ll have less competition. More on this topic soon.
This blog article was written for PropertyBlogs by Mobilize Mail.