New Zealand caps lending for residential property investors

New Zealand is introducing a new cap for residential property investors in the country.

The country’s housing market has been heating up for some time, with prices racing higher and higher. In July 2016, four regions hit new record high median sale prices, according to REINZ, with Auckland climbing up to an even higher $825,000.

The rise in values has been fuelled, in part, by low supply levels, prompting concerns among some that overseas investors could be snapping up houses and pricing out domestic buyers.

Indeed, several banks introduced limits on lending for overseas buyers earlier this year.

Now, the country’s Reserve Bank has confirmed that nationwide restrictions will apply to all residential property buyers, in an attempt to discourage investors from buying multiple properties to rent out.

As of 1st October, residential property investors will need a 40 per cent deposit for a mortgage loan, and owner-occupiers will need a 20 per cent deposit. In both cases, banks are still allowed to make “a small number of loans” to borrowers with smaller deposits.

Most banks have already begun to follow the new limits before the October start date, with existing exemptions to LVR restrictions continuing to apply under the new rules.

New Zealand banks restrict lending for foreign buyers

10th June 2016

Two of New Zealand’s biggest banks have introduced new restrictions on lending to foreign buyers.

Overseas investors have become a cause for concern among some professionals in the country’s real estate industry, as supply is low in some areas and prices are rising as a result.

The government, though, officially scrapped previous plans to tax foreign investors this year, arguing that data from the Land Information New Zealand shows just 3 per cent of sales in Q1 2016 went to overseas residents.

Now, two banks have imposed their own restrictions instead. Westpac Banking Corp is no longer lending to foreign borrowers with overseas income, while the maximum LTV ratio for New Zealand citizens and permanent residents with overseas income has been lowered from 85 per cent to 70 per cent.

Borrowers on temporary residence visas will only be accepted if they have a New Zealand address and a New Zealand income.

Westpac told Scoop that the move is part of an “ongoing review of lending criteria in a fast moving market”.

ANZ Bank New Zealand has changed its terms for applicants relying upon overseas income too, also capping its LTV ratio at 70 per cent. Money will also not be lent on investment properties, with no interest-only mortgages issued.

A spokesman said it was to “ensure that ANZ is appropriately positioned in the current housing environment, taking into account supply pressure in certain areas”.

The Bank of New Zealand, ASB Bank and Kiwbank have all said they have made no changes to their services for non-resident buyers.

Expats need not worry, though: the new restrictions will not apply to New Zealand citizens living abroad trying to buy a home back in their native country.


Photo: Craigsydnz