Imposing restrictions on loan-to-value ratios on home loans would have the opposite effect of what is intended, says BNZ’s chief economist.
Alexander said he did not think the Reserve Bank would force banks to impose higher loan-to-value restrictions to slow the housing market.
He said affordability varied across the country and measures put in place to counter Auckland’s price rises would be wrong for other parts of New Zealand – and young buyers would be virtually shut out of the market while offshore buyers were unaffected.
“Investors would down-shift to buying lower-priced properties in order to meet a lower LVR, thus increasing competition in the price range first-home buyers are looking.”
He said LVR restrictions would not be popular.
“The impact of maximum LVRs would basically be to prevent young NZ-domiciled Kiwis from buying property and opening up greater opportunities for offshore cashed up buyers. Now who on earth is going to vote for that?”
Meanwhile, he expects the house price boom to last another three years.
He says it bears the closest resemblance to the price rises of the 1990s, not the 2000s.
“One of the phenomena of the 1990s cycle was that it spread out of Auckland to the rest of the country. Commentary over the past three weeks has started to revolve around that theme.”
He says Auckland house prices are now up 27% from their 2009 low, Christchurch 23% and Wellington 11%.
Source: Landlords.co.nzcomments powered by Disqus