Booming house prices are leading to further restrictions on borrowings for property purchasers (both investors and owner-occupiers), a measure which is intended to cool the market.

The Reserve Bank of New Zealand is currently consulting on new loan-to-value ratio restrictions (LVRs) intended to start from October 1, under which property investors will need a 40 per cent deposit.

New investors and property speculators are expected to be impacted the most under the new LVRs. However, long-term investors with access to high equity in their property portfolio may find opportunities arising from the changes.

At the same time new nationwide restrictions are also proposed for owner-occupier purchasers requiring a 20 per cent deposit which will no doubt have a negative effect on first time buyers.

That said, with the recently announced amendments to the Government's HomeStart scheme, first-home buyers can now earn more and buy more expensive houses, and still qualify for the subsidy, which itself remains unchanged.

The scheme offers a grant of up to $10,000 for an existing house, and $20,000 for a new house to add to a deposit for first-home buyers.

Income caps for the HomeStart grants are now $85,000, up from $80,000, for a single person and $130,000, up from $120,000, for a couple.

In addition to the above proposed LVR restrictions, higher income and house price caps were needed because of a rise in wages and residential property prices since the scheme was first announced.

We recommend you seek specialist and legal advice when purchasing property.

(Published in The Weekend Sun - August 19, 2016)