PHOTO: Cameron Bagrie. Photo credit: The AM Show
An economist wants the Reserve Bank to restrict lending to investors who have racked up lots of debt, to stop them from continuing to buy houses and driving prices up.
Median house prices in Auckland recently surpassed $1 million, data from both the Real Estate Institute of New Zealand (REINZ) and Trade Me show.
The median price nationwide is now above $720,000 after posting a double-digit rise in both measurements.
While earlier this year most economists tipped house prices to fall thanks to the COVID-19 pandemic, the reverse happened – fuelled by low interest rates, the removal of loan-to-value restrictions (LVRs) and New Zealand’s successful elimination of the virus.
Last week the Reserve Bank said LVRs for investors would likely be back, but not until March next year. Banks will likely require investors to have deposits of around 30 percent to get mortgage lending.
Economist Cameron Bagrie says the Reserve Bank should add debt-to-income (DTI) ratios to its toolkit – this would prevent people with lots of borrowing taking out extra loans to buy more property.
“DTI limits I think would be an additional tool that could help around the edges,” he told The AM Show on Tuesday.
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