Will the latest amendment to LVR restrictions for home building impact house prices?

Only two months since the reserve bank brought in new LVR lending legislation, they have amended their stance. New home builds will now be exempt from the lending restriction, which according to the Registered Master Builders Federation, will ensure the development of up to 5000 homes in the next year.

This figure is only an estimate, and although the Minister of Housing Nick Smith announced today that there is additional land being released for new developments in Auckland and the Herald have reported that there is an increase in consents being issued (28% in the 12 months to October), it will take time for this to translate into actual dwellings ready for market.

Auckland needs a minimum of 10,000 new homes each year for the next 30 years to meet the expected demand. So even with this new LVR incentive for home building, and the increase in land availability, we are still playing catch-up. And each year that goes by we get further behind.

So while these changes may release some pressure on the property market in the short term we do not see this as having a huge impact on pricing in the long term.