Reserve Bank crackdown on landlords 'impractical' - economist

Economist Shamubeel Eaqub. Photo / NZME.

A leading economist has raised doubts about the practicality of a Reserve Bank landlord crackdown.

Shamubeel Eaqub, NZIER principal economist, said the bank could strike snags if it moved to curb lending to investors with more than five properties.

"I understand that the banks think this is difficult to monitor and implement. What if the houses are in different trusts, owned by different family members and if mortgages are through different banks?" Eaqub asked.

On Wednesday, Graeme Wheeler, bank governor, warned of "further measures" to discourage multiple investors and Eaqub said that might be a measure targeted against a certain specific sector.

"I think he is referring to the bank's previously announced policy option of treating multiple property mortgages as business lending which tends to be more stringent and more expensive," he said.

Craig Herbison, BNZ director of retail banking and marketing, questioned how much property landlords were buying each month and said it was less than some thought.

"There are various stats out there but we recommend looking at the numbers in the Reserve Bank's Financial Stability Report which includes 40 per cent to multi-property owners as opposed to 45 per cent quoted at the select committee," he said.

First home buyers were still active and there had been little change in their buying lately.

"Regarding the decline in first home buyers, CoreLogic data shows a 10-year average of 19 per cent of total sales. Post-LVR restrictions, it sits at 17 per cent so a 2 per cent decline against total sale volumes."

But Herbison also said the bank had been catering for the landlord market with a dedicated team established four years ago.

"BNZ launched a property investment team in March 2010 recognising that the needs of property investors differ from those of home owners. We've been consistently supporting property investors ever since and while we have seen some increase in property investment lending, we haven't made product or policy changes to attract this sector due to the restrictions presented by the Reserve Bank's speed limits.

"This slowdown in high-LVR lending to both property investors and home owners is an inevitable and a predictable outcome from the speed limits the Reserve Bank put in place. However, since their implementation, we've been prioritising loans to first home buyers where possible and they now make up around 30 per cent of all new high LVR loans for BNZ," he said.

Property is an attractive investment to New Zealanders because of the current taxation system which favour that asset class over all other types of investment, especially savings.

"As a consequence, we have seen in this country a massive long-term bias towards investment in residential property.

"To encourage other types of investments we need a national conversation around tax incentives for savings and investments in the capital markets, and potentially disincentives for residential property. This issue needs a holistic approach, which takes into consideration any unintended consequences of implementing the different measures that are being discussed," he said.