This has now all culminated in 5 primary market drivers, all independently orchestrated, and now perfectly aligned, to create quite the impact on New Zealand’s current real estate markets, all in a relatively short space of time.
1. Property investment tax-deductibility – Government (Oct ‘21)
Significantly undermining tax efficiency, cash flow, and overall yields, particularly of existing property stock versus a new build investment property.
2. LVR restrictions – Reserve Bank (May & Nov ’21)
In an ongoing battle to control macro market risks, banks were further directed to markedly reduce the amount of ‘low equity’ lending, to both homeowners and property investors alike.
3. Interest rate hikes – Reserve Bank (Oct ‘21)
In an attempt to rein in inflation, of which many point the finger at RBNZ for creating in the first place through the ‘money printing’ practices in response to the pandemic, the cost of using lenders is heading north at a genuine breakneck speed.
4. Property Market Dynamics – Ongoing
Most people were well aware the property market was simply an unbridled beast for far too long, with the age-old adage of ‘what goes up must come down’, the difference between January ‘22 versus June ‘22 is sobering reading for many.
5. CCCFA – Government (Dec ’21)
In the final blow of throwing everything and the kitchen sink at the housing market, those ‘notorious cups of coffee’ impacting your capacity to get a home loan. The new laws driving the treatment of discretionary spending in regards to mortgage lending settings, effectively handcuffed the banks and other lenders alike, in many cases, stopping Kiwis in their tracks.
This single piece of legislation has had more impact on the market than any of the other drivers. Not only has it stopped New Zealanders from buying a house, but it has also stopped people from topping up their mortgage for renovations, business assistance, or simply restructuring or refinancing their mortgage onto friendlier terms.
The CCCFA was criticised for depriving credit to perfectly dependable borrowers, and after backlash, submissions and complaints, a review was initiated.
The review findings are now in and the news is very good. Parts of this legislation have been refined, with banks now once again able to use their own judgement in assessing applicants’ discretionary spending levels, without fear of incrimination.
From July 7th, these reviewed changes will be implemented. Everyday Kiwis’ access to residential credit will once again be more ‘normalised’.
If you want to explore further what these changes mean for your specific situation, get in touch with our expert mortgage team. We can help you maximise your home loan potential to put you in a better position financially.
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