The Reserve Bank is eyeing measures to discourage speculators from buying multiple houses as it acknowledges its loan-to-value ratio (LVR) restrictions have favoured investors over first-home buyers.
Appearing before MPs at Parliament yesterday, RBNZ governor Graeme Wheeler acknowledged "the issue is also around people who invest and buy multiple houses".
"We have been thinking quite deeply about whether we need to introduce measures to discourage some of those practices", he said.
The RBNZ had consulted financial markets, realtors and investors, "and we're currently exploring that in-house".
NZ Institute for Economic Research economist Shamubeel Eaqub said that with many property investors having built up considerable equity in their portfolios over time, "they're hardly ever hitting against the LVR restrictions".
However, measures specifically targeting investors owning multiple properties would be difficult for the Reserve Bank to formulate.
"In the past they've talked about policies that might move property investors away from mortgage lending to business lending which tends to have tighter criteria and higher interest rates," Eaqub said.
"I'm not quite sure how that would work because what if the property portfolio is split up into several trusts for example, so there might be some issues around implementation."
Meanwhile, the decision to continue the loan-to-value ratio regime introduced to help curb surging house prices has been endorsed, due partly to sharply rising migration.
The rules came in last October, limiting to the total amount banks could lend to borrowers with deposits of less than 20 per cent.
Nick Tuffley, ASB chief economist, said LVRs had helped moderate the risk of a sharp correction in house prices during the past year but he is worried about an influx of migrants.
Bruce Patten, of Auckland mortgage specialist LoanMarket, backed the bank's decision but estimated thousands of Kiwis were affected.
LVRs were being picked to end after Finance Minister Bill English said this week pressures were easing, although decisions on LVRs were for the Reserve Bank to make.
Tuffley said the risk of a price resurgence was still very real.
"The key risk we and the Reserve Bank see is net migration, which has yet to peak. Although it could start to show signs of peaking by early 2015, in recent months the net inflow has been very strong." he said. Even when changes come, they will be gradual, he predicted.
"The financial system faces the same key risks that the financial system faced at the time of the May Financial Stability Report, although the balance of these risks has shifted in the past six months," Wheeler said. "We have always indicated that the LVR restrictions are a temporary measure.
"The reduction in house price inflation and housing credit growth are welcome developments, along with indications of increased residential building."
Wheeler said the restrictions had been successful, with house price inflation falling nationally from just under 10 per cent to 4.9 per cent, while in Auckland it had also halved from 17 per cent to 8.5 per cent thanks mainly to the combination of LVRs and interest rate increases.