The Reserve Bank of New Zealand (RBNZ) has announced that it will not be relaxing mortgage lending rules, citing high immigration as the main reason behind its decision.
The RBNZ last year placed restrictions on the amount of money banks and other money lenders could loan homebuyers in a bid to slow property price rises that were threatening to spiral out of control.
While the bank, in its bi-yearly financial stability report, revealed that the reduced loan to value ratios (LVRs) had slowed the housing market, it also stated that the record high net-migration levels recently seen in the country means that now is not the time to relax the rules.
“Our concern, in essence, lies around migration flows,” explained Reserve Bank Governor Graeme Wheeler, pointing out that migration figures have consistently been stronger than expected over the past two years.
Wheeler revealed that that without the introduction of LVRs, New Zealand would have faced years of rising house prices that could have potentially increased “quite significantly” from the 9.8 per cent rises seen before LVR rules were introduced.
The latest Quotable Value house price figures in New Zealand show that prices in the country rose by 6.4 per cent in the year to September, meaning that house price growth in NZ has slowed for ten consecutive months. Prices in Auckland, the region most popular with new immigrants, continue to rise far faster than those in any other area of NZ, though, increasing by 9.2 per cent in the past year.
However, Wheeler believes that without the LVRs, price growth in NZ’s most populous region would have been closer to 20 per cent.
Article published 12th November 2014