Restrictions in Place for Auckland Property Investors

June 11, 2015 at 7:51 PM

The Reserve Bank is targeting Auckland property investors with new lending restrictions.

It sees the elevated market in our biggest city as a key risk to New Zealand's financial system and is looking to take the heat out of it by making further adjustments to the LVR policy.

In the Auckland region, house prices relative to incomes and rent are far more elevated than elsewhere in New Zealand and the bank has identified property investors as a key driver of demand. They account for about a third of new lending in the 6 months to the end of March. It also cited the experience in the UK and Ireland where it was found that buy-to-rent borrowers were those most likely to be in arrears with their repayments.


Auckland’s median house price is now 60 percent above its 2008 level, a rate of increase that the Reserve Bank describes as very stretched, increasing the risk of financial instability from a sharp correction in prices.

As a result, from October 1, property investors in Auckland will require at least a 30 percent deposit to get a mortgage. A residential property investor loan will be defined as any retail mortgage secured on a residential property that is not owner-occupied.

Reserve Bank Governor, Graeme Wheeler has said the objective of this new policy is to promote financial stability and improve resilience in the banking system by reducing the rate at which Auckland house prices are rising.

The Bank is predicting transactions in Auckland will drop by 8-10 percent as a result and slow price increases by 2-4 percent. It has clearly indicated that while the policy changes won't be introduced until October, they expect banks to observe the spirit of the restrictions prior to then.

The proposed LVR restrictions will not apply to loans to construct new houses or apartments.

Our professional property management consultants at Wendell Property Management have decades of expertise and industry knowledge behind them so if you have any questions about your Auckland investment portfolio, please do get in touch.