NZRB 30% deposit disadvantages first homebuyers, mom and pops
June 12, 2015 at 8:02 AM
The Reserve Bank restrictions that come into effect in October, will also make it difficult for the average person, even first home buyers.
I have a lot of young couples as clients who have bought an investment property and gone to live with mum and dad, at least until they can afford to move into the new property.
That door is about to be shut.
The restrictions will also affect mom and pop investors, who rely on equity in their existing home to help leverage them into an investment property.
The reality is that established investors should not have a problem meeting the 30 per cent deposit requirement, and overseas investors will not be affected because they mostly pay cash.
There are, however, a number of alternatives for mom and pop investors, but I do not recommend turning to non-bank lenders as a viable alternative for entry level investors, because that kind of finance costs too much money to service.
The first step for mom and pop investors is to get a registered valuation on your existing property to determine what equity you have, because that's what the banks will rely on – particularly if Capital Values (CVs) and Quotable Values (QV) don't show the necessary equity.
Other options include:
* Buy outside of Auckland (although at the moment there is no clarification of what is in Auckland and what is outside Auckland); or
* Purchase apartments instead.
I expect there will be a last minute flurry of investment buying before October because, despite the Reserve Bank's position that it expects banks to observe the spirit of the changes now (and not lend more to investors before October), it is currently more or less business as usual.
If you're worried about how you're going to afford an investment property, or you're a first home buyer thinking of an investment property as a way to get your foot on the property level, get in touch -- I'm always happy to discuss your options.