It is becoming increasingly likely that the Reserve Bank may require Aucklanders in particular to have bigger deposits to buy property, economists say.
A poll of economists showed that several thought Reserve Bank Governor Graeme Wheeler was looking increasingly likely to deploy macroprudential tools to tackle the heat in the Auckland property market.
The most likely tool was a loan-to-value (LVR) restriction, so that people cannot fuel the market by buying expensive properties with very little money down. They said it would likely be variable, to target the areas where the market was strongest.
While there has been a reported pick-up in activity in most regions, only Auckland and Christchurch’s residential property markets are posing any real house price inflation risk.
Gareth Kiernan, of Infometrics, said Wheeler’s comments indicated a growing risk that he was reaching for LVR restrictions.
He said he still expected a rise in the Official Cash Rate to be the Governor’s first-choice tactic. He expects the OCR to be 2.75% by the end of the year and for floating mortgage rates to rise past 6% in early 2014. Kiernan predicts they will be as high as 8.6% by 2015.