The significant 0.5% reduction in the Official Cash Rate (OCR) last month is now expected to spur on the New Zealand property market as buyers continue their cautious approach.
The rate is now just 2.5%, down from 5.5% in July of 2024. And this stimulus is expected to fuel not just the property sector but also the languishing Kiwi economy.
The latest national property survey has found that an injection of cash and optimism is needed.
The OneRoof/Valocity survey for October says the average property value nationally dipped 0.8% ($8000) over the last three months to $957,000.
That’s the same level as 12 months ago – a frustration for owners and investors, and a source of concern for cautious buyers wondering if values might fall further.
Perhaps this is as good as it gets for buyers, though.
Standing on the sidelines for too long may end up an expensive error.
That’s because the Reserve Bank of NZ (RBNZ) has added a further market boost by signalling it will ease restrictions on Loan-to-Value Ratios (LVR) from December 1.
Its goal is to give banks more flexibility to issue loans, which in turn will improve market efficiency and give buyers greater access to credit.
The RBNZ said property values were within “our range of sustainable estimates”. And it added: “Growth in mortgage lending remains moderate and the share of high-risk lending is low.”
These are the key LVR changes:
- For owner-occupiers, the limit on the share of new lending allowed with an LVR above 80% will increase to 25% (up from 20%).
- For investors, the limit on the share of new lending allowed with an LVR above 70% will increase to 10% (up from 5%).
However, the RBNZ will maintain the current debt-to-income (DTI) restrictions that it imposed last year to prevent banks issuing unsustainable loans that could fuel a price break-out and subsequent property boom.
The RBNZ said that DTI settings “remain calibrated to limit high-risk lending in housing upswings during periods of low interest rates”.