The Reserve Bank could be readying for a flip-flop on its home loan crackdown after pressure from builders.
Worried at what it sees as an overheated housing market, the Reserve Bank put the brakes on through tough new measures limiting the number of mortgages banks make to home hunters with low deposits.
But building representatives say those restrictions could result in 3000 fewer homes built each year, hindering government efforts to lift supply to curb rampant house price inflation.
Economists have also taken the Reserve Bank to task for being heavy handed, saying the Government should be the one devising the country's housing policy.
Registered Master Builders Federation chief executive Warwick Quinn met Reserve Bank and Treasury officials earlier this month to spell out the impact.
He said the Reserve Bank agreed to look into the points raised and said it was keeping "its options open" - a response which has encouraged Quinn that the rules could be revoked or amended for home hunters looking to build.
"We had received quite a few calls from various concerned businesses saying their work had dropped away significantly, particularly those working in the markets that required low deposits," Quinn said.
That contradicts the Reserve Bank's predictions of the effect of its changes. It had published a paper saying there could be 5 per cent fewer homes built and deputy governor Grant Spencer later said the impact on new builds would not be significant.
Quinn said his organisation surveyed more than 1000 builders to gauge the proportion of new builds for buyers with low deposits.
"No-one keeps great records of the lending levels, particularly banks and mortgage brokers, so with that information we're going to then have a look at that and go back to the Reserve Bank and tell them what we've found."
They had sought an assurance from the Reserve Bank that their information would be considered and "they were quite happy to say 'once we've got the data clearer, let's analyse it and see what happens' and they've kept their options open which is good".
The Reserve Bank said in a statement its low value ratio rules (LVRs) were only recently imposed and it was "gathering information on their impact on various parts of the housing market, including new housing construction".
Treasury was also interested in the figures and keen to see whether they were aligned with previous studies or whether the impact would be greater.
Tony Alexander, BNZ chief economist, questioned the extent the Government was "contracting out" its housing policy to the central bank.
"The Reserve Bank has stated already very strongly that they don't think that they can give exemptions . . . and it just seems to me like the central bank is starting to move a bit away from what their prime function is supposed to be here and moving into determining the Government's housing policy so I find that a source for concern.
"This is for the Government to be working on, our elected representatives, not the central bank."
Finance Minister Bill English, however, said it was a matter for the Reserve Bank. "They'll decide who they discuss the issue with."
Any impact of the LVRs would be short term with high house prices and fast-tracked consents attracting developers which would improve supply.
The bank had been open to feedback during the submission process on the LVR policy "and I imagine that's still their attitude . . . It's just not a matter of lobbying, it would be a matter of information. Their job is not to manage the politics, their job is to manage financial stability".
Shamubeel Eaqub, NZIER principal economist, said introducing exemptions would weaken the policy.
The Reserve Bank had suggested there was very little impact on new builds and this was the experience internationally.
"It's hard to tell whether New Zealand is a different scenario or not because we simply don't have very good data on where the LVR loans go to. It's one of the questions I've been asking the Reserve Bank but nobody has been able to tell me."
Political parties were already interfering with Labour promising to exclude first-home buyers from the exemptions and National helping first-home buyers through policies such as Welcome Home Loans, he said.
- © Fairfax NZ News
