Deputy Prime Minister Grant Robertson has announced that he’s contacted Reserve Bank Governor Adrian Orr for advice on ways in which they can support the Government around skyrocketing house prices.

This comes in the wake of major banks moving to restrict investor LVRs to 70%, ahead of the Reserve Bank’s rule change on March 1.

Economist Tony Alexander says that this, in effect, gives the Reserve Bank a remit for suggesting wide-reaching changes, many of which are likely to affect investors.

“I don’t think it is likely that the Reserve Bank will change interest rate polices, but I think they could suggest bringing in debt-to-income ratios and LVR restrictions that strongly differentiate between owner-occupiers and investors,” he says.

Alexander believes that if 30% deposit restrictions don’t cool the market, there is a chance that they could be pushed up to as high as 40-50% for investors.

The combination of debt-to-income ratio restrictions and high investor LVRs would be likely to disproportionately affect new investors, or those wanting to enter the market, in particular.

Robertson says that overly restrictive planning rules are one of the causes of extremely high house prices.

“The replacement of the RMA is a priority to address that. We will build on the National Policy Statement on Urban Development and examine other potential barriers to affordable housing. Minister Woods is working on new and innovative ways to increase supply,” he says.

He continues that he has also sought advice on further demand-side measures that can add to the initiatives they have already taken.

In an extended period of low interest rates, and given the lack of housing stock, Robertson feels it is an appropriate time to consider how the Reserve Bank can contribute to a stable housing market.

“[But] I want to be clear I am not proposing any changes to the mandate or the independence of the Reserve Bank,” he continues.