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LVR bite may not last: Quotable Value

NZN 4/04/2017 Pattrick Smellie

New lending restrictions imposed late last year appear to be behind a slowdown in the pace of house price inflation in the first three months of this year, but the impact may not last.

The latest QV House Price Index from government-owned Quotable Value shows that while national property values increased on average by 12.9 per cent over the year to March 31, the increase in the last three months was just 0.6 per cent.

However, in the overheated Auckland housing market, QV warns the impact of tougher loan-to-valuation (LVR) restrictions may be temporary, even though Auckland house prices fell on average by 0.2 per cent in the first three months of this year for a 12.3 per cent annual increase.

"Values in parts of Auckland, Hamilton and Christchurch are still seeing a downward trend, but values are stabilising and continuing to rise in other parts of these main centres as well," said QV spokeswoman Andrea Rush.

"This means the downward trend and dampening in these markets seen since the latest round of LVR restriction may be shallower than anticipated."

The LVR restrictions, imposed from October, target residential property investors, who are now required to have a deposit equal to 40 per cent of any property they wish to buy before a bank is permitted to lend to them.

However, investor activity continues unabated, with QV noting that "sales to investors have hit a high of 44 per cent".

"First home buyers have dropped to a record low of 19 per cent of Auckland sales," Ms Rush said. "Prices are still too high for most."

On a national level, average house values are 52.4 per cent above the 2007 peak, with an average nationwide house value of $631,432. Adjusted for inflation, the national average increase over the decade is 28.5 per cent, with that growth heavily skewed to Auckland.

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