Banks are in the news. In fact, they are all over the news! But the real question is why? And what does it mean for you? Graham finds out.
Firstly, please remember that behind the scenes the Reserve Bank of New Zealand is always policing what the banks do and don't do. It also gives the banks strong suggestions about how lending should look … or else!
It is no news to anyone that the Reserve Bank is nervous about the Auckland property market. The changes connected to this nervousness are that if you want to buy an investment property in Auckland you must have a 30 per cent deposit available.
ANZ have gone a step further and now say that if you own a property in Auckland ALL your investment properties will be limited to this 70 per cent ‘loan to value ratio regardless of the location of those investment properties. ANZ have also said that to buy any owner-occupied property in Auckland you need 15 per cent deposit whereas other banks are still operating, when they can, on only 10 per cent deposit.
Also, all the major banks have now restricted their overseas lending towards non-citizens. Basically, if you are not a citizen or resident of New Zealand you cannot use overseas income to prove your ability to borrow and your borrowing will be limited to 70 per cent of the value of the property.
So what does this all mean?
I think that it shows banks are preparing for two things:
1) They want to show the Reserve Bank that they are trying to curb speculative lending—stopping people gambling that property prices will only keep rising.
2) That they are preparing in advance so they don't get caught out, like last time, when the property market does slow down.
ANZ is particularly leading the charge in the area of preparing for a potential slow down. They have reduced their enthusiasm for apartments being purchased off the plans and for land purchases, not just in Auckland but throughout the country. Other banks have not followed with similar responses but watch this space.
So what should you do?
Ring us if you want some clarification. If you are in negotiations directly with the ANZ and have property in Auckland then ring us as well. And … finally … don't speculate on land and apartments.
Graham Goodison 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.