Yes, most people agree there is a housing problem but there is a lot of “blame” going on and people suggesting ways to fix the housing problem too.
It is the first home buyers that are finding the rising house prices an issue, but in many ways this has been compensated by lower home loan interest rates.
Quotable Value (QV) figures released this week showed that national house values had risen by 5.6% in the last three months – the fastest rate in 12 years and that Auckland’s average house price is now $975,087 which is up a massive 16% on last June.
The Reserve Bank deputy governor Grant Spencer said “house price pressures have re-emerged in Auckland following an easing in late 2015 and have also strengthened across other regions” and he along with other economists are concerned with this.
So what can be done to fix the housing problem?
Let’s Blame Immigration…
We cannot ignore that the 160,000 net inflow of permanent and long-term migrants over the last 3-years has generated an unprecedented increase in the population and a significant boost to housing demand and therefore is a major contributor to the increasing house prices in Auckland and other regions.
When the John Key led National Party came to power in 2008 there were major concerns with “the brain drain” of Kiwi’s leaving our shores to find work in Australia and elsewhere. The fact is immigration and population growth is led by Kiwi’s returning home and others not leaving rather than the “Asian invasion” that is often reported in the press and on social media.
The reality is this is a good problem to have – but as a country we still need to deal with it.
We Need To Build More Houses & Faster
Statistics show that in October 2008 there were 10 homes per day built in Auckland and now there are 40 houses per day being built and it is still not enough.
Most people also agree that it will never be possible to fine-tune the overall level of migration or smooth out the migration cycle but the Government is focused on making it a role of the Councils to be able to adjust land supply quickly to accommodate the demand and therefore ease the pressure on housing.
The LVR Rules May Change
New LVR restrictions were not introduced today as many thought they might, but indications are they could potentially be introduced by the end of the year.
With the current rules on LVR limits, banks must demand 30% deposits for a mortgage secured against an investment property in Auckland and 20% in the rest of the country.
There has been a lot of talk about potential changes and we have not been told what they will be yet, but as experienced mortgage brokers we expect that some changes will be introduced and it could be something like;
- An increased deposit required for investment properties
- A commercial (higher) interest rate on loans for investment properties
- A specific land tax on rental or investment properties
It may be one of these or a combination, but we are telling people to expect change and to review their loan structures before any changes are introduced.
Debt-to-Income Ratios Could Be Introduced
This has been talked about for a while now and if introduced, would stop people from borrowing too much relative to their income.
The introduction of debt-to-income ratios in New Zealand would be a controversial move with opponents and the Governments opposition saying that such a policy would hit first home buyers the hardest.
In the United Kingdom most buyers cannot get a mortgage higher than 4.5 times their annual earnings on homes but with no income test on properties purchased for investment.
Be Prepared For Change
It is almost guaranteed that there will be some changes and that those changes will be announced before the end of the year.
The key message is to prepare yourself and the way your finances are structured as soon as you can.
At The Mortgage Supply Company we have years of experience and have seen a lot of changes over those years. One of the things that we have always advocated is for people that own more than one property to have their loans with more than one bank and not cross securitised, and this is more important now than it has ever been.
Speak to one of our advisers today and prepare yourself for the changes ahead so you can take advantage of the housing problem and turn it into your advantage.
