Property expert predicts even tougher year for first home buyers with loan-to-value ratios set to return

Reintroducing loan-to-value (LVR) limits this year is "ultimate stupidity" because it won't make any difference to house price inflation, a property expert claims.

That contradicts predictions from other experts who say the reintroduction of LVRs - the size of a loan in comparison to the value of a property - will start to slow the property market. 

Data from released on Tuesday shows asking prices continue to skyrocket throughout the country. 

"Ten years' worth of data shows, in the long term, the value of property in New Zealand increases steadily in nearly every region," it said in a statement.

"This suggests that property is still a sound investment for Kiwis."

Contrary to forecasts that property prices would fall due to the COVID-19 pandemic and an economic recession, house prices climbed to record highs as interest rates plummeted.

But Quotable Value (QV) has said something that will mitigate that in 2021 is the reintroduction of LVR limits. The Reserve Bank (RBNZ) confirmed in November that it would reintroduce them from March. 

"When the LVRs do eventually kick back in just as the weather begins to cool in March, I expect the property market will start to cool as well," QV general manager David Nagel said late last month.

Property expert Ashley Church disagrees.

"They'll make absolutely no difference to house price inflation, and will dash the dreams of a section of first-home buyers again - it's sort of an exercise of the ultimate stupidity," he told The AM Show.

Ashley Church.
Ashley Church. Photo credit: The AM Show

"I would be very surprised that if, at some stage during this year, [Housing Minister] Megan Woods doesn't introduce a suite of initiatives around trying to assist first-home buyers into the market - that's largely a reflection, I think, of the fact that the Government has finally recognised that there's actually not much they can do to cool the market," said Church, the former Property Institute of New Zealand boss.

Earlier this month, CoreLogic said house prices would stop going up. Again, Church disagreed.

"House price inflation will continue right through 2021 - I'm pretty confident house prices right throughout New Zealand will be strong for 2021."

Economist Cameron Bagrie told The AM Show the economic success of New Zealand's housing market has come at a social cost.

Bagrie. Photo credit: The AM Show

"You can't just look at this through an economic lens - you've got to look at it through a social lens as well."

The re-introduction of LVRs for household borrowers means the amount of new bank lending at LVRs greater than 80 percent will be restricted to 20 percent of new borrowing.

For property investors, up to 5 percent of new bank lending will be at LVRs greater than 70 percent.

Finance Minister Grant Robertson penned a letter to RBNZ Governor Adrian Orr in November requesting him to consider how it can help to stabilise house prices, a request that was rejected by the central authority.