“I think that’s ridiculous. What does the down payment have to do with it?” Joe Rosati, chief executive officer of Broker Financial Group, told MortgageBrokerNews.ca. “If somebody has the capacity to pay their debt, whatever it may be, and it makes sense to them on an income-to-debt ratio, then why should a regulator dictate that? It doesn’t make any sense and I don’t think it will cool [New Zealand’s] market.”
Obviously not one to mince words. And one would assume many industry players in New Zealand are singing a similar tune.
The country’s central bank will now require citizens to put 40% down on investment properties
, the Reserve Bank said in a statement Tuesday. The policy has been put in place to cool the country’s hot housing market.
“A sharp correction in house prices is a key risk to the financial system, and there are clear signs that this risk is increasing across the country,” Governor of the New Zealand Reserve Bank Graeme Wheeler said, per the New Zealand Herald
The average home price in Auckland, the country’s hottest housing market, is about $675,000 (C$619,269).
That’s below the average home prices in Canada’s two hottest markets, Vancouver and Toronto, where houses averaged $1,026,207 and $746,546 respectively in June.
Of course, no economy is equal and there are several differences between New Zealand’s and Canada’s, so a direct comparison based solely on home prices offers just one piece of the economic puzzle.
And for his part, Rosati argues Canada’s housing market isn’t overheated.
“I don’t think we have an overheated market in Canada and I don’t think they can really capture the numbers,” he said. “I think in any open market, supply and demand will prevail and I don’t think we need intervention and certainly not government intervention.”
New Zealand’s central bank is taking aim at investors by jacking the required down payment for a home to 40% in a bid to cool its market; one industry veteran has some strong opinions about what a similar Canadian would mean.