Larger Deposits Proposed for Investors
Last week, the Reserve Bank of New Zealand (RBNZ) made a major announcement proposing changes to the Loan-to- Value Ratio (LVR) Restrictions Policy, which if it goes ahead on 1st
September, will require property investors to have a 40 percent deposit. This proposal should not necessarily come as a surprise, as the RBNZ tries to slow down the property market which is extremely hot at the moment. Without these changes, economic stability would be at risk with an over inflated housing market, and first home buyers would continue to be priced out of the market.
So, what does it actually mean?
Well, in very simple terms it’s not such good news for investors seeking to increase their property portfolio, but is better news for first home buyers – as there may be less competition at tenders and auctions.
You will not be able to leverage as easily to grow your portfolio, as a greater chunk of your money will need to go towards a deposit – perhaps also limiting those planning on a quick capital gain.
Someone purchasing a stand alone investment property worth $500k would previously needed a $50-100k deposit, come 1st September they will need a $200k deposit. Investors with current
pending investment property pre-approvals will likely need to ‘use it or lose it’ if not unconditional prior to 1 September, 2016.
For those of you who have been holding off in hope of further capital gain, you may wish to cash up now….
First Home Buyers:
Happy house hunting!