A question that is asked many times, “Is it possible to buy an investment property in 2021?”
The Reserve Bank made an announcement early February this year that from the 1st of May, the loan to value (LVR) restrictions on lending by New Zealand banks on investment properties would essentially be reduced to 60%. Which now requires you to provide a deposit of 40%.
The reason why they have done this, is to decrease the amount of higher risk lending in New Zealand and to protect NZ’s financial stability.
Deposit Required
The required amount in the past for an investment property deposit has been 40% of the purchase price and as low as 20%. The Reserve Bank has now set the deposit amount required which means that all banks will need to abide by it. Mortgage advisers on the hand have the option of 2 tier or non-bank lenders too.
What are the options?
Options For Investors
As an adviser I have access to both bank and non-bank lenders; therefore I have options for investors.
Option 1
We are all aware that NZ is currently facing a housing shortage , but there is hope for potential investors. The Reserve Bank has allowed the LVR’s on newbuilds to be up to a maximum of 80%, this will increase the number of new homes being built.
The newbuild must meet the following criteria to be considered for this 80% LVR
- CCC must have been issued with 12 months (off plan or construction)
- Existing property will be considered with CCC issued during the previous 12 months
In other words, as long as you purchase a new property under these conditions you will
only require 20% deposit.
Option 2
Another option is ‘Second Tier’ or Non Bank Lenders. They also provide lending services but are not the same as our traditional, registered Banks.
Some of these Non Bank Lenders are still offering Investment Property loans with LVR’s of up to 80% on existing homes. While a little more expensive than the main Banks, they still remain very competitive and could be a further solution to enable your purchase on an investment property.
If you would like to find out more and discuss what is required, you will need to speak to a mortgage adviser who has knowledge in this field or feel free to contact me. I’ll be happy to help you.
The answer to the question is yes! It is possible to buy an investment property in 2021.
