Reserve Bank signals tougher stance on property investors
The Reserve Bank has warned of a severe correction in the housing market that could pose real risks to the financial system and broader economy.
In a speech this afternoon, Deputy Governor Grant Spencer was widely expected to announce the details of further loan to value ratio (LVR) tightening in an effort to cool the housing market.
However, there was no detail except that the LVRs could be tweaked and extended to other parts of the country.
"The Reserve Bank is considering tightening LVRs further to counter the growing influence of investor demand in Auckland and other regions, and to further bolster bank balance sheets against fallout from a housing market downturn. Such a measure could potentially be introduced by the end of the year," Mr Spencer said.
"A dominant feature of the housing resurgence has been an increase in investor activity, which increases the risk inherent in the current housing cycle."
At the moment Auckland investors need a 30 percent deposit, while investors in the rest of the country do not.
Mr Spencer also said that limits on how much people could borrow against their incomes, called debt-to-income ratios, could have a role to play. The Bank will investigate these further but such a measure would have to be approved by the Minister of Finance.
"The longer the boom continues, the more likely we will see a severe correction that could pose real risks to the financial system and broader economy."
Reacting to the speech, Property Investors Federation chief executive Andrew King said it was disappointing the Bank was targeting investors when supply was the major problem.
Data out this week from QV shows the national housing market is roaring away, with the biggest price increases recorded since 2004.
Newshub has obtained the latest figures from Core Logic which shows investors - known as multiple property owners - account for 45 percent of sales in Auckland.
Data for the rest of the country shows investors are active around the country, accounting for 35 percent of sales, while Auckland-based investors only account for another 5 percent in the regions. That means a total of 40 percent of sales outside the super city are to property investors.
Mr Spencer said the growing imbalances require a broad response and the Reserve Bank sees itself as part of a team effort.