REPEAT:MNI:RBNZ Relaxes Macro-Pru Measures, More Easing Likely

Repeats Story Initially Transmitted at 23:33 GMT Nov 28/18:33 EST Nov 28

--RBNZ Could Ease Macro-Prudential Measures Further at Future Quarterly Reviews

--Updated With Comments From Media Conference

By Sophia Rodrigues

     SYDNEY (MNI) - A slowing in the housing market since mid-2016 and

expectations that the new government's policies will act as further dampener on

housing market has prompted the Reserve Bank of New Zealand to slightly ease its

macro-prudential policy.

     In the Financial Stability Report published Wednesday, the RBNZ said that

financial stability risks associated with the housing market have eased, so it

is adjusting the loan-to-value restrictions on mortgage lending. The RBNZ said

it will gradually adjust the policy further if financial stability risks remain

contained.

     --From January 1, banks will be allowed to make up to 15% of their new

mortgage lending to owner-occupiers with a loan-to-value ratio of more than 80%.

Previously the maximum lending was 10%.

     --Banks will also be allowed to make up to 5% of their mortgage lending to

housing investors with loan-to-value ratios of up to 65%. Previously the maximum

LVR was 60%.

     At the media conference after release of the report, Governor Grant Spencer

said the RBNZ will further ease its macro-prudential measures as appropriate and

this could happen at their regular quarterly review of such policies.

     "We will review it from time to time. Our internal reporting cycle tends to

be quarterly," Spencer said.

     There are two main criteria to be satisfied for macro-prudential policies

to be eased further, Spencer said: The RBNZ must be satisfied that housing

market risks have decline, which means house price inflation and credit growth

remain moderate; and there is no risk of a resurgence in risks.

     In the report, the RBNZ noted that a range of factors contributed to the

slowdown in the housing market since mid-2016, including: a tightening in the

LVR policy in October 2016; an increase in mortgage rates in early 2017;

uncertainty ahead of the general elections; reduced demand from foreign buyers;

and a tightening in banks' lending standards.

     And while there will be factors that will support the housing market, the

RBNZ expects conditions to remain soft as banks further tighten lending

standards in the next six months, mortgage rates rise and the impact of housing

policies of the new government is felt.

     "While some factors continue to drive housing market pressures -- high net

migration, low mortgage rates and a housing supply shortfall -- on balance,

house price inflation is expected to remain modest in the near term," the RBNZ

said.

     The precise nature of the government policies and the timing of their

implementation are uncertain but they are likely to reduce housing demand and

increase housing supply, the RBNZ said.

     The new Government's KiwiBuild programme will ramp up gradually, with

100,000 affordable homes planned to be built in the next decade. The Government

has also announced its intention to restrict non-residents -- other than New

Zealanders and Australians -- from purchasing existing houses, to extend from

two to five years the "bright-line test" threshold for determining the

requirement for house-sellers to pay capital gains tax, and to not allow

property investors to use tax losses on rental properties to offset tax on other

income.

     "While some of these policies may take time to be implemented, they are

likely to reduce house price inflation expectations and weaken demand for

housing, particularly from investors seeking capital gains," the RBNZ said.

     It noted recent surveys showing a decline in the expected rate of house

price inflation over the next year and a fall in the share of respondents who

expect house prices to rise in the next year.

     At the media conference, Spencer said the RBNZ doesn't see a collapse in

house prices as a particularly high risk and stressed that the easing announced

Wednesday is not aimed at bolstering the housing market.

     "We are not acting because we are concerned house prices are about to fall

off the edge," Spencer said, adding "this is not an attempt to bolster the

housing market or to move it up."

     The easing is simply following through on the RBNZ's commitment that the

stricter LVR measures were temporary, he said. 

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com