The country's biggest banks are changing lending rules on small apartments to make it easier for customers to get on to the property ladder
First home buyers will need significantly smaller deposits to buy apartments as two major banks change their lending rules.
ANZ, the country's biggest bank, effective immediately is reducing the apartment size at which it will require customers to have a higher deposit.
Under the new rules, customers only need a 20 percent deposit for freehold, standard apartments that are 38 square metres or larger.
Meanwhile ASB bank will also now lend up to 80 percent of the value of owner-occupied studio apartments of at least 40 square metres.
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Prior to these rule changes, as Newsroom revealed earlier this year, any apartments smaller than 45 square metres required a 50 percent deposit.
The banks said lending for apartments carried more risk, and when Newsroom asked the big banks for any data substantiating their conclusions, none provided evidence.
ANZ NZ managing director Ben Kelleher maintained lending for apartments carried more risk than for other property, and as a result these new rules would not apply to apartments smaller than 38 square metres.
Those smaller non-standard apartments like leasehold or studio apartments would still require a 50 percent deposit, Kelleher said.
"Higher risks can include the ability for the property to maintain its value and increase over time, building defects, the quality of the body corporate, and leasehold tenure," Kelleher said.
“However, it’s important that home ownership is accessible to as many Kiwis as possible. So, we’ve changed our rules to unlock a wider range of apartments at lower deposits, as an affordable property option for more people.”
Under ANZ’s rules, a standard apartment must have a bedroom separate from the living area. Usual ANZ lending criteria, terms, conditions, and fees apply.
City Sales real estate broker Scott Dunn said while this was a step in the right direction, it was not quite enough yet.
"While it's definitely welcome news, what we're generally selling to first home buyers is a two bedroom with or without a carpark," Dunn said. "I would like to see people be able to buy a good quality freehold studio if that's what they have the money for.
"Studios can range from 28 square metres to 38 square metres. There's good quality stock, that would solve a lot of problems if people have access to even small apartments to move up from there."
ASB retail banking executive general manager Craig Sims said the bank amended its rules following customer feedback.
“Traditionally studios and apartments without carparks tended to be lower quality and more susceptible to market volatility, making them higher risk for both banks and customers and our guidelines reflected this. However, the apartment market has matured and customer demand for apartments has increased along with the desire to live more sustainably," Sims says.
Sims said there were many apartments in Auckland that sneak just under that threshold.
ASB said under its new rules, apartments were no longer required to have a carpark to be eligible for lending from the bank.
Sims said because apartment owners are increasingly using public transport, requiring them to own a carpark no longer felt like "the right thing to do.”
"The apartment market has matured and customer demand for apartments has increased along with the desire to live more sustainably." - Craig Sims, ASB.
Maximum loan to value ratios for leasehold apartments, those that are not purpose-built and student accommodation remain unchanged, with larger deposits required depending on individual circumstances.
Among the four major banks, BNZ maintains its current state of a 35 percent deposit for apartments smaller than 50 square metres.
A spokesman for the bank said: "We review our settings and policies and around two years ago we reduced the small house definition from 65 square metres to 50 square metres.
"The deposit required by BNZ for small homes is 35 percent, except for investors who require 40 percent per the new RBNZ regulations."
Westpac has been approached for comment.
Kiwibank has maintained its current stance of a minimum acceptable size of 40 square metres for apartments and a minimum deposit of at least 20 percent. However, there was flexibility outside that range on a case-by-case basis, the bank's spokeswoman said.
