RSS Feed

No Silver Bullet: LVR Restrictions and the Role of the Reserve Bank in the Auckland Housing Crisis

Wednesday, October 16, 2013

In his address to the Property Council Of New Zealand yesterday, Deputy Reserve Bank Governor Grant Spencer gave a broad-view digest into the current housing supply pressure faced by New Zealanders, in particular, Aucklanders and Cantabrians.  

The Reserve Bank is under no disillusionment that LVR Restrictions are the silver bullet to the current market challenges, nor had it ever expected them to be.    In that respect, Mr Spencer was unequivocal from the off.  The central bank's mandate relates to financial stability, not social equity.  It is watching house prices with keen interest because of the extent this debt-fuelled market can impact (negatively) the New Zealand economy as a whole.  As such, the Reserve Bank is taking preemptive steps to mitigate price growth rather than to enable mass homeownership.

First home buyers are to be forgiven for being unsettled by this sentiment.  Bearing the heritage of a settler's society, New Zealanders hold landownership (and homeownership) as sacrosanct.  This innate cultural disposition has not faltered despite challenges relating to supply, population influx, and now, LVR Restrictions.  Although auction rooms are significantly quieter since 1st October, the law of unintended consequence has a sneaky way of distorting even the best laid plans.  Property commentators who had been through a similar period of restrictions in the 70s are predicting a reemergence of second-tier financiers.  Making life harder for borrowers in the mainstream banks drive their determination to obtain finance elsewhere.  It is only a matter of time before first home buyers are able to circumvent the current restrictions and re-enter the market.  

Undeterred by the naysayers, the Reserve Bank was bold in its estimated prediction that by 1st October 2014, 
  1. Mortgage credit growth will be 1-3% points lower; 
  2. Home sales will be 3-8% lower; and
  3. House price inflation will be 1-4% lower.
Mr Spencer was quick to point out that the current pressure on homeownership is the direct result of a chronically undersupplied market.  The LVR Restrictions are holding first home buyers at bay, for now.  The central bank hopes to buy enough time for other policy makers to come to the party.  The supply side of the equation can only be resolved by freeing up more land, speeding up consenting processes, and encouraging profitability in the building industry, none of these come under Graeme Wheeler's purview.  Mr Spencer is confident that 'provided the "red tape" costs and delays are reduced, there will remain a strong incentive to expand the housing stock, particularly in Auckland and Christchurch.'  

Changes are already underway.  Both the Auckland Housing Accord and Unitary Plan are preceded by pro-development overtures.  Housing is quickly shaping up to be the election issue of 2014.  Every politician worth his/her own weight will be expected to have a solution to what the media has conveniently dubbed The Great Kiwi Housing Crisis.  The question remains however, will first home buyers have enough patience and confidence in the Reserve Bank to keep their anxiety in check and hold fire before flocking back into the auction rooms?   

Recent Posts


Must knows structure management business tenancy tribunal banking Kris Pedersen Mortgages and Insurance HHS renovation termination short-term rental insulation clnz smoke alarm Standards New Zealand heater RBNZ LIM beginner investor inspection initio sale and purchas capital gain water bill skill shortage meth contamination bond Tribunal case study Jeff Bezos trespass recycling equity relationship sublease unitary plan market Investment tip rta winz How to auckland council parry v inglis insurance ask an expert advice minor dwelling covid-19 boarding house investor cash-flow bond form tenancy issues trademe heating Property (Relationships) Act auckland Must know property value television interest only sale and purchase maintenance rental wof off the plan robert kiyosaki asbestos lvr property shower dome income Landlording CCC negotiation mindset housing affordability landlord data security CoreLogic Gluckman rent rta reform RTAA 2019 worksafe rental market equity positive cash flow anz government khh DTI development rent increase scotney williams bad tenant ird house prices speculator property maintenance twg report Case study Question and answer fixed-term tenancy Market report cat buyer's agent personal growth mortgage holiday house debt enforcement extractor fan property management housing bubble warren buffett tenant education letting damage buying rules Investor story rent arrears Holler gluckman report market rent subdivision interest rates warm up new zealand airbnb investment strategy finance wealth creation election 2017 trust nzpif ventilation Level 4 tax return reserve bank cgt productivity p lab buying ocr watercare ring-fencing HSWA property cycle tenancy services partners Sponsored post TCIT legal Editor's Choice Guest blog Q&A HHGA letting fee wins meth principal and interest financial advisers act privacy building first home buying


Introducing Our Partners
Principal Sponsor - Kris Pedersen Mortgages & Insurance logo Gold Sponsor - Barfoot & Thompson logo Gold Sponsor - CoreLogic logo Property Apprentice logo Keith Hay Homes logo The Insulation Warehouse logo The Renovation Team logo The New Zealand Property Investors' Federation logo
09 360 2376

The Tenancy Practice Service and TPS Credit Control work closely with the Auckland Property Investors' Association. Our vision of bringing helpful resources, documents and high quality services to Auckland Property Investors and Property Managers is shared by APIA, so its a partnership that works well. 

The Auckland Property Investors' Association is a great organisation for those who want access to advice and information from a range of industry experts and partners. 

Mathieu Holt- Managing Director, The Tenancy Practice Service & TPS Credit Control
Through the Association I found the channels and methods to fund the purchase of property I never dreamed about. Grant Brown

All round it has been one of those things Neil and I felt was really worthwhile belonging to. We have learned so much it has just built our confidence in what we are doing.

Janice Bieleski
I read two articles in the monthly magazine that saved me over $5,000. That is my membership fee for the next 26 years and I am sure I will learn a whole lot more! John Duncan
Fantastic organisation. The networking opportunities are brilliant and provide us with information and opportunities that cannot be obtained anywhere else. We learn something new at every meeting and we've been in this game for nearly 20 years. Pauline and Gyanen Kumar

I find the information obtained from various APIA meetings very useful in guiding my own property investment and rental management.  I also enjoy the networking opportunities with like-minded investors.  I am inspired by other investors’ success and find the more experiences and knowledge that I share with others, the more confident I become.  

Thanks to all APIA event organizers and administrators for your brilliant work. 

Stella Shao

I like talking to people and learning from their experience because it gives me the confidence to invest well. I think it is a knowledge thing. I now know I am doing things the right way.

Stephen Weatherall

My APIA membership has become a total success.

Every time I attend a monthly or regional meeting I come away with so many useful and positive tips that have added value to my property investments and management.

Not only that, the website is a great place for practical advice and useful information. It has now evolved into an important resource for my business.

Talk about value for money! The discounts I have been getting at Bunnings when I present my APIA membership card have more than paid for my annual subscription!

Tim Duffett, Plan A Investments Limited