"We're starting to see the lending restrictions that took effect in November and December playing out in the Real Estate's Institute's latest monthly statistics. Unfortunately, it's first-home buyers who are bearing the brunt of it," says Tim Kearins, Owner of Century 21 New Zealand.
His comments follow REINZ releasing its Monthly Property Report for December – a month which saw median house prices across New Zealand up 21.5% compared to the same time last year. REINZ, however, notes that commentary from agents nationwide suggests that 'market headwinds are gathering strength'.
At $905,000, it's down from November's record high national median house price, with a notable 1.6% price decrease when comparing December to November.
"The reality is only a handful of first-home buyers are now allowed to borrow more than 80%, so most are falling well short with their deposit. On top of that, significantly fewer mortgage applications are being approved because banks now need to conduct ultra-conservative assessments on all new borrowers," says Mr Kearins.
Since 1 November, Reserve Bank restrictions have meant banks are only able to lend 10% of their new lending to owner-occupiers wanting to borrow more than 80% of a house's value. Then on 1 December changes to the Credit Contract & Consumer Finance Act (CCCFA) took effect which has led to criticism that too many new home loans are being declined unnecessarily.
"I'm pleased the Government has asked the financial regulators to bring forward their investigation as to whether the CCCFA is being implement as intended. Unfortunately, how it's currently being applied is not only hurting first-home buyers, but next-home buyers with an exemplary repayment history," he says.
The Century 21 leader says across the real estate sector, residential listings remain tight which is also constraining nationwide sales volumes.
"I appreciate that the Government and Reserve Bank are determined to get on top of rampant house inflation, but let's not kill off too many Kiwis' dreams of home ownership and quest for greater security.
"These latest statistics will be a wake-up call to the Government and Reserve Bank. If they continue to tighten the screws too hard, the very people they're trying to protect will be the ones most adversely affected," he says.
Tim Kearins says all eyes will be on the next Official Cash Rate announcement on 23 February, with the coming weeks perhaps the best time for home buyers to lock in a good mortgage rate.