Next Wednesday the Reserve Bank will reveal a decision that could open the door a little wider for first-home buyers - but could also make property prices even higher.
That decision is whether to relax, or even remove, the strict loan-to-value ratio (LVR) rules the central bank has imposed on mortgage lending, six years after they were introduced.
Will they do it? And if so, by how much?
And, with banks increasingly sticking to tougher self-imposed lending rules, will the Reserve Bank's decision really make a difference to house hunters?
For first-home buyers, the amount they need to save to qualify for a mortgage can be overwhelming, so when that hurdle was doubled overnight in October 2013, there were howls of outrage.
In Opposition the Labour Party was opposed, describing the move as unfair to young savers.
Suddenly, banks were allowed just 10 per cent of their lending to be for borrowers with a deposit of less than 20 per cent.
That backlash has made the LVRs something of a "political disaster" for the Reserve Bank, says Westpac chief economist Dominick Stephens.
That's despite the fact that there is evidence the rules have worked to cool the market - and that first-home buyers are the very ones who may now be benefiting.
"I don't think first-home buyers or buyers who have low deposits are well served by a market that is in danger of getting out of control,'' the Reserve Bank's then-governor Graeme Wheeler told the Herald at the time.
"When an asset price bubble bursts," he said, ''it imposes huge costs to individuals, to families and also to the economy.''
In a roundabout way the central bank did have had the interests of first-home buyers at heart.
''If house prices did decline because of a financial setback - which could happen, for example, if China's growth slowed dramatically - then the people most affected are the first-home buyers,'' Wheeler argued.
But ultimately, the Reserve Bank's job of maintaining financial stability is focused on the big picture, without much scope for sentiment about individuals.
"The loan value restrictions are around the resilience of the banking system and the resilience of the household sector, as opposed to trying to manage asset prices directly," says Reserve Bank assistant governor Christian Hawkesby, talking to the Herald after the latest official cash rate decision last week.
In other words, technically they aren't even specifically targeting house prices.
"The Reserve Bank's job is to look at the economic risk in aggregate," says NZIER principal economist Christina Leung.
"So we tend to look at LVR effects in an aggregated way and we don't look at who has been crowded out of the housing market."
Leung says she thinks LVRs have played a role in slowing that market and giving first-home buyers a better chance of getting on the property ladder.
This is especially true since the rules were revised to target investors in 2016.
"I would say they've contributed to the slowing of the housing market and the reduced investor interest," she says. "But there were other things, such as all the discussion of capital gains [tax] and the ban on foreign buyers."
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Real Estate Institute (REINZ) chief executive Bindi Norwell agrees that the tough investor rules – initially requiring most second-home buyers to find a 40 per cent deposit (now 30 per cent) - had a big impact.
There was 80 per cent growth in the residential housing market in the four and a half years before the introduction of investor rules in 2016, Norwell says.
Since those rules were imposed, we've had stability for three and a half years in Auckland.
In August 2015 investors accounted for 34 per cent of mortgage lending, or $1.89 billion, according to REINZ data.
"Then in 2019 Investors accounted for 19 per cent of borrowing, $1.2023b – it's come down by nearly half."
Norwell also acknowledges the complex mix of factors at play.
"But it seems the LVRS have had a very big effect, particularly on the Auckland market."
There is now some evidence that the pendulum is finally swinging back towards younger people looking to get into the market.
Lending to first-time buyers in the first 9 months of this year was 12.2 per cent higher than in the first nine months of 2018, according to RBNZ figures.
For the same period, lending to investors fell 16.4 per cent.
Norwell feels we should still be trying to help first-home buyers.
"KiwiSaver, fractional ownership, all that's helping so first-home buyers are actually increasing - to around 18 per cent of new home loans," she says.
But more broadly across New Zealand, there is still "astronomical growth" in house prices. "So we think [LVRs] haven't done much at all in the regions."
So will the Reserve Bank move to ease the rules next week?
"If I was a betting person, and I'm not, I'd say they are going to hold them because of the huge growth around regional NZ," says Norwell.
"We're in territory with double-digit growth and if you loosened them even more there is potential danger."
Median house prices for the Auckland region were at $850,000 for the three months ending September 2016 and have fallen to $830,000 for the three months ending September this year – a 2.4 per cent drop.
But for the same period, Hawke's Bay median prices rose by 48.2 per cent, Manawatū/Whanganui 55.2 per cent and Southland 50.1 per cent.
Leung also thinks the RBNZ is likely to hold off next week – although she says the case for further easing is growing.
"A year ago we thought interest rates would be on the way up, so it's always hard to tell," she says.
"The fact that we have seen renewed activity in the housing market does mean less justification for easing.
