The Reserve Bank's loan to value ratio (LVR) restrictions
on banks' lending has seen a large decline in the lower end
bracket of Dunedin house sales, and an increased workload to
As with indications from the national data from the Real
Estate Institute of New Zealand (REINZ), the numbers of house
sales are declining, while the median price is rising, the
latter likely because the higher price brackets are making up
a larger percentage of sales.
An unanticipated consequence of the LVR, may be buyers having
to dig deeper yet again to supply a wider range of reports
for insurers and banks.
Nationally, the sub-$400,000 bracket historically makes up
more than half of overall sales, and compared with a year
ago, the number sold for March was down almost 22%, from 4042
Conversely, house sales in the $600,000 to $1 million bracket
rose 9.4% to 1616, while sales above $1 million rose 21%,
from 492 a year ago to 597 last month. REINZ spokeswoman for
Otago, Liz Nidd, said the impact of the LVR restrictions has
caused Dunedin sales to fall in the lower bracket, which for
Dunedin is the sub-$300,000 segment.
''The LVR application, as a broad brush stroke, has been
crazy,'' Ms Nidd said; citing Dunedin house sales in March
falling 16%, from 225 homes a year ago to 189 this year.
While the LVR started in October last year, there appeared to
be little immediate, measurable effect.
However, so far this year in Dunedin, the median monthly
house price had gone from $273,000 in January, down to
$270,000. then for March leapt 3.7% to $280,000; having been
$265,000 in March 2013.
The Dunedin sales numbers in January were down 6.2% to 134
homes, February was down 11.6% to 168 homes and March was
down 16% to 189 homes.
For the three-month period, there were a total 66 fewer
Dunedin homes sold than during the corresponding period a
Ms Nidd said ''The work required to get each deal together
has become huge ... up to 80% of sales now require an
electrical report,'' she said, alongside more common LIM and
''Many insurers now want a [electrical] report on properties
more than 30 years old,'' Ms Nidd said.
Subsequently, the need for more information meant more time
and decision-making before a purchase could be completed.
''It is the nature of older homes, 50 or 60 years, that
something will crop up from an electrical or building report.
Then [buyers] want to renegotiate the price,'' she said.
In the Dunedin selling bracket of $180,000 to $200,000, Ms
Nidd said to get deals through ''they had to be superglued
together'', because of the increased scrutiny from banks and
insurers, plus the LVR restrictions.
On the REINZ data for January, Ms Nidd said she was
continuing to see the proportion of sales under $300,000 at a
lower level as first-home buyers came to terms with the Loan
to Value changes.
Ms Nidd noted February was a quieter month than expected,
with just 160 sales, compared with 181 last February, which
contrasted with 330 new listings during February.
''This is being felt at the front line as there seems to be a
normal number of properties coming to market, [but] with
fewer buyers to attract,'' she said.
Ms Nidd said there were also indications of a market which
was ''very risk averse''.