News
No Changes to the LVR Rules – And for Property Investors, That’s Not a Bad Thing
Sometimes, no news really is good news.
For property investors, banks can continue to have up to 10% of their new investor lending at LVRs above 70%.
Owner-occupiers also remain unchanged, with up to 25% of new lending able to be above an 80% LVR.
So why do I think this is positive?
The interesting part of the Reserve Bank's announcement wasn't just the decision. It was the reasoning behind it.
They said:
> Housing risks are currently contained
> House prices have been broadly flat in recent years
> Mortgage lending growth has been modest
> Higher-risk lending remains manageable
> The banking system remains resilient
That's hardly the description of a housing market that's getting out of control.
For investors, maintaining the current rules also provides something we haven't always had much of lately — certainty.
We know the rules.
We can run the numbers.
And investors considering their next purchase don't suddenly have to find another suitcase full of deposit money because the goalposts have moved again.
Of course, LVRs aren't the only hurdle. Debt-to-income restrictions remain in place, and banks will still apply their own lending criteria.
But when you combine stable LVR settings with an OCR of 2.25%, increasing housing consents and some of the other positive economic indicators we've been seeing recently, the environment for property investors is certainly looking more interesting.
I'm not suggesting we are about to see another property boom — and frankly, that's probably a good thing.
What we may be seeing instead is something much healthier:
A more stable property market where investors can make decisions based on the numbers rather than trying to predict the next rule change.
And after the rollercoaster of the past few years, I'm quite happy with a little boring.
What do you think? Are the current lending settings giving you more confidence to consider your next rental property?