Steps to subdue Auckland property prices

Without delay I will step right in with the news of the hour:

The Reserve Bank and John Key have announced measures which will affect investors in the Auckland property market. The reason behind the proposed changes is to reduce the financial risk a downturn in the property market could cause, without affecting the rest of New Zealand.

It’s likely that we’re going to start seeing the new rules take effect from 1 October 2015. Here are a few points worth noting:

  1. The Reserve Bank has proposed that investors will need to put down a 30%, deposit on Auckland investment properties.
  2. A residential property investor loan is defined as: any retail mortgage secured on a residential property that is not owner-occupied.
  3. These rules only pertain to properties within the Auckland Council area. You can see where the borders are here (http://maps.aucklandcouncil.govt.nz/aucklandcouncilviewer/)
  4. Good news for the regions outside of the Auckland Council area! The Reserve Bank has increased the LVR limits from 10 to 15%, meaning the banks now have more funds available to lend to those buying outside of the Auckland Council region with less than 20%, deposit.
  5. John Key announced there will be a capital gains tax on properties sold within two years. Exceptions to the new rule include sales on deceased/inherited estates, properties that are transferred as part of a relationship settlement, and in cases where the property sold has been the seller’s main home.
  6. The government has also put in a requirement to identify foreign investors by requiring them to have a New Zealand tax number.

Note: The finer details are yet to be finalised and consulted on. We will provide feedback as soon as it is published. One question I’ll be wanting to know the answer to is how much equity or deposit would we be allowed to raise against a client’s owner-occupied property?

So what’s the bottom line? If you’re hoping to invest in an Auckland rental property then you need to move very quickly. We expect the banks to start imposing the lending rules soon in anticipation of the 1 October deadline. Give us a call if you have questions about any of this.

My initial thoughts are that although these rules will have an impact, it won’t significantly damper the rising property prices in Auckland. We all know about the shortages in the housing market, and the above measures would only remove a few people from the market. Overall, I think it’s a step in the right direction, but more needs to happen.

If you have any questions about what I’ve discussed this month, just let me know.

Nick

0211 9444 24

nick.kotze@loanmarket.co.nz