| WELLINGTON, Sept 5
WELLINGTON, Sept 5 The Reserve Bank of New
Zealand, as part of an effort to cool the hot housing market,
raised deposit requirements on Monday for home buyers taking out
a mortgage, unless the loan was being taken for a newly built
As of October 1, new rules mean residential property
investors will generally need a 40 percent deposit for a
mortgage loan while owner-occupiers will need a 20 percent
The new rules also no longer distinguish between the
nation's largest city of Auckland and the rest of New Zealand.
The central bank also broadened an exemption on newly built
homes from the higher deposit requirement to avoid dampening
Previously borrowers would have needed high deposits for new
homes once the build had progressed beyond "ground work" or
laying the initial foundation. As of Oct 1 first homes that have
been built within the previous six months and were bought from a
developer are exempt from the new rules.
"We've always argued that increasing supply is the most
important step towards addressing the challenges facing the
Auckland housing market - but achieving that will require a
massive increase in investment by the private sector," said
Property Institute of New Zealand Chief Executive Ashley Church.
New Zealand house prices have soared on the back of strong
immigration, low mortgage interest rates and restrained housing
supply, with much of the push coming from investor property
owners. The strain is particularly evident in Auckland where
prices are up more than 80 percent since a prior peak in 2007.
Central bank data show that total new residential mortgage
lending was NZ$6.3 billion ($4.61 billion) in July. Of that
NZ$2.4 billion was investor property.
The central bank has long signaled that the rise in house
prices is a risk to financial stability.
The change will likely encourage increased supply as
"developers can feel more confident about going ahead with the
building, knowing that buyers will be able to qualify for a high
(loan-to-value ratio) if they need to," said Westpac Bank Acting
Chief Economist Michael Gordon.
The latest round of macro-prudential tools are the third for
New Zealand. The central bank put in place temporary
restrictions on high loan-to-value ratio bank lending in October
2013 and tightened those restrictions for investors in the
largest city of Auckland in November last year.
($1 = 1.3656 New Zealand dollars)
(Reporting by Rebecca Howard; Editing by Simon Cameron-Moore)