New home deposit rules could turn off 22% of investors

The Reserve Bank’s move to increase the deposit needed for investors to buy a home above 30% will have a significant impact on the market.

New research finds 22% of those who said they were definitely going to buy an investment property during the next 12 months would no longer buy if deposits go above 30%.

Another 21% of definite investors said they would delay buying.  34% would still buy and 24% were unsure, according to new findings from nationwide surveying by Horizon Research.

The Reserve Bank announced on July 19, 2016, it is consulting on increasing the deposit rate for all but 5% of loans banks make to investors to 40%.

The new policy would apply nationwide.

Horizon says the new policy will have a slightly greater impact in the Auckland market: 29% of the Auckland respondents definitely looking to buy an investment property said they would not buy if the deposit required increased above 30%.  17% said they would delay buying, while 27% said they would still buy.

Horizon conducted the survey of 1,817 adults nationwide in the two weeks ending July 14.It has a maximum margin of error overall of +/- 2.3%.

Results for “definite” buyers were reported in the analysis instead of including those who said they “may buy” because Horizon’s research over the past six years on property selling and buying has indicated that the “definite” respondents give a better indication of likely property sales trends.Results for definite buyers are indicative because of smaller sample sizes.

Horizon says it is also looking at the potential impacts of any Reserve Bank decision to restrict borrowing in relation to household income.

Preliminary findings indicate, on a national basis, respondents who were looking to buy an investment property in the next 12 months were marginally more in favour of implementing debt to income ratios in addition to controlling deposits than controlling deposits only.

However, a majority of those in Auckland who were looking to buy an investment property were in favour of only controlling deposits and not implementing debt to income ratios.

Those who were looking to buy a home to live in were in favour of only controlling deposits.  

This issue is open for comment at our Facebook page.

For further information please contact: Grant McInman, Manager, Horizon Research

Telephone: +64 21 076 2040

E-mail: gmcinman@horizonresearch.co.nz