Cash rate stays, foreign buyers go

Yesterday the Governor or the Reserve Bank, Graeme Wheeler, announced there would be no change to the record low cash rate of 2.25% and also warned that property investors could soon be targeted with new Loan to Value ration rules.

Wheeler said that rising house prices as a risk to the country’s financial stability.

Later in the day, possibly in part at least in response, the Westpac and ANZ banks said they would no longer lend to overseas buyers of New Zealand properties due to financial risks.

This follows similar moves recently in Australia. Other banks are expected to do likewise.

This is expected and hoped to have some impact on escalating property prices.

NZ Herald: Westpac, ANZ Bank shut out foreign buyers

Westpac New Zealand has announced that from today it will no longer lend to non-resident borrowers with overseas income.

Borrowers on temporary resident visas will only be accepted if they have both a New Zealand address and a New Zealand-based income.

ANZ has also announced restrictions that will effectively shut out most non-resident, overseas-based borrowers, including restricting lending to owner-occupied properties.

The restrictions will not affect New Zealand passport holders living abroad and purchasing property funded by overseas income.

A Westpac spokeswoman said the restrictions “reduces risk”.

“Verification of foreign applications is essential to meeting our lending criteria and obligations, but is operationally difficult in these cases.”

An ANZ spokesman said the changes were made to ensure the bank was “appropriately positioned in the current housing environment, taking into account supply pressure in certain areas”.

Auckland mortgage broker Bruce Patten, of mortgage brokerage Loan Market, said he expected more banks to follow Westpac and ANZ.

The majority of non-resident, overseas-based buyers would take out New Zealand bank loans for purchases here, unless they paid cash, Mr Patten said.

“Most banks around the world won’t take security in a country other than their own…it is going to cut any overseas purchases out.”

Mr Patten believed the change was partly driven by the Australian-owned banks wanting to follow developments across the Tasman – but there could also have been pressure from Government or the Reserve Bank.

“If this has an impact on slowing the house price rise down, then perhaps they might decide that they don’t need to bring [other] measures in.”

Time will tell how much effect this will have on the property market and house prices.

Leave a comment

1 Comment

  1. Brown

     /  10th June 2016

    I’m so sick of an Auckland issue being talked about as though its a national issue. Effectively the country generally is being stuffed around because Auckland’s council is grossly incompetent. Where’s a volcano or two when you need it?

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s