First-time homebuyers, rejoice! The summer months could bring some much-needed relief, thanks to a proposed relaxation of loan-to-value (LVR) rules. This move, as explained by Cotality, a property research firm, aims to make the process of getting preapproved for a home loan less daunting.
The latest housing data reveals an interesting trend. Sales volumes have increased, with a notable 4% jump compared to last year. New listings are also on the rise, although the overall stock remains 12% lower than the previous year.
Kelvin Davidson, Chief Property Economist at Cotality, believes the market is stabilizing, creating a more favorable environment for buyers. He highlights the impressive momentum of first-time buyers, who accounted for a record-breaking 28% of activity in September.
But here's where it gets controversial...
The Reserve Bank is proposing to ease LVR restrictions, allowing banks to lend more to owner-occupiers with lower deposits. From December, banks can lend up to 25% of new loans to owner-occupiers with deposits below 20%, an increase from the current 20% limit. For investors, the limit will increase from 5% to 10% for those with deposits or equity of less than 70%.
Davidson suggests that while banks aren't currently reaching their limits for owner-occupiers, this change could simplify the preapproval process. However, he cautions that the impact on investors might be more limited, as debt-to-income ratios and servicing tests still apply.
The Reserve Bank seems to be taking a cautious approach, aiming to restore loan-to-value rules to a perceived 'normal' level. Davidson believes lower interest rates could have a more significant impact on the market.
With almost half of all loans either floating or due for repricing within the next six months, falling rates are expected to provide a quick boost. The property market is currently stable, neither soaring nor plummeting.
Davidson predicts that 2026 could be a stronger year for both sales volumes and property values, citing improved affordability, lower listings compared to last year, more borrowers benefiting from lower interest rates, and a projected drop in the unemployment rate.
New Zealand's residential real estate market is valued at a staggering $1.65 trillion.
And this is the part most people miss...
While the market shift towards rising house prices is gaining traction, Davidson emphasizes that it's not a guarantee. Affordability has improved, listings have decreased, and economic forecasts are more optimistic. As fundamental conditions shift, confidence could be the key driver.
Price growth is expected to be modest, with provincial New Zealand potentially leading the way.
So, what do you think? Is this a sign of a healthier housing market, or are we heading towards another bubble? Share your thoughts in the comments!
