Alexander: Rules will push up regional house prices

It has been suggested that the new restrictions – to be imposed on October 1 – could quash markets around the country that are only just getting off the ground. Most regional centres are only experiencing price growth of less than 5% year-on-year.

But Alexander said the restriction, which will force banks to lend only 10% of their total loan books to borrowers with deposits of 20% or less, would hasten price appreciation outside the biggest city, rather than drive prices down.

“Some buyers will shift their attention out of Auckland to other, cheaper, parts of the country where their deposit will go further so the Reserve Bank move will accelerate the spreading of Auckland and Christchurch house price gains to the rest of New Zealand. The spread of ultra-fast broadband will encourage this population spread also to some degree.”

Banks would likely lend their 10% to those prepared to pay a premium for it, Alexander said.