"When we look at our own modelling, we find that easing in LVR restrictions does tend to crowd out first-home buyers. From that you would expect that if you wanted to target housing affordability, easing would hinder that.
"We modelled the effects of 10 per cent easing for investors and our findings suggested the move would crowd out first-home buyers for the lower priced houses."
But in his latest analysis, KiwiBank chief economist Jarrod Kerr argues the conditions are there for an easing.
"Credit growth remains well behaved," he says. "While at the same time household income growth is lifting.
"As REINZ data shows, national house price appreciation is gaining momentum but remains modest by recent standards, and there is no suggestion in the data it will become unhinged and accelerate over the coming months."
And, debt servicing costs are significantly lower than they were, after 0.75 percentage points of official cash rate cuts delivered since May.
ANZ economists also lean towards a slight easing next week.
In report published last month, they suggest "the path of least regret" for the Reserve Bank may be to hold the rules while it waits for clearer signs of the strength of the housing market.
"But if we had to make a call we still think a small loosening is more likely.
"In the end, the case could be made either way: loosen the restrictions a little at the November Financial Stability Report or wait and see where things are after the dust settles on the recent mortgage rate moves," writes chief economist Sharon Zollner.
For other economists, it looks like a line-ball call that may have been swung by the latest surge in housing market data.
"We had previously been expecting another loosening of the LVRs in November. But the house price turnaround that we've been expecting for some time has started to materialise," says Westpac's Stephens.
"So I think that's going to be enough to get the Reserve Bank to hold off this time."
One thing that now seems unlikely is the complete removal of the LVRs.
While they were originally billed as a temporary measure, Reserve Bank governor Adrian Orr has said the LVRs will stay in place. However, they could be eased to the point that they no longer had any meaningful impact - but the Reserve Bank would still have scope to tighten again quickly if required.
"The LVRs are in place now and forever - just what level they are set at is going to be a function of all of that complexity around what is facing this industry," Orr said in a speech this year.
Westpac's Stephens suggests they are already getting close to that point.
"In fact they've been loosened a lot, to the point where they are not particularly binding anymore," he says.
The percentage of high LVR loans on the books of the commercial banks has fallen.
"So the banks are looking a whole lot safer than they were."
There have been plenty of other constraints on the banks, says the REINZ's Norwell.
"The banks have been very prudent with their lending. They have been tightening up a lot of their criteria so they're probably naturally doing this anyway."
There has been a mix of natural credit tightening related to housing market conditions, and the proposed introduction of tougher capital adequacy requirements in Australia and New Zealand.
And there's also been the fallout from Australia's Royal Commission into the banking sector and New Zealand's culture and conduct review.
"Even that culture and conduct work will be about making sure that people aren't overly leveraged and not lending to people who probably aren't able to pay it back," Norwell says.
At its annual results briefing last month, ANZ chief executive Antonia Watson hinted at the extent to which more conservative attitudes have made the banks' own self-imposed lending restrictions more relevant than the LVRs.
Asked if she thought the Reserve Bank might ease LVRs, she said she didn't know if there would be any change, but noted: "The constraint now for us is more responsible lending and affordability rather than running to meet an LVR target."
Stephens says: "So [the RBNZ] are moving to get the banks to take more individual responsibility for the quality of their loan books.
"And particularly the move to ask banks to hold more capital; that will replace the need for macro stability tools."
Stephens thinks the LVRs and the backlash around struggling first-home owners has been "a bit of a political disaster" for the Reserve Bank.
"The new [RBNZ] management is basically not that keen to have those tools in vigorous use like the previous governor was.
"So over time the LVRs will become irrelevant," he says.
He thinks they may be left as they are until this time next year.
"Because I think this upswing in the housing market will last a while," he says. "But once it starts to fade again, then I think then longer term the LVRs will disappear."
Evolution of lending rules:
Banks are required to restrict new residential mortgage lending at LVRs of over 80 per cent to no more than 10 per cent of their lending.
Loans for new residential construction are exempted.
Restrictions outside Auckland eased. Restrictions on loans to owner-occupiers in Auckland continue to apply.
Restrictions for residential property investors introduced – most now need a 40 per cent deposit for a mortgage loan.
First easing. No more than 15 per cent (previously 10 per cent) of each bank's new mortgage lending to owner-occupiers can be at LVRs of more than 80 per cent.
No more than 5 per cent of each bank's new mortgage lending to residential property investors can be at LVRs of more than 65 per cent (previously 60 per cent).
Eased again. Banks are now permitted to make no more than 20 per cent of their residential owner-occupier mortgage lending to high-LVR (less than 20 per cent deposit) borrowers and no more than 5 per cent of investor lending to high-LVR (less than 30 per cent deposit) borrowers.