Auckland Council's chief economist has hit out at Reserve Bank lending rules, saying the requirement to raise huge deposits is "kicking first home buyers while they're down".
He is among a chorus of experts who want the restrictions eased so more families can get a foothold on the property ladder.
The central bank maintains the rules are crucial to financial stability, though admits a growing number of first home buyers are getting exemptions in recent months.
Economist David Norman yesterday revealed Auckland housing affordability had improved 26 per cent since 2015 and is now the best it's been in six years.
That's on the back of low interest rates and regulatory changes aimed at investors and overseas buyers that have helped put a dent in the city's booming property market.
But persistently high prices have shut many out of home ownership, consigning thousands of families to a lifetime of renting.
Reserve Bank loan to value ratio (LVR) lending rules introduced in 2013 mean most buyers need to raise a deposit of at least 20 per cent to secure a mortgage.
That's nearly $170,000 on a median-priced Auckland home of $850,000.
Reserve Bank governor Adrian Orr this week decided to leave LVRs unchanged , warning that prolonged low interest rates could lead to a resurgence in higher-risk lending.
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Responding to the announcement, Norman told the Herald he was not a fan of the lending rules, which would be better targeted solely at investors, whose lending was much riskier from a financial stability perspective.
"I've never been a fan of restrictions on first home buyers. I think that's barking up the wrong tree.
"I don't think we should be effectively kicking first home buyers while they're down."
Norman said surging prices illustrated how far the market had moved, with the average Auckland house adding $380,000 in just five years - putting them beyond many entry level buyers.
"Between 2011 and 2016 most Auckland homeowners earned more untaxed capital gain sitting drinking tea in their living room than the median income of going to work."
Real Estate Institute data shows Auckland's median house price increased 10.5 per cent over the past four years, compared to a 63 per cent surge in the previous four years.
While measures like the LVRs and foreign buyer ban had helped moderate growth, lending restrictions were hampering home ownership rates, a spokeswoman said.
"A stable market is good for everyone, and we think keeping LVRs in their current position was a prudent decision by the Reserve Bank.
"The difficulty, however, continues to remain for first home buyers to save that 20 per cent deposit in a city such as Auckland.
"It's imperative to get the balance right between allowing people to get a foot on the market and ensuring they're not over leveraged in terms of their borrowing."
A Reserve Bank spokesman said lending at high LVRs to owner occupiers remained risky and the rules limited the share of such loans banks could undertake.
There were exemptions for first home buyers under the Kāinga Ora First Home Loan scheme and banks had prioritised entry level buyers within their allowance of high LVR loans.
"As a result, 41 per cent of loans to first home buyers have been with a deposit of less than 20 per cent in recent months.
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"We have seen significant growth in purchases by first home buyers in the last two years, and the share of sales to first home buyers is higher now than it was before we put LVR rules in place."
Housing Minister Megan Woods would not be drawn on whether LVRs should be eased, saying financial stability decisions were made independently by the Reserve Bank.
The Government was focused on a wide range of other measures to help more New Zealanders into home ownership, she said.
"These measures include banning overseas speculators, building hundreds of houses for first home buyers through the KiwiBuild programme, improving First Home Loans and First Home Grants, and establishing a $400m progressive home ownership scheme to help those who would otherwise struggle into home ownership."