At the end of April, the Reserve Bank scrapped loan-to-value ratio restrictions for owner-occupiers and investors for one year, removing previous LVR “speed limits” on what the banks could lend.

The decision, along with the OCR cut in March and vast quantitative easing programme, have boosted the housing market through 2020 in spite of the global pandemic.

Now the latest REINZ data reveals that 8,377 properties sold nationwide in September which was a 37.1% year-on year increase. Investors have dived back into the market in recent months, borrowing more at high LVRs.

Alexander says that as the housing market continues to heat up, the central
bank will reintroduce LVRs for investors come May next year. “I think that the chances of the 30% deposit requirement coming back for investors are fairly high given the strength in the residential real estate market.”

However, the outlook may be different for owner-occupiers and first home buyers. Recent comments from the Reserve Bank indicate it views the recent surge in house prices as helpful to the economy. Officials recently said falling house prices would be the “worst-case scenario” for our economy as it recovers from the Covid recession.

Alexander says the Reserve Bank may be more inclined to extend the LVR-free period for owner-occupiers. “Given the bias which the Reserve Bank has toward generating as much momentum as possible in the economy, they may hold off reimposing those requirements for a few months after May.

But this far out, it’s still fairly much a guessing game.” CoreLogic senior property economist Kelvin Davidson agrees the LVRs will return. He says the longer this upswing runs – and the more investors continue to target property – the greater the chances that the LVRs are reintroduced next year. ■