The head of Auckland's biggest real estate company wants anyone purchasing a property worth more than $1.5 million to pay a deposit of around $500,000.
In an exclusive interview with the Herald, Barfoot & Thompson director Peter Thompson said the move would force people to live in suburbs they could afford, "not where they want to be".
Mr Thompson also wanted properties under $500,000 excluded from the LVR (loan-to-value) restrictions to help Auckland's struggling first-home buyers over the line, and admitted the risk of a market correction as prices spiral out of control.
He has lobbied politicians, the Reserve Bank and Real Estate Institute industry leaders over his proposals. Higher deposits on top-end homes would reduce Auckland's surging prices and the risk of buyers over-extending themselves by making people purchase cheaper houses, he said.
"If they haven't got the deposit they really shouldn't be going up to that next level because at some time interest rates will rise and that's when they're going to over-commit."
His comments follow an announcement this week by the Reserve Bank that from October residential property investors in Auckland will need 30 per cent deposits to secure banking finance. The bank estimates the move will slow price growth by about 2 per cent and promote greater stability in the face of a potential downturn.
Mr Thompson welcomed the move but said it did not go far enough.
He wanted anyone purchasing properties at $1.5 million or above required to raise deposits of 30-35 per cent - around $500,000 on a $1.5 million home. "What it would do is then bring people back into suburbs they can actually afford to live in, not where they want to be. It brings back some reality."
The Reserve Bank's latest rules would do little to stop price growth as people found loopholes, and did not address the fundamental problem facing Auckland's housing market - supply and demand.
Mr Thompson supported moves to ease LVR lending restrictions elsewhere in the country, but said Auckland properties valued under $500,000 should be excluded to give first-home buyers a "head start".
"That would help bring the average sale price down and it's those sorts of people that really need the help."
Asked about the apparent anomaly of a realty boss lobbying for higher deposits on expensive homes, Mr Thompson said prices would still rise because of Kiwis' love affair with property. "But we also prefer a more steady market than a market that can go up and then back just as quickly."
Real Estate Institute chief executive Colleen Milne said the 20 per cent deposit rule was "sufficient in this environment" and the market would balance itself when supply eventually met demand.
Labour's housing spokesman, Phil Twyford, said removing LVR restrictions on cheaper Auckland homes could have "unintended consequences". It would further fuel property speculation at the lower end of the market, making life even harder for first-home buyers.
Harcourts chief executive Hayden Duncan said Auckland was suffering from a severe lack of housing supply.
"The demand and supply imbalance is so great that even if some property investors are removed from the equation, or choose to purchase outside Auckland, there will be plenty of buyers to fill their place."