NZ’s Main Lender Makes it Harder to Get a Home Loan

The merged banks ANZ/National Bank have announced that first home buyers will need 20% deposits. From yesterday the previous minimum deposit requirement of 10% has been doubled.

This means that buyers in Auckland, New Zealand’s most expensive city, where the median price is $433,000 will need a $86,600 deposit. In Wellington they will need $74,000 for a median-priced property.

Professor Bob Hargreaves, who heads Massey University’s real estate analysis unit, said rationing credit was a natural reaction to the global financial turmoil.

“People are re-pricing risk. Banks are finding it harder to obtain the overseas money that we rely on because it’s more expensive.

“I would say it’s one way of throttling demand. Banks are saying, ‘OK we’re still in the business of lending to people but you have to put more in yourself.’ In good times they’re your best friend; in not-so-good times they can be quite tough.”

Saving - the Old Fashioned Way

So yes banks are fair weather friends but seriously would you really want to be borrowing 90% of a home’s price when there is as yet no evidence that the New Zealand property market has reached the bottom? Obviously the bank thinks its a bad idea to lend you 90% so I would tend to avoid being over-leveraged myself at the moment.

Housing affordability is still dire according to Massey University’s quarterly survey:

While his unit’s last home affordability survey in September had shown “slight” improvements over the past three quarters for home-buyers, things were still grim.

On an annual basis, national affordability improved 4.1 per cent because of average weekly wages increasing, as well as mortgage rates and house prices trending down.

The real problem we be of course is that New Zealanders are terrible at saving and most of those renting consider saving a deposit the biggest barrier to getting into the housing market. The reality though, is that at the moment deciding to buy a home is a little bit more difficult than worrying about the location or the decor: saving is suddenly going to be trendy again!

The good news for landlords appears to be that there will be no sudden shortage of tenants and that should support rental prices, so eventually the rental yields will improve if prices continue to drop, and then the cycle will start again.
Photo Credit