Measures to dampen property demand are on the table and in the media it’s the upping the current LVR restriction on property investors that is most favoured as the most likely action taken by the RBNZ. However it may not be the only measure as the RBNZ Deputy Governor is reportedly saying DTI (debt to income) ratios may also have a role.
On Thursday RBNZ chose not to take immediate action to curb demand despite eager encouragement from Hon. John Key. Property investors on PropertyTalk say targeting them is a short-term fix at best which may dampen demand for a few months, while they find another way into the market. Additionally there will still be high demand from immigrants and offshore buyers whom are cashed up and ready to pay top dollar for the property they desire.
An active PropertyTalk discussion on Debt To Income Rules commenced a couple of weeks ago and it’s now closing in on 10,000 views and 200 replies. The unknown of a DTI rule is clearly worrying some investors we suspect it will be a primary topic of conversation online until the RBNZ restrictions are known late 2016.
One investor on PropertyTalk explained the impact of a 4.5 max DTI on investing:
“At 4.5 if you earned $100k gross from all sources you couldn’t borrow more than $450k.”
Another investor believes the focus should be on debt payments to income:
“Debt payments’ to income ratio makes sense, and that’s what is enforced on investors in UK: gross rent should not be lower than 125% of debt payments.”
A PropertyTutors’ spokesperson said their investor clients primarily use alternative funding sources therefore their business should be largely unaffected by change to the status quo.
Any action taken by the RBNZ or Government late 2016, to further restrict property investors will more than likely result in higher than usual rent increases which in turn will fuel ‘greedy landlords’ sentiment.
This blog article was written for PropertyBlogs by Mobilize Mail.