LVR restrictions hurt Dunedin house sales. Photo by Gerard
House prices are being picked to continue to rise for the
year and flagging sales numbers get a boost, before hitting a
''pervasive slowdown'' in 2015, according to Westpac economist
The housing market, in not only residential sales but overall
construction supply and demand, remains a key issue for the
Government, opposition and Reserve Bank this year.
While monetary policy focuses on restraining inflation, the
Reserve Bank is most alarmed at housing inflation. New
Zealand's 2007 housing and property bubble hugely undermined
the financial markets, investors and households.
The Reserve Bank's loan to value ratio (LVR) restrictions,
which began last October, suppress the extent of banks'
lending to people with less than a 20% deposit and are now
acknowledged to be removing many national sales in the
under-$400,000 bracket and, in Dunedin, the under-$300,000
However, actual house prices beyond the $400,000 bracket are
climbing, with the national median REINZ up 10% at $440,000
while QV's average national values for March were up 8.8%, at
Mr Stephens said, in Westpac's most recent ''home truths''
monthly comment on housing, that the drivers of the recent
market slowdown were obvious.
''The Reserve Bank's LVR restrictions have led to a drastic
reduction in lending to first-home buyers, and mortgage rates
have risen sharply,'' he said.
Before the LVR restrictions, some bank's portfolios amounted
to holding 30% of the riskier less than 20% deposit loans,
but they had collectively hauled back, not just to the
Reserve Bank's preferred 10%, but on average about 6%.
''Banks have clamped down too hard on lending to first-home
buyers - [and] as they they loosen up in the near future, the
market will get a little boost,'' Mr Stephens said.
Mr Stephens questioned conclusions of recent housing data,
from both government agency Quotable Value (QV) and the Real
Estate Institute of New Zealand (REINZ).
He said QV data was based on settlement dates, reflecting
sales negotiations completed up to three months earlier,
while REINZ's ''house price index'' may be skewed by the
decline in cheaper housing, and subsequent rise in median
prices with more higher priced homes.
''The Reserve Bank's mortgage restrictions have drastically
reduced sales of low-price houses, while leaving sales of
higher-priced houses broadly unchanged,'' Mr Stephens said.
ASB economist Daniel Smith said housing market activity had
continued to ease in March, although that impact was mostly
visible outside Auckland and Canterbury.
Low levels of inventory continued to push prices higher in
Auckland and Canterbury, he said.
'' The rate of house price appreciation has only eased
marginally from mid-2013,'' Mr Smith said.
He expects the OCR will rise at the review next Thursday and
another two hikes are anticipated during the rest of the
''Higher interest rates should ease housing market pressures
further,'' Mr Smith said.
He said scrutinising the number of days taken to sell a
property was an indicator of housing market pressures, saying
the sector in general looks to be ''holding fairly stable''.
Days to sell hit a low of 33 in June 2013, and had eased to
around 35 or 36 days since the LVR restrictions came into