Auckland property investors will have to come up with at least a 30 percent deposit under new proposed lending limits set to be introduced in October.

The Reserve Bank is targeting Auckland property investors. The new lending restrictions is intended take the heat out of the property market in Auckland because it is seen as a risk to the whole of New Zealands financial system.

The bank intends in October to introduce new limits on bank lending to property investors in the Auckland Council area that would require those borrowers to have at least a 30 per cent deposit.

Although New Zealand’s financial system is sound and operating effectively, it faces significant risks says The Reserve Bank Governor, Graeme Wheeler, when releasing the Bank’s May Financial Stability Report.

The Reserve Bank said the potential for a sharp correction in the Auckland market has increased with investors the key source of new demand for the city. House prices in Auckland are elevated relative to incomes and rent, compared to elsewhere in New Zealand.  Although the measures aim to slow housing demand, policies to address the housing supply constraints remain key to addressing Auckland's housing issues.

A consultation paper will be issued in late May.

Source: Reserve Bank of NZ