New loan restrictions officially come into effect tomorrow, meaning property investors now need a 40 percent deposit to buy property.
From tomorrow investors will need a 40 percent deposit to buy property in New Zealand. Photo: RNZ / Cole Eastham-Farrelly
The higher loan-to-value restrictions (LVR) officially come into effect on 1 October but several banks have been applying them since the Reserve Bank first announced they were coming in July.
Finance Minister Bill English said he expected they would have some initial impact on rising prices, but he was not sure for how long.
"We've found that these tools for controlling demand can have a limited impact, but the long-term solution is just more houses on the ground, and buyers starting to believe that house prices won't keep going up because they can see more houses being built.
"And at the moment there is a very large construction pipeline out ahead."
Labour Party finance spokesperson Grant Robertson also predicted they would have a temporary effect on rising house prices.
He said the Reserve Bank was using all the tools it could to try to manage an out-if-control housing market but the government needed to do more.
"What's really important here is that we crack down on speculators, and the two measures that we think will make the big difference there are on foreign speculators, and taking them out of the market for buying existing homes.
"If someone wants to involve themselves in the housing market in New Zealand and not live here, then the only option for them should be for them to build a new home."
Most people wanting to buy a house to live in throughout New Zealand need a 20 percent deposit.
Property Institute chief executive Ashley Church said first home buyers bore the brunt of LVRs and they should be exempt.
"If you take a young couple looking to buy their first home in Auckland at an average of a million dollars then they have to come up with a deposit of $200,000 - and clearly that's unobtainable for the vast majority of people."
Mr Church said the LVRs are rebalancing the whole basis of home-ownership in the country, which he said is not healthy for the economy or for the New Zealand's social fabric.