Investors plead with ASB's rival banks not to restrict loans for new builds

Wednesday, 17 February 2021

Every home counts: Homebuilding fell behind demand for decades, which has contributed to high house prices.

Investors are calling on other big banks not to follow ASB’s move to require 40 per cent deposits from investors buying new-build homes.

From March 1, Reserve Bank rules will ban big banks from lending more than 70 per cent of the value of an existing property to all but a handful of property investors.

From May 1, the loan to value ratio lending limits (LVRs) will rise further, meaning the majority of residential property investors will only be able to borrow 60 per cent of the value of properties they want to buy.

The move is designed to curb runaway house price inflation, though the LVR hikes were signalled well in advance, and big banks moved late last year to require 40 per cent deposits from investors.

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The LVR rules have an exemption for new-build properties, for investors and first-home buyers. The rules will only require the borrower to either commit to the purchase at an early stage of construction, or be buying the residence from the developer within six months of its completion.

But ASB has decided to require 40 per cent deposits from investors in new-build homes, too.

Sharon Cullwick, executive officer for the NZ Property Investors’ Federation, called on other banks not to follow suit.

She said banks should not prevent money flowing into the supply of new properties, which were needed to help tackle the housing crisis.

”We have to keep things moving along. We need to increase housing supply,” Cullwick said.

Kiwibank signalled it intended to continue lending at lower LVRs to investors to buy new-build properties.

“The Reserve Bank has outlined a list of lending types that are exempt from the LVR restrictions which Kiwibank continues to offer, including new builds,” spokeswoman Kara Tait said.

“By enabling more new builds/construction loans Kiwibank is supporting more New Zealanders into homes as well as adding to our housing stock,” she said.

ANZ spokesman Stefan Herrick said: “In line with the Reserve Bank’s exemption criteria, we do allow construction lending for investors with less than a 40 per cent deposit.”

Other exemptions under the planned LVR rules included remediation loans to fix leaky buildings, which continue to plague the country’s towns and cities, or to bring rentals up to healthy homes standards.

Also exempted were government-guaranteed low-deposit Kainga Ora home loans designed to help middle and lower-income families get into first homes.

Short-term bridging loans where an owner-occupier was purchasing a new property to live in before the sale of their current residence were also exempt.

The LVR rules are also not designed to stop people shifting between banks.

“Refinancing of existing residential mortgage loans is exempt from high-LVR restrictions, as long as the loan balance does not increase,” the Reserve Bank’s LVR rules say.