Property

Construction demand tipped to remain high

Low-deposit loans for housing construction make up a very small part of the mortgage market, the Reserve Bank said today.

Wednesday, November 13th 2013

Its latest Financial Stability Report was released this morning.

There have been concerns raised by builders and brokers that the new house market may slow considerably more than other sectors under the new LVR restrictions.

Banks must lend no more than 10% of their new loans to borrowers with a deposit of less than 20%. But because construction loans are more complex, commentators have said they may be avoided. Builders have reported losing first-home contracts.

It has been suggested that new homes, which help address the supply side of the housing problem, should be exempt from the rules.

Graeme Wheeler said the bank was looking at the issue. But he said high-LVR lending for construction was only about $60 million to $80 million a month, or 2% to 3% of the market. He said he expected demand to remain strong – consents are 50% up on an annual basis from where they were in 2011.

“The market price in Auckland and Christchurch is running ahead of the cost of new building.”

Deputy governor Grant Spencer said banks had cut back their low-deposit lending strongly to start with but would come back. “Once some high-LVR lending comes back in, some could cover new building.
Wheeler said if the Government was deeply concerned about the situation, it would engage with the Reserve Bank. But he said so far it had left decisions to the Bank. “The memorandum of understanding has been respected so far.”

Wheeler said it was too soon to say whether the LVR restrictions were having an effect on the demand side of the equation. Rising house prices and household indebtedness were a big concern for the Reserve Bank, he said. 

Comments

On Wednesday, November 13th 2013 2:41 pm Lewis said:

if they're concerned about people being in debt, why talk about raising interest rates?!

Heartland Bank - Online 6.69
SBS FirstHome Combo 6.74
Wairarapa Building Society 6.95
Unity 6.99
Co-operative Bank - First Home Special 7.04
ICBC 7.05
China Construction Bank 7.09
BNZ - Classic 7.24
ASB Bank 7.24
ANZ Special 7.24
TSB Special 7.24
Unity First Home Buyer special 6.45
Heartland Bank - Online 6.45
China Construction Bank 6.75
TSB Special 6.75
ICBC 6.75
ANZ Special 6.79
ASB Bank 6.79
AIA - Go Home Loans 6.79
Kiwibank Special 6.79
BNZ - Classic 6.79
Unity 6.79
Westpac Special 6.39
China Construction Bank 6.40
ICBC 6.49
SBS Bank Special 6.55
Kiwibank Special 6.55
BNZ - Classic 6.55
Co-operative Bank - Owner Occ 6.55
ASB Bank 6.55
AIA - Go Home Loans 6.55
TSB Special 6.59
Kainga Ora 6.99
SBS FirstHome Combo 6.19
AIA - Back My Build 6.19
ANZ Blueprint to Build 7.39
Credit Union Auckland 7.70
ICBC 7.85
Heartland Bank - Online 7.99
Pepper Money Essential 8.29
Co-operative Bank - Owner Occ 8.40
Co-operative Bank - Standard 8.40
First Credit Union Standard 8.50
Kiwibank 8.50

More Stories

Support for regulation

Monday, March 18th 2024

Support for regulation

REINZ has emphasised the need for property management regulation to Parliament’s Social Services and Community Committee.

A better investment market

Thursday, March 14th 2024

A better investment market

“Reinstatement of interest deductibility starting from the new tax year on 1 April brings property investors back in line with every other business in the country, where interest costs are a legitimate deductible expense," Tim Horsbrugh, New Zealand Property Investors Federation (NZPIF) executive committee member says.

[OPINION] Recessionary times

Thursday, March 14th 2024

[OPINION] Recessionary times

It is not the best out there for many businesses and property sector people. Sales are down across the board, our clients’ confidence is falling, and there is a lot of uncertainty.

Interest rate expectations: It’s not over yet

Thursday, March 07th 2024

Interest rate expectations: It’s not over yet

Most Kiwis think interest rate increases have peaked.