Property investors will need a 40% deposit

The Herald reports:

Property investors will need a 40 per cent deposit under tough new restrictions revealed today.

The new rules are being urgently introduced in an attempt to put a lid on New Zealand’s spiralling property prices.

Reserve Bank Governor Graeme Wheeler has outlined the new rules this morning, and told banks they will be expected to act immediately.

The new loan-to-value ratios (LVRs) would take effect on September 1, but the Reserve Bank wants banks to “observe the spirit of the new restrictions” in the lead-up to the new policy.

The rules are:

Investors
• Restrictions for investor lending extended from nationwide from Auckland only
• Banks will be forced to require a 40 per cent deposit – up from 30 per cent – for at least 95 per cent of the loans they make in this area.

Home buyers
• Restrictions for owner-occupier lending extended from Auckland to nationwide.
• Required deposit level remains at 20 per cent for at least 90 per cent of bank lending.

It will be interesting to see how much impact this has. The large property investors may have enough capital that this won’t impact them greatly.