On the eve of new mortgage lending restrictions coming into
effect, there are signs the first-home-buyer market in
Auckland has gone off the boil.
Open homes in the sub-$500,000 price range in Auckland were
unusually quiet over the weekend, apparently because buyers
knew they would be unable to close a deal before the new
Reserve Bank rules take effect tomorrow.
The change limits the number of home loans banks can make on
purchases with a loan-to-value ratio greater than 80 per cent
- meaning most would-be owners need to have a 20 per cent
The apparent cooling of the market comes as a Herald-DigiPoll
survey reveals almost 60 per cent of New Zealanders think
house prices should come down to help first-home buyers.
Just under 14 per cent said they weren't worried about
house-price increases and 21.7 per cent said they wanted only
Sam Bellairs of Glover Real Estate in West Auckland said that
over the weekend, the agency's three offices - in New Lynn,
Green Bay and Titirangi - received only one offer on a house
despite there being a usual number of listings. There were
usually at least five offers.
The offer was on a $435,000 three-bedroom property in Glen
Yesterday, the Titirangi office received only one phone call,
compared with the usual two dozen on a Sunday.
"The phone has certainly got a lot quieter," Mr Bellairs
"That's a bit unheard of. It is going to have an effect,
there's no doubt about it. We're experiencing that. I'm sure
if we do, everybody else will."
One couple had put an offer in on a house last week for
$505,000 but had to pull it because their bank had cancelled
its loan pre-approval.
The ASB Bank said last week that it was withdrawing
outstanding loan offers for borrowers with less than 20 per
cent equity so it could meet the Reserve Bank's new rules.
The regional sales manager for Bayleys Counties, Raymond
Mountford, said a survey of his agents in Takanini, Karaka
and Papakura yesterday showed open homes over the weekend
were quieter than usual.
Auckland mortgage broker Bruce Patten of Loan Market, which
administers lending through ASB, said his company had a rush
of calls from worried customers after the Reserve Bank
announcement, and again last week after ASB's change.
The bank sent out letters on Wednesday advising of the change
for the company to give to its customers - two days after the
public announcement and nine days before its final date (this
Friday) for cancelling the pre-approvals.
"I think if they'd given it any longer, it would have created
a bit of a false economy, with people going out and buying
for an unrealistic price just for the sake of getting into
the market," Mr Patten said.
The Reserve Bank expects its new rules will affect as many as
8000 of the 20,000 to 30,000 families, couples and
individuals who seek to buy their first home each year.
The policy is intended to reduce the chances of a collapse in
the housing market and the damage a crash would inflict on
home buyers, banks and the economy.
Housing Minister Nick Smith said steep falls in house prices,
in the order of 10 to 20 per cent, could cause significant
He said there was no question that the 16 per cent increase
in Auckland house prices in the last year was unsustainable.
The national median house price in August was $390,000, while
Auckland's was $550,000.
The Government wanted the median house price to be about four
times the median household income.
Last year, Auckland house prices were 6.9 times the median
Labour Party finance spokesman David Parker said nobody
wanted to lurch from rapidly rising house prices to a market
But the poll showed "New Zealanders are not yet ready to give
up on the Kiwi dream of owning your own home, and they
recognise that the house-price inflation we've got in our
main centres like Auckland threatens that".