The real estate boom could get worse, economist warns

This story was originally published on RNZ.co.nz and republished with permission.

Economists are calling on the Reserve Bank of New Zealand to re-establish credit restrictions, warning that the housing market is spiraling out of control.

In May, the Reserve Bank temporarily lifted loan-to-value (LVR) restrictions, freeing up banks to sell mortgages to buyers with small deposits.

Since June, lending to investors has tripled and last month banks loaned more than $ 7.3 billion to home buyers, an all-time high.

ASB Bank senior economist Mike Jones says the housing market could be too far along if the LVR hiatus continues until next May.

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He said Morning report today, it was one-way traffic with low interest rates and a limited supply of homes.

“The removal of the LVR restrictions in May has allowed for slightly more leveraged loans to be produced than otherwise.”

Jones said at the time that the country was not anticipated to be in “a deep recession but, interestingly, we have also had a housing boom.”

“There is some merit in going back [LVR] restrictions “.

He couldn’t say if the changes should take effect immediately.

“Whether [Reserve Bank] If he waited until May of next year, he would risk letting the cat out of the bag … and the housing boom would get a little further away from us. “

But, he said, the Reserve Bank should make sure that the LVR return did not interfere with the mortgage vacation plan.

Yesterday, Infometrics senior economist Brad Olsen said the state of the housing market was exacerbating inequality where prices were rising as people continued to lose jobs.

This story was originally published on RNZ.co.nz and republished with permission.