New figures from Statistics New Zealand have revealed that 78 per cent of those currently renting – or 458,000 households – have a net worth of $120,000 or less which means they cannot afford the 20 per cent deposit on the average New Zealand home required under the Reserve Banks rules.
Mr Church says that this constitutes a massive crisis and is the primary reason that many kiwis now can’t get into their first home.
“The main barrier to first home ownership isn’t housing affordability or the cost of servicing a mortgage – it’s the LVR restrictions. That means that a generation of kiwis can say goodbye to a first home because of an artificial barrier, created by the Reserve Bank, to solve a problem which almost certainly doesn’t exist”.
Mr Church says that the LVR restrictions on first home buyers were originally introduced as a precaution against the possibility of a housing market crash – but almost two years on prices have, instead, kept increasing.
“This was entirely predictable – and we said so when the LVR rules first came in. Talk of an imminent crash was always nonsense. Even figures out of Treasury show that the New Zealand market hasn’t had a significant fall in house prices in over 45 years and is unlikely to suddenly have one now”.
Mr Church says that the LVR restrictions on first home buyers have been a devastating failure and have, instead, ended up creating a ‘perfect storm’ in which property investors have been able to snap up homes that might traditionally have been bought by kiwi families.
“The situation is now beyond ridiculous and it’s time for this ill-conceived experiment to end”.
Mr Church wants first home buyers exempted from the deposit rules and the power returned to the Trading Banks to decide whether or not someone constitutes a good credit risk and what deposit, if any, should be required.
“That’s the situation which prevailed prior to the imposition of the LVR rules and it worked well, for the country, for several decades and through several property downturns – so the sky isn’t going to collapse if we do it again”.
Press release here.