Wednesday 20th July 2016
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ANZ Bank New Zealand chief executive David Hisco, who head's up New Zealand's biggest lender, has warned property prices in Auckland are overcooked and the ending of the property boom will be "messy".
In an article written for the Auckland-based New Zealand Herald, Hisco writes that "having been in banking since 1980 I have seen this movie before. The ending is pretty much the same - sometimes a little plot twist, but usually messy".
He warned baby boomers who have become property investors are starting to see more and more rentals where the owner can't find a tenant or the rent doesn't cover the mortgage. He said "it's a matter of when, not if, the market adjusts".
On Tuesday, the Reserve Bank governor Graeme Wheeler proposed new regulations which would see property investors require a 40 percent deposit to borrow from a bank to buy an investment property anywhere in New Zealand. Those rules are scheduled to come into force on Sept. 1, although Wheeler asked lenders to abide by them immediately. These regulations extend and expand the demand for a 30 percent deposit on investment properties in Auckland introduced by the bank last year.
Westpac Banking Corp today confirmed it would not accept any new loans that did not meet the Reserve Bank's requirements.
Hisco said the central bank needs to go further and demand 60 percent deposits, which "will be unpopular amongst investors but it may end up doing them a favour" and mean less business for the banks.
He also called for the Reserve Bank to do more to weaken the New Zealand dollar, urge a debate on the levels of immigration, particularly in Auckland, and for the government to look at ways to fund new infrastructure.
Hisco finished by warning "logic tells me things cannot continue to run this hot" and urged borrowers to use record low interest rates to repay their debt, rather than as a chance to borrow as much as they can.
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