Should first home buyers be exempt from LVR lending?

Barfoot and Thompson, the leading residential agent in Auckland is lobbying for first home buyers be exempt from LVR lending.

REINZ reports there are many households who earn $250k between themselves and can easily service a mortgage, yet have difficulty coming up with a deposit.

Barfoot & Thompson has proposed that exempt entry-level buyers should be allowed to purchase houses with less than 20 per cent deposit, provided the properties are below a $600,000 threshold. But a $600,000 price cap would not help Auckland buyers, as there was little available in that range.To be honest, you have to look hard to find a property under $600,000 in Auckland, unless you start dabbling into apartments.

What will probably happen is there will be a surge in demand for houses in the below $600,000 (most likely apartments). As we all know, from basic economics 101, if there is a huge increase in demand (while supply is fixed), it won’t be long before we run out of houses less than $600,000.

If the deposit exemption is going to have any benefit for Aucklanders, the limit should be $800,000. There are still a fair amount of decent 2 bedroom units selling for under this price.



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