Real Estate Institute calls for looser LVR rules on sales slump

Reinz chief executive Bindi Norwell calls the banks' tighter lending criteria and restrictions "an intimidating barrier to entry"

New Zealand house prices increased in July but the Real Estate Institute still wants first-home buyers carved out from mortgage lending restrictions in the face of shrinking sales numbers.

The REINZ house price index was unchanged in July from a month earlier and was up 1.2% from July 2016, the real estate agents group said. Excluding Auckland, house prices rose 7.5% from a year earlier, while in Auckland they were 2.1% lower.

Nationwide sales volumes dropped 25% last month compared to July 2016, with Waikato sales dropping 32% and Auckland sales down 31%. The national median house price increased 3.4% to $518,000 in July from last year, while the median number of days it took to sell a home rose to 35 days from 31 days.

Record migration and low interest rates have bolstered the country's housing market, prompting the central bank to clamp down on the level of high loan-to-value ratio mortgages in an effort to reduce the risk to the nation's financial stability.

In Auckland, the country's largest city where rising prices have made housing unaffordable for many, the median sales price dipped an annual 1.2% to $830,000, although REINZ chief executive Bindi Norwell said the city would "likely to be protected from significant price decreases in the short term" due to the housing shortage and population growth.

"The number of sales across New Zealand has dropped significantly in comparison to the same time last year," Ms Norwell said. "A key reason for this is that the two biggest hurdles to purchasing a house right now are access to finance as the banks continue to tighten their lending criteria and LVR restrictions. This creates an intimidating barrier to entry to the real estate market, particularly for those saving for their first home."

"The LVR restrictions have done their job of slowing the market, but now it seems they are acting as a handbrake which is why REINZ is calling for LVRs to be reviewed for first time buyers," Ms Norwell said.

On an index basis, Gisborne/Hawke's Bay saw the biggest price increases, up 17% from a year earlier. Prices in Northland rose 15% to hit a new high, with Manawatu/Whanganui prices also rising 15% to a new high.

Nationwide, the number of properties available for sale rose 7% compared with July last year, while in Auckland properties for sale jumped 49%.

More houses moved into the $500,000-to-$750,000 price bracket, with 27% sold for that in July compared to 24% last year. Fewer were sold for less than $500,000, at 47.8% compared to 49.4% a year earlier, and the proportion of houses selling for over $1 million dropped to 12.9% from 13.8% last July.

(BusinessDesk)


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Sales have slowed, simply due to the fact that New Zealand prices are unreasonable and overinflated.
LVR restrictions have helped in the way the were designed to do.. Mortgage rates now will obviously will continue to rise.. As the cheap interest rates we've had for to long have added to the high escalating house prices..
Banks will continue to tighten lending across the board for one simple fact.. House prices are falling and will continue to full. Debt has been given out at to higher and alarming rates..
Sadly many hardworking NZders and Banks are about to pay a very heavy price..

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Yes. They most certainly are !

The controls on this debt fueled property madness are working precisely as planned - and with good reason. What we should see now is what is known as a "price response". That is "down". The property cabal have talked prices up for years, now they will have some explaining to do when these prices reverse.

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House prices falling, sales volumes falling, Real Estate Agents income is falling - so lets make things loose again so we can protect the real estate agents. Sorry they took 4% of the sale price when houses where $500k, they take 4% when they are $800k with no more work etc. They have made money for jam over the past 3 years, let them now work for their living.

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Agree, it's quite revolting that they're specifically calling for FHBs to be exempted too - not investors. Why? Are investors not buying because they don't think it's a great equation...? Oh well, better get FHBs to come up and naively take the properties off their hands.

Hot potato, hot potato.

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..the 'slump' is more to do with the tightening of capital out of mainland china than any other individual factor.

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Correct. Less demand and poor old horse bought and is now watching his equity slowly melting away.
Oh dear, never mind.

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Where's 'The Moose" when you need him? He's been calling this downturn for the past 6 years!!!

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'Bindi Norwell said the city would "likely to be protected from significant price decreases in the short term" due to the housing shortage and population growth.'

Sorry, been busy elsewhere recently.

Ah, I love the shrill cries of "it's different this time" just as sales and prices start dropping off a cliff.

The July BF&T report makes for sober reading. Ignore it at your peril!

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Auckland house prices are cheap when you compare international cities.

Bank restrictions on Lending is the only reason for the slowdown in sales.

New Zealanders need to stand up to these Banks now and sue for losses!

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Caveat emptor, and 'own two feet', Ted.

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"Real estate agents body calls for more transactions and greater fee pool for real estate agents". A longer headline but would save everyone the bother of reading the disengenuous press release...

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For years it was commonly accepted that leeching was a medically accepted form of treatment for a variety of ailments.

I strongly believe the financial sector is comparative to the above.

I would like to place emphasis on RBNZ's note:
http://www.rbnz.govt.nz/news/2017/07/looking-at-the-stars

Finance or Economics as a subject or field isn't based on anything concrete. It's all a conceptual model of how wealth can be valued or priced. We are just observing what's happening without any real understanding of the underlying factors.

^ In the long run

In the short run, New Zealand specifically...

The amount of rules and disclosures needed when offering financial products to the market needs to be comparable with property. It is in most cases the largest investment one makes. If you float a company you need to provide pro forma accounts and projections that adhere to a set of guidelines, policies and formulas.

The bubble while has been fueled by higher demand and low supply, it has been exacerbated by real estate agents who are getting high on the company supply. It's too easy for agents to say "I don't know, I think..." to some fundamental questions as it's the buyers responsibility to do all due diligence, but it's one of those things - you don't know what you don't know and many are just going on what the agent is telling or implying to them.

If properties are being priced as investments they should be treated like offering investments to the public and thus better disclosure around why future potential gains are to occur.

This would lead buyers to be better informed and lead to better price discovery and increased stability in property prices.

.. Just like the staff member at the bank giving you a mortgage - they are not an expert nor qualified to give you financial advice in relation to what is the best deal for you - likewise agents should be viewed for what they are - sales staff, nothing more.

There should be a decoupling of the "insights" or analysis agents are providing to clients and the industry as a whole - from REINZ "The Real Estate Institute of New Zealand (REINZ) is a membership organisation representing more than 14,000 real estate professionals nationwide." ie they are set up to represent agents first. It's the membership fees and statistics fees that keep their lights on. The board membership fees are insane for a body that rakes in 5m pa , 500k on membership fees and travel.. ouch.

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**6m in total revenue, 500k on board fees including travel.

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