Will the 20% LVR kill affordable housing?

Will the Reserve Bank’s 20% LVR home loan rule kill affordable housing?

Yes it will.

And Michael Barnett of the Chamber of Commerce is bang on the money with that call.

Provincial New Zealand is paying for Auckland’s overheated housing market, the Auckland Chamber of Commerce says.

The head of the chamber, Michael Barnett, said his organisation was worried the Reserve Bank’s new requirement for a 20 per cent minimum deposit on most new mortgage loans was beginning to have unintended effects. 

One was that by taking first-home buyers out of the market, developers might be encouraged to continue building expensive homes, resulting in fewer affordable new homes, he said.

His other concern was that the rest of New Zealand was being “unfairly penalised” with measures for Auckland’s overheated housing market.

Developers will continue to build high end houses to meet the remaining market – people with equity.

NZ is awash with low equity home owners and purchasers. Moodys realises but the majority of home purchases are stretched on a loan to value
ratio. People then borrow against the rising home equity to find boats, European Cars and lifestyles. It’s fact.

The LVR mechanism might reduce the heat long term but it will murder all attempts to create affordable housing because people looking for ‘affordable housing’ have low equity.

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