Last month the Reserve Bank Governor released new restrictions to lending that would take effect on September 1st.
Banks have started to implement these restrictions already, but the nuts and bolts of the changes are:
- For investment properties banks are now forced to require at least a 40% deposit for the majority of the loans they issue.
- For owner-occupied property banks require a 20% deposit on the majority of their loans.
- Loans that are exempt from the existing LVR restrictions, including loans to construct new dwellings, would continue to be exempt. At present many banks are struggling with this exemption however lending rules seem to favour new homes over existing.
NZ Property Investors Federation executive officer, Andrew King, has said that experienced and better resourced investors would see this as an opportunity as many smaller investors will be forced out of the market for the time being. The banks still have 5% of lending for investors at their discretion so it is worth enquiring to see if this is an option. Investor borrowers may wish to spread borrowing across multiple lenders (split banking) to avoid LVR grouping. Some investors may also wish to consider non-bank providers who are not bound by these restrictions. This gives equity short investors an opportunity, albeit with a higher interest rate.
The Residential Tenancies Act being considered makes an investment in new property much more favourable.
- Minimum standards for insulation and health and safety requirements will mean added cost for existing homes. All of our homes already meet this new standard.
- Being a new home there is no or little maintenance for a number of years. All of our homes have a 10 year Masterbuild guarantee.
There is greater tax advantage for depreciating chattels on a new property.
- New homes attract a higher quality of tenant with long term lease arrangements. The start point for tenancy is a brand new home and our property managers look to return property to the same standard at the end of tenancy.
- Horncastle is the only company that offers full property management with the option of rent guarantees for new homes.
It will be interesting to see how these restrictions play out from September 1st moving forward. If you are considering purchasing an investment home, or adding to your existing portfolio, Horncastle Homes has a variety of property options that may be suitable. Feel free to call or email if you would like to discuss the options specific to you.
For more information, contact Matt Withington: 027 496 6524