I read with interest Tony Alexander’s TView last week talking about the tools the Government and the Reserve Bank have in their toolbox to curb investors buying more investment properties but allowing First Home Buyers in to the market. The first shot has been fired with the introduction of the inability to deduct interest expenses from income set to take effect from October 1. Other tools in the toolbox could well be the inability to claim any expenses from income such as maintenance, rates and insurance, and increasing the debt servicing to income ratio where traditionally a borrower may have been allowed 30% of their income to service debt. This may be decreased to 25% of income being allowed for debt servicing. Banks may be required to work out debt servicing on inflated interest rates for instance banks may lend at 4% but the Reserve Bank may require they work out debt servicing costs using an 8% interest rate.
Governments policy is to support sustainable house prices. Dampening down investors demand for existing housing stock would improve affordability for first home buyers.
*Information from Tony’s View
EVES. Exceptional. Every day.