Will the recent relaxing of the Reserve Bank’s LVR rules open up the market and make home buying easier?
We don’t think so. Not until the banks and the Reserve Bank get on the same page.
Here are two reasons why.
Firstly, banks were approving high LVR lending, up to 15% of their overall lending, before the lockdown.
In recent times there has been no problem getting high LVR lending for owner occupied purchases. The main restriction is that most banks would only do high LVR lending for their own clients, but we expect to see this change.
Already one bank has announced that they will do high LVR lending for new customers. However, considering that this type of lending was previously quite easy to get anyway the impact on the housing market is likely to be minimal.
Secondly, the banks aren’t playing ball with the Reserve Bank for property investors.
Since high LVR lending for owner occupied situations has been relatively easy, it’s the investors who are left waiting to see if they’ll get any easing of LVR rules. To date the banks haven’t moved on the requirement to only do 70% lending on investments, even though the Reserve Bank has given them the green light. If the banks open this door, it will cause a flood of market activity.
The property investor community is brave. They know that NZ has a housing shortage and that houses are likely to retain their values. They play a long game.
So what will increase housing market activity?
First home buyers need to borrow some of confidence from property investors and get out there and buy. Regardless of what the market does over the next 12 months everyone still needs a house to live in. Plus the desire for home ownership is never going to go away. Ignore the naysayers and go and get your piece of real estate.
What the economists and naysayers can never measure is the human spirit.
We’ve had recessions and depressions before. We’ve had world wars and trade wars before. The economy and property market has always recovered and it does so because people find a way to win. It is not within the nature of the human spirit to accept defeat and give up. That’s ultimately why all of us should have confidence that regardless of the challenges our economy currently faces we will recover and we will prosper.