This is largely because the RBNZ relied on overseas evidence that may not apply to New Zealand, as banking practices and laws are different, economist Ian Harrison said.

Harrison, who analysed the papers cited in various relevant RBNZ documents, argued the New Zealand evidence suggests that retail investor loans are not riskier than other housing loans.

Most investor loans in New Zealand are to small lenders and will be serviced by salary/wages, while professional investors, who rely more on rental income, belong to other asset classes and carry more risk weigh, the summary of his paper said.

In contrast, the UK and Irish examples used by the RBNZ were on buy-to-let (BTL) mortgages.

These had risky characteristics like low deposit and low margin between rental income and loan repayment, and were often advanced by non-mainstream institutions.

However, this is not the case with New Zealand investor loans as lending standards are higher, according to the summary of Harrison’s paper.

It also noted that some of the RBNZ’s evidence is based on subprime loans, or investment in holiday destinations, which have little relevance to New Zealand.

“The literature does not support the RBNZ’s position that investors are more risky than other housing loans. None of the papers cited by the RBNZ provide ‘substantive support’.”

This contributed to Treasury’s view that the case for specifically targeting investor loans should show that they are riskier than other loans.

Treasury also indicated there should be evidence that this risk would have a noticeable impact at a systemic level - across the banking system, for example.

Infometrics managing director Gareth Kiernan said the Treasury papers seem to indicate a concern that the RBNZ may have misrepresented the evidence it cited regarding investors.

This, in turn, means there is some concern about the justification for targeting investors – and for further complicating the LVR restrictions.

“The more complicated you make a policy the more loopholes and problems there will be,” he said.

“Therefore you need to have identified the problem you are meant to be addressing and justified the benefits of the policy substantively, or it could be problematic.”

Meanwhile, the papers also show that Treasury did not agree with other aspects of the RBNZ’s housing market policies.

For example, Treasury said the relaxation of the speed limit for households outside of Auckland does not remove the distortionary effect of the new higher LVR limits for investors in Auckland.

Rather the effects of the policy in and outside of Auckland would offset each other to an extent and, as a result, would send a confusing policy message.

Treasury also pointed out the increased proportion of investors in the Auckland market could be an unintended consequence of the 2013 LVR restrictions which cut a segment of first home buyers out of the market.

But the papers show that, overall, Treasury supports the RBNZ’s view that the Auckland housing market potentially poses a threat to financial stability over the medium term.

“Although there may not be signs that a systemic risk may crystallise imminently, there is cause for vigilance,” it said.

“Given the consequences of doing too little too late, we support the case for intervention at this stage on financial stability grounds on the basis of the available data.”