Financial advisors expressed shock recently when the Reserve Bank suggested that interest rates may be dropped during the coming year. After having stated that interest rates will remain the same or higher due to an overheated Auckland and Christchurch property market, the Reserve Bank may instead play a part in heating it further.
However financial commentator Bernard Hickey has said that he believes that in order to offset New Zealand’s low inflation rate, the Reserve Bank would be better off introducing regional LTV rates or telling lenders that they may only approve loans of seven to eight times the borrower’s income. Mr Hickey said that a lowering of the interest rate would only boost Auckland and Christchurch’s property market, making properties in even shorter supply.
Regional Loan To Value Rates Tricky To Implement
With LTV’s put into place by the Reserve Bank to slow the housing market, commentators are saying that some regions where rising house prices are not an issue are being disadvantaged. A regional LTV rate has been suggested to help introduce some balance for home buyers around the rest of the country, where a lowering of the 20% deposit threshold would benefit the local economy.
However others have said that the administration levels required by this would be too challenging and complicated to deal with. “If you move from Wellington to Auckland and you wind up owning two properties, if your loan for your Auckland property is subject to the Auckland LVR cap, then you get around it with your Wellington LVR,” said David Tripe, the head of Massey University’s School of Economics and Finance, who does not believe a regional LTV is appropriate.
Auckland’s Housing Shortage Hits Renters
With the university year about to start up again, students have been hunting fruitlessly for rental accommodation close to Auckland University. With the booming property market in Auckland continuing into the new year with Mum and Dad investors approaching retirement choosing to cash in and sell rather than rent their property portfolio, leading to a shortage of suitable rental properties.
With up to 150 potential applicants attending an open home for a three bedroomed house ready for rent, many students have resorted to bringing a CV, their parents and offering extra cash to try and secure a contract to rent a property.