Despite the announcement last week that the Reserve Bank will reinstate tougher loan-to-value ratio restrictions than were in place last year, listings and sales continue to soar, breaking records in the process.

Here’s what you need to know:

Residential sales continue to soar breaking multiple records

Auckland’s largest agency, Barfoot & Thompson, auctioned more than three times as many homes in the first week of February as it did in the corresponding period of last year.

The agency handled 185 residential auction properties in the week form January 30 to February 5, compared with just 54 in the corresponding period of last year (1-7 February 2020). The sales rate was also considerably higher this year with sales achieved on 71% of the auctioned properties compared with the sales rate of 52% in the corresponding week of last year.

The sales rate was 100% for properties in Rodney, Papakura and Franklin, although the number of properties offered from those areas was relatively small. At the bigger auctions the sales rates ranged from 60% for properties in the central Auckland suburbs, to 77% for North Shore properties.

This corresponds with the announcement from Realestate.co.nz that the number of residential properties coming on to the market hit a five year high in January. The site received 8048 new residential property listings from throughout the country in January, which was up 10.2% compared to January last year and the highest number of new listings the website has received in the month of January since 2016.

The rise in listings was mainly driven by a surge of 3139 new listings in Auckland, which was up a whopping 37.4% compared to January last year and the highest number of Auckland listings the website has received in the month of January since 2010.

Sales prices also continues to soar with Barfoot & Thomson reporting that auctions which were able to be matched with their rating valuations (RVs), 98% sold for more than their RVs. This indicates that there seems to be no slowing down of the house price increases, with QV House Price Index also revealing that the national average value increased by 6.27% over the three months to the end of January and had increased by 15.11% over the previous 12 months.

LVR restrictions: Investors to need 40% deposits and owner-occupiers 20%

The Reserve Bank (RBNZ) announcing last week that it will reinstate tougher loan-to-value ratio (LVR) restrictions than were in place last year.

From May 1, at least 95% of new bank lending to residential property investors will have to go to borrowers with deposits of at least 40%, and owner-occupiers at least 80% of new bank lending will need to go to borrowers with deposits of at least 20%. The owner-occupier level won’t be hiked in May like the investor one.

RBNZ Deputy Governor and General Manager of Financial Stability Geoff Bascand said LVR restrictions were removed last year “to ensure they didn’t interfere with COVID-19 policy responses aimed at promoting cash flow and confidence”.

“Since then, in part due to the success of the health and economic policy responses, we have witnessed a rapid acceleration in the housing market, with new records being set for the national median price, and new mortgage lending continuing at a strong pace,” Bascand said.

ANZ on December 15 announced it would start requiring investors to have 40% deposits. ASB, Westpac and BNZ last week announced they would follow suit.

It is expected that these measures will slowdown house price inflation, means rate at which prices are rising will slow down, not that the prices will come down.

-by Ravi Mehta from Professional Financial Solutions