Mortgage lending shows NZ property market continues to run hot

Mortgage lending shows NZ property market continues to run hot
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New Zealand's housing market continued to run hot in February with Kiwis snapping up real estate.

On Wednesday afternoon the Reserve Bank released the mortgage lending figures for February 2021, showing Kiwi homeowners borrowed a staggering $7.6 billion - up 36.2 percent (more than $2 billion) compared to the same time last year.

February was the sixth month in a row the annual change has been at least $1.6 billion, CoreLogic reported.

Both owner-occupiers and investors saw solid annual growth, with investors borrowing $1.8b (up 63.5 percent year-on-year) and owner-occupiers, not including first home buyers, borrowing $4.5 billion (30.8 percent increase).

First-home buyers only borrowed $1.182 billion in February.

But CoreLogic's senior property economist Kelvin Davidson said the most interesting takeaway from the new statistics was the breakdown by loan-to value-ratio (LVR).

"The figures also showed that high LVR investor lending has slowed pretty sharply so far in 2021, even though the official rules didn’t kick in again until 1st March," he said. 

"No doubt the Government will be pleased to see that slowdown, and on top of yesterday’s measures (e.g. bright-line extension, ending of interest deductibility), we suspect more is still to come for investors (e.g. limits on interest-only lending)."

LVR restrictions were dropped in April 2020 amid fears the COVID-19 pandemic would drastically impact the economy and cause house prices to plummet. However, house prices have gone in the opposite direction since then, climbing to record highs, which prompted the Reserve Bank to reintroduce LVRs.

The statistics come just a day after the Government announced a raft of new measures intended to "deliver a more sustainable housing market". They included an extension to the bright-line test and income cap increases for First Home Grants, which are intended to help first-home buyers.

"Of course, the game is now changing for investors and the Government certainly wants to enable first-home buyers to continue to buy property," Davidson said.

"In amongst all of this, however, in some ways we might be ‘lucky’ these are the issues on the table, and not the converse scenario of large falls in property values and the financial stability risks that would involve."