Thursday’s announcement by the Reserve Bank that it is considering imposing new restrictions on lending for residential property investment will lead to another burst of activity by investors that will push up prices even further, according to the Property Institute, which represents valuers.
And when the new measures are introduced they will probably be ineffective at bringing prices down, according to Property Institute chief executive Ashley Church.
Deputy Reserve Bank governor Grant Spencer said in a speech on Thursday that new lending restrictions such as higher loan-to-value ratio limits that could apply to residential property investments throughout the country could be introduced by the end of the year.
Church questioned the wisdom of the Reserve Bank signalling its intention so far ahead of introducing any changes, saying it would almost certainly lead to another frantic burst of buying activity which would further inflate house prices.
“It will lead to huge flurry of last minute buying which will push up prices as property investors rush to beat the end of year deadline,” he said.
“Watch the house price inflation figures over the next few months.
“You’ll see big price increases and a surge in activity as investors compete with each other, on price, to squeeze that last property out of their equity before the higher level restrictions kick in.
“What’s worse is that it will all be to no purpose because the evidence of the last two years is that the loan-to-valuation restrictions have had virtually no impact on reducing house price inflation.
“So we’ll get a sharp increase in prices with no economic payout at the end.”
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