Moving on Up in Nelson – 27/07/2016

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Last week the Reserve Bank of New Zealand announced a stricter control over lending from banks to investors of property, upping the LVR restrictions to 40% deposit required right across the country.

This could inevitably lead to unintended consequences, but I doubt the LVR change will be the silver bullet the government would like it to be, because the fundamental issue is that of supply and demand.  Whether investors need a bigger or a smaller deposit, there still needs to be enough houses for us all to live in.

One of the ingredients of a thriving and vibrant economy is good levels of inflow migration, but just before you go off on a tangent about immigration, do remember that many of the new arrivals in this country are Kiwis returning home. There’s over a million of them overseas, and it doesn’t take a big percentage of them arriving here with their families to put strain on the supply of homes.

The LVR restrictions, as well as the recent loss of ability to depreciate, are all examples of lawmakers making moves to control house prices, but ignoring the supply/demand dynamic.

Evidence over the last week since the announcement would suggest there’s no change in this city that would affect prices downwards.

Have a great week – enjoy the sunshine.

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