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Sweeping extensions to the Reserve Bank's contentious loan to value ratio (LVR) banking restrictions tightens lending to Auckland property investors, but loosens lending elsewhere around the country.
The changes have been met with surprise and, in some cases indifference, by economists and analysts questioning whether Auckland's rampant prices will be corralled.
The introduction of regional LVRs was forecast in Business & Money on Saturday.
Auckland is the Government's housing problem child, where demand outstrips supply and median prices have reached an eye-watering more than $700,000 per home, far higher than the previous property bubble in 2007-08.
Auckland's record median price was up about 18%, year-on-year to $720,000 for both March and April, while the rest of the country in April, excluding Auckland, rose less than 1% in the year to $353,000, less than 50% of Auckland values.
Any further imposition of country-wide LVR restrictions would be detrimental to nearly all markets outside Auckland.
Reserve Bank governor Graeme Wheeler said Auckland's median house price was 60% above its 2008 level and prices had been rising rapidly since late last year.
''Prices in the Auckland region have become very stretched, increasing the risk of financial instability from a sharp correction in prices,'' he said in a statement yesterday.
The LVR, introduced in October 2013, was unpopular, as it initially locked out first-home buyers by increasing the size of deposit required and capped banks' lending extent. That later softened, when new-build homes for first-timers were excluded from the LVR restrictions.
Westpac chief economist Michael Gordon said the Reserve Bank had targeted the ''frothiest'' part of the market, Auckland property investment, but described the three major changes as being ''on the mild side of what we braced for''.
Westpac would, therefore, not be changing its earlier house price forecasts, still anticipating 10% nationwide house price inflation this year, and 4.5% next year.
Mr Gordon said the Reserve Bank's estimates the new restrictions could reduce Auckland house price growth by 2% to 4%, translating to 1% to 2% nationally, and was ''not a huge impact''.
He noted just 2% of property investor loans had LVRs above 80%, or a deposit of less than 20%.
''So a 70% limit [30% deposit] on property investor loans is actually not that tight,'' Mr Gordon said.
Mr Wheeler said: ''We are proposing these adjustments to the LVR policy to more directly target investor activity in the Auckland region, where house prices relative to incomes and rent are far more elevated than elsewhere in New Zealand.''
The policy objective was to promote financial stability, by reducing the rate of increase in Auckland house prices, and improve the resilience of the banking system to a potential downturn in the Auckland housing market, Mr Wheeler said.
Property Institute chief executive Ashley Church described the LVR changes as a ''mixed bag, of good and bad measures''.
He applauded the easing of the LVR restrictions outside Auckland, to turnaround falling prices in some regional centres, and in retaining the exemption for new-build homes or apartments.
However, he criticised the now required 30% deposit in Auckland as ''more about posturing than pragmatism'', given new-home Auckland buyers were already closed out of the market.
''The policy had no impact on house prices at 20% and it will have no impact at 30%,'' Mr Church said.
It would not be a ''particularly onerous imposition'' for property investors to find an extra 10%.
''This won't be the silver bullet that the Reserve Bank clearly hopes it will be,'' he said.
However, ASB chief economist Nick Tuffley said the bank's proposal seemed ''appropriate'', given housing market pressures were ''most acute in Auckland'', but continuing the exemption to assist new home construction.
He said the proposed ''clamp-down'' on Auckland residential investment properties would help the Reserve Bank contain the financial stability risks it had identified around the property sector.