colinrealestate

A loan-to-value ratio (LVR) is a measure of how much a bank lends against residential property, compared to the value of that property. Borrowers with LVRs of more than 80 percent (less than 20 percent deposit) are often stretching their financial resources. They are more vulnerable to an economic or financial shock, such as a recession or an increase in interest rates.
LVR restrictions or ‘LVR speed limits’ restrict the amount of high-LVR lending a bank can do. These restrictions reduce the risk of a sharp housing downturn and the loss of equity that would result, particularly for highly-indebted home owners.
Latest figures shows that first home buyer activity declined in December and January. In December 2013, first home buyer sales in a month dropped to 19%, this was sitting at 20% for the same month in 2012 and 2011. January saw a further slump to 18% in first home buyer sales segment, which was also at 20% in January 2012 and 2011.
This is the lowest percentage of first home buyer sales in any month since mid-2010. It is also the lowest actual number of buyers in any month since the late 2010 and 2011. The flurry of activity in September and October from first home buyers appears to be over and this will not improve until the LVR restrictions are lifted. Predicted inflation increases look set to further disadvantage first home buyers without significant deposits.
It would appear from data on first home buyers that all the main cities have been affected by the LVR and have registered a drop. Hamilton, Rotorua, Napier and Wellington City are the worst hit regions, reporting more than a four per cent drop.

Filed under: REAL ESTATE