Reserve Bank to ease LVR restrictions

AdobeStock_130671316.jpeg


You may well have heard that the Reserve Bank announced some changes to their LVR (Loan-to-Value Ratio). 

They have announced that as of the 1st January, the amount of funds banks can lend with less than 20% deposit is increasing from 10% to 15%. Banks are also able to lend to investors with a 35% deposit compared to the current 40%. 
So what does this mean? 
If you are a first home buyer, it's going to be slightly easier for you to purchase if you haven't got a 20% deposit. (Note, however that the banks will still decide how generous to be with these applications). 

For investors, we predict that the banks will loosen up their policies in line with the reserve banks rules of needing a 35% deposit compared to 40%. This will make some difference particularly to new investors. We don't think these changes are going to be dramatic, but it will have a small effect. 

If you think this will impact you, free to get in touch with your friendly Velocity Financial broker. We are always happy to help.

Until next time.. 

The team at Velocity Financial

 

 

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

 

Kylie’s 5 Summer Reno Tips

AdobeStock_125764975.jpeg

Whether the goal is to sell or to dwell, Kylie shares her five top tips for making renovations work for you and for your financial and lifestyle goals.

 

1. Budget

Are you planning on living in your property long term? Before setting a budget, think about your plans. Adding a swimming pool to the family home might not get the return you’re after when it comes time to sell, however, if you’re around for another 20 years it’s can be an investment your family will have time to enjoy.

Consider the re-sale value of your property and your target market if you were to re-sell. Look at what other properties in your neighbourhood are selling for and consider what you paid for yours.

It may be tempting to put an expensive $30,000 designer kitchen in, but not everyone can appreciate the difference between a $15,000 flat-pack kitchen and a designer one. However, doing things on the cheap can be counter-productive, too.

 

2. Keep it simple

Most buyers will be interested in putting their own stamp on the property. So, choose your colours and patterns carefully. Opting for neutral colours and styles is always the safe option.  

 

3. Make a priority list

If you’re not sure where to start, concentrate on things that will improve the comfort of your home, such as insulation and heating.

 

4. Consider your target market

If you are thinking about removing a bedroom to create more space in your dining room, it pays to think about who your target will be if you sell. Will your home be suited to a young family or a retired couple? The ideal number of rooms and the ideal size of the dining room will vary for different buyers.

 

5. DIY or professional?

It may be tempting to take a DIY approach to renovations, but some jobs are best left to the pros. Anything structural or major gas, electrical and plumbing work is best outsourced. Purchasing fixtures and plumbing yourself might not be the cheapest option either, as tradies can usually get trade discounts.

 

The Election Fallout: The Jacinda Effect

Picture1.jpg

As the country wakes with an election hangover, what does the new government mean for New Zealand’s runaway housing market? Alex explores.

 

Since Jacinda took the helm a few weeks ago we’ve been getting many questions along the lines of:

·      How will a Labour government change the housing market?

·      What will it do to house prices and interest rates?

 

As you will well know, house prices have been heading north for the last couple of years. Great if you own property; not so great trying to get on the ladder. One of Labour’s main pre-election promises was to curb this and fix the housing crisis by building more homes, reducing foreign buyers and creating somewhat of an equilibrium in the housing market.[1]

 

 

Will this cause house prices drop?

 

Who really knows, but, best guess: it’s highly unlikely. Demand has fallen recently (see the Auckland stats for example[2]), but there also has been a reduction in supply (listings are as low as ever and the spring surge of houses coming on the market has just not been happening). This lack of supply helps to keep the pressure on house prices.

 

Some areas in New Zealand have been over-inflated, but … most areas are just playing historic catch up after a number of years of no growth at all.[3]

 

As to banning foreign buyers to relieve pressure … the forecasts from economists and investors is that it will have little to no impact (see Australia which has similar policies already in place). According to LINZ, the number of foreign buyers is actually very small and only affects purchasing of existing houses.[4] [5]

 

What will interest rates do?

 

New Zealand interest rates are influenced from events offshore. The European central bank just reported that European banks can sustain low levels of interest for the next couple of years. The Bank of England is looking to increase its base interest rate[6] and this is also the trend in the US.[7] 

 

So, will the New Zealand Reserve Bank adopt similar policies? No one knows. Maybe Peters will cause a stir with the Reserve Bank Act.[8] Besides this, economists say it is unlikely for interest rates to change too much, as other factors like net migration, unemployment and the financial outlook of New Zealand are all very positive.

 

This piece is a little more formal than normal from me, but these are the questions and answers we’re getting and giving on a daily basis. Feel free to discuss any of this over a cup of coffee with me.

 

Alex Barendregt is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

 

 

Sources:

[1] http://www.labour.org.nz/housing

[2] https://www.interest.co.nz/property/90313/auckland-records-second-lowest-volume-house-sales-september-month-after-2008-during

[3] https://www.interest.co.nz/charts/real-estate/median-house-price-growth

[4] https://www.theguardian.com/world/2017/oct/25/new-zealand-to-ban-foreign-buyers-existing-homes-jacinda-ardern

[5] https://www.linz.govt.nz/news/2017-06/linz-releases-latest-property-data

[6] https://www.theguardian.com/money/2017/oct/28/interest-rate-rise-affect-homeowners-savers-bank-of-england

[7] http://www.nasdaq.com/article/potential-implications-of-a-us-december-interest-rate-hike-on-global-markets-cm860632

[8] https://www.newsroom.co.nz/2017/10/19/54406/its-the-sixth-labour-government