Data released by the Reserve Bank of New Zealand (RBNZ) revealed that property investor lending has cooled materially since the RBNZ implemented new loan-to-value ratio (LVR) restrictions targeting investors, which officially came into effect on 1 October 2016, although banks began informally applying the rules since they were first announced in mid-July 2016.
According to the RBNZ, the value of investor mortgages taken out in April 2017 was down by 48% versus April 2016, whereas the number of mortgages was down 49%. In the hotspot of Auckland, the value of investor mortgages was also down 43% year-on-year, whereas outside of Auckland investor mortgages were down 62%.
Auckland investors’ share of mortgages by value were 42% in April – up 3% on March, but a significant moderation from the 48% peak recorded in June 2016:
The share of investor loans in the nation as a whole was 25%, up 1% from March but down significantly from the peak of 35% recorded in June 2016. Whereas the rest of New Zealand was 9%, down from 20% in March 2016.
The slowing in investor mortgage demand follows new loan-to-value ratio (LVR) restrictions targeting investors from the RBNZ, which officially came into effect on 1 October, although banks have been informally applying the rules since they were first announced in mid-July.
As shown below, investors nationally comprised 25% of total lending in April by value (15% by number), whereas first home buyers accounted for a pitiful 14% of lending by value (8% by number):
Moreover, the share of new loans that are interest-only was 33% in April down from 41% in May 2016, whereas the share of new investor loans that are interest-only was 50% in April, down from the 55% recorded in June 2016:
Thus, investor LVR restrictions from the RBNZ continue to have an impact. However, it remains to be seen whether the dampening effect will be maintained, nor whether it will rein-in house price growth, given the record immigration-fueled population growth into New Zealand and Auckland in particular. So far, the impact seems to be encouraging, with New Zealand (Auckland) house price growth slowing materially.
Regardless, to the RBNZ’s credit, it has for several years tried to pro-actively manage housing risks, which is a far cry from APRA/RBA, which implemented weak measures far too late.