Property Institute welcomes 'game changing' RBNZ policy

Property Institute of New Zealand Chief Executive, Ashley Church, has welcomed a recent policy change, by the Reserve Bank calling it ‘a game changer’ and ‘a massive step in the right direction’. Up until recently, an exemption from the Reserve Bank’s policy of requiring a minimum 20% deposit on a property purchase was available where the purpose of the loan was to build a new home - but the exemption was only available to those who were purchasing the property as their own home. However, in briefing papers released in June, the Reserve Bank has extended the policy to include Property Investors - a move that Mr Church describes as ‘probably the single most significant step made toward addressing Auckland’s housing supply problem in the past 2 years’. The move is in line with an address, made by Reserve Bank Deputy Governor Grant Spencer, earlier this week where he acknowledged the need for ‘rapid progress’ in the construction of new housing in Auckland - a point on which Mr Church agrees. "Property investors are the people who are best positioned to get new houses built in large numbers - and instead of futile attempts to curtail their activity it would appear that the Reserve Bank has now elected to try and direct their investment to where it will do the most good - the construction of new homes". Mr Church says that the policy change was introduced without any fanfare and most investors will not be aware of the new rules. He notes that the Reserve Bank is only estimating an additional 200 houses being built, per month, as a result of the policy change and suggests that this figure will probably prove to be much higher ‘once word gets out’. "You could see a very large and rapid switch to investment in new home construction - measured in months, rather than years". Mr Church says that the move should also lead to a significant ‘gearing up’ by House Building Companies and the development, by them, of easily accessible new home building packages and products. He acknowledges that ‘switching’ market investment to new home construction will not immediately curtail house price inflation but says this is because house price increases are a symptom of severe undersupply. "House prices won’t start tapering off until supply catches up with demand - so our first priority is to start making a dent in the number of houses that we need to build. At least, with this policy change, that goal becomes more achievable". Mr Church also notes that, while the new policy allows Banks to reduce the deposit required for the construction of a new property - the details of any such lending are still the prerogative of the Banks and that investors will still need to qualify under any criteria that their Bank sets. "The best thing an Investor can do is talk to their bank".