Newland: Buyers will find a way around restrictions
Wednesday 24 July 2013
Loan-to-value restrictions won’t really make any difference to people who really want to buy a house, property commentator Olly Newland says.
By The Landlord
“There is nothing new about these sorts of restrictions. We had them all through the 1960s, 1970s and 1980s… All sorts of creative ideas where dreamt up to get around the ‘regulations’. It’s clear to me and others that if the proposed LVR limits are imposed, these old tricks (and some new ones, no doubt) will be dusted off and come back with a vengeance.”
He said purchasers who had to find a 33.33% deposit used to turn to second mortgages from vendors, loans from parents, credit cards, personal loans, solicitors’ nominee companies, buying with friends, rent-to-buy schemes and guarantors for the money to make up the difference.
And he said they would likely do the same again.
“There are still solicitors nominee lenders around today — so if you, or someone you know, is short of deposit, and if the Reserve Bank gets off the fence and actually imposes LVR limits, a few phone calls to the right people will hopefully soon sort the problem out.”
He said high interest rates charged by second-tier lenders were seen as a necessary evil by people who just wanted to get into the property market.
But he said the change could force some people to remain tenants for longer.
That, combined with the fact that migration was turning around and there was a rental supply shortgage looming, would eventually push up rents.
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There’s no sign of a slow-down in Wellington’s property prices with Trade Me Property’s latest data showing that asking prices continue to rise solidly.
Vacancy rates in the commercial property sector are set to increase as changing economic conditions dampen demand.
LVR restrictions were never meant to be a permanent feature of New Zealand’s housing market and ANZ economists argue that some further relaxing of them could soon be on the cards.