Property investors will need a 40 per cent deposit under tough new restrictions but some locals question whether the change will make a difference.

Restrictions to lending limits on residential properties were not only limited to Auckland, and were being extended nationwide.

The new rules are being urgently introduced in an attempt to put a lid on New Zealand's spiralling property prices.

Reserve Bank Governor Graeme Wheeler outlined the new rules yesterday, and told banks they would be expected to act immediately.


The new loan-to-value ratios (LVRs) would take effect on September 1, but the Reserve Bank wants banks to "observe the spirit of the new restrictions" in the lead-up to the new policy.

Dan Lusby, owner of Tauranga Rentals, said he was unsure how much of an impact the new restrictions would have.

"A lot of property investors actually use equity from their other properties to buy new properties. It's very rare that they come up with any real cash anyway for the deposit."

He said investors continued using equity and other assets to keep buying properties, so many would be able to get around the new law.

"It won't stop smart investors well set up with assets and equity," Mr Lusby said.

However, he said the new 40 per cent deposit would put off some investors who did not have enough equity.

"In Tauranga, a lot of investors come from Auckland, and they have a lot of equity from their houses there. It seems to me it won't slow them up too much rather it will slow
Tauranga investors who don't have the same sort of equity in their properties."

Tauranga mayor Stuart Crosby said it was a good move.

"I also think the Government needs to look at a form of speculation tax because there is no doubt that people buying multiple homes that aren't their family homes are reducing the opportunity for first home buyers," he said.

The 40 per cent deposit might put off speculators which would help first-home buyers, which Mr Crosby supported.

"I hope later this year and into next year there is not the rampant house price rise which we have experienced over the last two years."

The people that have come in and swamped the market and now own properties, it's not going to affect them because they've already bought houses up.


Tommy Wilson, of Te Tuinga Whanau Support Services, who sees the impact of high rentals and homelessness on Tauranga locals on a day to day basis, said the horse had already bolted.

"The people that have come in and swamped the market and now own properties, it's not going to affect them because they've already bought houses up," he said.

The Reserve Bank introduced LVRs of 20 per cent in 2013 to rein in the housing market, and last year it raised the limits to 30 per cent for investors in Auckland.

It would consult on the changes until August 10.

Yesterday's announcement came after Prime Minister John Key expressed frustration about the Reserve Bank's response to rising house prices, saying that it should not need any more time to investigate stricter rules for property investors and should "just get on with it".

Reserve Bank deputy governor Grant Spencer on July 7 said that the bank was considering new LVR restrictions, but would not introduce them before the end of the year.

Spencer also told the Government to get its own house in order, by taking another look at its immigration and tax settings.

New rules - to begin September 1


• Restrictions for investor lending extended from nationwide from Auckland only

• Banks will be forced to require a 40 per cent deposit - up from 30 per cent - for at least 95 per cent of the loans they make in this area.

Home buyers
• Restrictions for owner-occupier lending extended from Auckland to nationwide.
• Required deposit level remains at 20 per cent for at least 90 per cent of bank lending.

- The exemption allowed under the current LVR policy will continue to operate, including for construction lending and major non-routine repairs of dwellings

Read the Reserve Bank's consultation paper released this morning on proposed loan-to-value restrictions.