Ominous rumblings are coming from the Reserve Bank – it’s going to do something and chances are it won’t make your investing any easier. That’s because the Reserve Bank wants to let the lid off the Auckland property pressure-cooker and keep investors under control.
What could it do? The number one candidate is debt-to-income ratios on lending, but there’s also been talk of a land tax and other commentators are talking about setting the rate at which banks calculate servicing ability. Interest deductibility and loss offsetting could also be in the line of fire.
One thing is certain: whatever changes the Reserve Bank implements, they won’t make borrowing more affordable. It’s possible we’re seeing the easiest and cheapest borrowing any of us will see in our lifetimes. And, of course, it’s possible (though it seems less likely to us) that rates will drop further, the Reserve Bank will continue to sit on its hands and property prices will soar.
Either way, it takes time to organise a development, a minor dwelling or a subdivision, so don’t delay for too long if your plans involve a substantial mortgage. Get that pre-approval before October/November, which has traditionally been the Reserve Bank’s favourite month for putting changes in place.