Call to limit LVR restrictions to where market hottest

Wellington’s economic development agency wants loan-to-value restrictions removed immediately from parts of New Zealand where the housing market is not over-heated.

Thursday, May 29th 2014, 12:00AM

by The Landlord

Chair Paul Mersi said the success of the LVR restrictions in slowing house price and household credit growth was bad news for cities where house prices had not risen much.

Apart from Auckland and Christchurch, most of the country is experiencing minimal growth in house prices.

Mersi said: “For any town, city or region within New Zealand not ‘suffering’ from an over-heated property market or high household credit growth, a nationwide policy such as the LVR restriction si like having a bucket of cold water poured over you on a wintry day.”

He said there was no reason why LVR restrictions could not be applied regionally.

“With a flick of the pen, the Reserve Bank could restrict its LVR policy to loans secured on properties situated in those areas of the country which it has concerns about. Those areas can be readily defined by existing local authority boundaries and the banks know the addresses of the mortgaged properties, so it should be simple.”

It might also encourage first-time buyers to look to other areas, he said.

“The Reserve Bank’s recently-expressed view that LVRs have had an effect on reducing house price inflation and household credit growth seems to be based on the national position. It is disappointing that there seems to have been no attempt to determine the impact that the policy has had either in the cities or regions that triggered the need for the policy, or on the rest of New Zealand where such impacts are the last thing they need.”

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