Reserve Bank may hit landlords next year

Posted by MarkL on November 30, 2014

After turning its eye on first time buyers and introducing loan-to-value lending restrictions last year, the Reserve Bank is now looking to do something similar to property investors.

Reserve Bank Governor Graeme Wheeler warned recently the bank may target investors with five or more properties with higher interest rates.

He said the LVR restrictions had forced many first-time buyers out of the market, but that had allowed cash-rich investors to benefit by picking up cheaper houses.

Reserve Bank data showed 45 per cent of residential properties being sold a month are being bought by investors, while just 9 per cent is going to first-time buyers.

The Reserve Bank is expected to introduce the five property lending criteria early next year and would require banks to set aside more capital to back loans to investors with five or more properties.

Wheeler said: "The issue is also around people who invest and buy multiple houses. We have been thinking quite deeply about whether we need to introduce measures to discourage some of those practices", revealing the bank had consulted with financial markets, realtors and investors, "and we're currently exploring that in-house".

Andrew King, NZ Property Investors Federation executive director, told the New Zealand Herald anti-landlord lending curbs were "ridiculous". "There are very few speculators, so it would appear they are talking about investors, not speculators," King said.

"The idea that rental property owners are forcing first-home buyers out of the market is false.

"Low rental yields make it very hard to buy rental property, so investors want to pay as little for them as possible. In addition, low rental prices mean rental property owners are actually helping first-home buyers to save a home deposit."

Landlords with multiple investments should be prepared for borrowing to become more expensive next year if they wish to add to their portfolio.