Banks Change Small Apartment Lending Rules To Help First-Time Home Buyers
The country’s largest banks change small apartment lending rules to make it easier for clients to access the real estate scale
First-time homebuyers will need much smaller deposits to buy apartments as two big banks change their lending rules.
ANZ, the largest bank in the country with immediate effect, is reducing the size of the apartment for which it will require customers a higher deposit.
Under the new rules, guests only need a 20% deposit for standard freehold apartments of 38 square meters or more.
Meanwhile, ASB Bank is now lending up to 80 percent of the value of owner-occupied studios of at least 40 square meters.
Before these rule changes, as Newsroom revealed earlier this year, any apartment under 45 square meters required a 50% deposit.
Banks said the apartment loans were more risky, and when Newsroom asked the big banks for data supporting their findings, none provided any evidence.
ANZ NZ Managing Director Ben Kelleher maintained that lending for apartments carried more risk than for other property and, therefore, these new rules would not apply to apartments smaller than 38 square meters.
Those small, non-standard apartments like leasehold apartments or studios would still require a 50% deposit, Kelleher said.
“Higher risks can include the property’s ability to maintain its value and increase over time, construction defects, corporate quality and the lease,” Kelleher said.
“However, it is important that home ownership is accessible to as many Kiwis as possible. So we changed our rules to unlock a wider range of apartments at lower deposits, as an affordable home ownership option for more people.
According to ANZ rules, a standard apartment must have a bedroom separate from the living room. Standard ANZ loan criteria, conditions and fees apply.
City Sales real estate broker Scott Dunn said while this was a step in the right direction, it was still not enough.
“While this is good news, what we typically sell to first-time buyers is a two-bedroom with or without parking,” Dunn said. “I wish people could buy a good quality freehold studio if that’s what they have the money for.
“Studios can range from 28 square meters to 38 square meters. There is a good quality stock, which would solve a lot of problems if people had access to even small apartments to move from there.
ASB’s executive retail banking chief executive Craig Sims said the bank changed its rules following customer feedback.
“Traditionally, studios and apartments without parking have tended to be of lower quality and more susceptible to market volatility, making them riskier for banks and clients and our guidelines reflect this. However, the apartment market has matured and customer demand for apartments has increased along with the desire to live more sustainably, ”said Sims.
Sims said there were plenty of apartments in Auckland that squeezed just below that threshold.
The SBA said that under its new rules apartments are no longer required to have parking to be eligible for loans from the bank.
Sims said that because apartment owners increasingly use public transportation, requiring them to own parking no longer seemed “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.
The maximum loan-to-value ratios for rental apartments, non-purpose-built apartments and student accommodation remain unchanged, with larger deposits required depending on individual circumstances.
Among the big four banks, the BNZ maintains its current state of a 35% deposit for apartments under 50 square meters.
A spokesperson for the bank said: “We are reviewing our settings and policies and about two years ago we reduced the definition of the tiny house from 65 square meters to 50 square meters.
“The deposit required by the BNZ for small houses is 35%, except for investors who require 40% under the new RBNZ regulations.”
Westpac has been approached for comment.
Kiwibank has maintained its current position of a minimum acceptable size of 40 square meters 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 spokeswoman said.