The RBNZ today announced that lending to customers wanting to build new homes would not count towards banks’ low-deposit lending cap.
“The Reserve Bank has recently consulted with the building industry and banks on the impact of LVR restrictions on residential construction activity,” Deputy Governor Grant Spencer said. “While high LVR construction lending is only around 1% of total residential lending, it finances around 12% of residential building activity.
“This exemption means that low deposit lending will fall outside the 10% speed limit if it is financing the construction of a new house or apartment.
“However, any new low deposit construction loans will still need to meet the internal risk requirements of the lending banks.”
He said it would help support the supply of new housing and reduce some of the pressure arising from excess demand in the property market.
Ian Webb, of New Build Residential Construction Lending, said he was pleased and relieved. “I couldn’t be more delighted.”
He said the Reserve Bank had underestimated the impact of its decision. “In construction, we lose a whole season if the change isn’t made quickly. Approvals had dropped 50%, which is huge for construction.”
Webb said it would encourage people to get into the supply side of the housing market by making it advantageous for them to build rather than buy second-hand. “I hope we’ll see a massive influx.”
