60% investor LVRs in NZ

O

It's a silly example, to start with the CG on the property is historically abnormal and secondly how can you assume what borrowing criteria is assumed ten years from now

 

60% LVRs should slow the market.
Although I have enjoyed the large gains and positive returns in Auckland, The lvr restrictions make it hard to pull equity and invest further for the long term.
But there is always the other lenders which will lend to higher lvrs for those who want it.

 

You really have both missed the maths...hope neither of you are brokers !

 

This whole thread is boring and rich in fearmongering, NZ market is nothing like OZ in comparison from financial to demographically, and to even assume that Australia will face min 60% lvrs, too many repercussions will erupt from such a primitive move.

 

Australia already has 60% LVR's.. it's called non resident lending. In fact, in many cases, it has 0% LVR's now available to a considerable driver of price growth- the Chinese.

I understand that's not what you are saying... but my point is; ask anyone whether they saw that coming 6 months ago or 12 months ago and.... well you get my point.

But again.. conversations about LVR's miss the point. It's the changes to the macro's and formula's that lender servicing calcs use to determine borrowing power, that are of far more concern in growing a portfolio. LVR's are a non issue for the most part.

 

"It's a silly example, to start with the CG on the property is historically abnormal and secondly how can you assume what borrowing criteria is assumed ten years from now"


You can use any example you wish, to be fair..... CG can be doubled or tripled or quadrupled for all the scenario matters. Its got absolutely diddly to do with the scenario in question. I just used those numbers for the purposes of a hypothetical.

So lets go for something that might better demonstrate the point , while keeping you from being too bored.

Mr Brown's property grows from 500K to $2 Million value after 10 years. Ka-ching!
Mr Brown still owes 500K though. Oops! Hasnt paid off any debt - which was THE point of the scenario by the way

Poor old Mrs Blue gets absolutely zero growth but reduces her debt from 500K to 400K - which again, was kinda THE point of the scenario.

Now... remember everything else about them is the same. Same income, same dependents , same rent etc... but one has less DEBT than the other now.

Mrs Blue will have the superior capacity. She may not have the superior equity...but we are talking about borrowing power, not net equity.

for 2 people with identical financial circumstances, less debt = better capacity - every day of every week