The Government and Reserve Bank love to blame property investors on the housing crisis and so have implemented higher deposit requirements; however they also know there is a real need for more housing so new builds are not covered by the same rules.
When the Government relaxed the LVR rules in 2020 they had not expected the property market to remain quite so robust.
The property market of course is seen as a safe haven in volatile times and times when deposit rates are low.
So when COVID hit and the Government and Reserve Bank reacted it really was no surprise that the property market strengthened.
Changes By Government and Reserve Bank To Slow Investors
Again the Government and Reserve Bank have reacted and this time to slow down property investors by increasing the deposits required.
They have announced that investors will need a 40% deposit when buying properties that are existing.
As they previously had, they have made an exemption for new builds as they need more houses to be built.
This has left an opportunity for property investors – they can still buy of the plans and only need a 15% deposit.
Lower Deposits On New Builds Helps Investors
Lower deposits have always made sense to property investors.
An investor may have ‘say’ $100,000 available to start investing with.
With the new LVR rules requiring 40% deposit this means they can only spend $250,000 on a property and therefore that excludes buying in a lot of places.
When the deposit required is only 15% then the same $100,000 deposit allows an investor to but for up to about $665,000 and that opens up a lot more opportunities.
It also means that you will get a new property which will require less maintenance and if you are looking for capital gains then you will be a lot happier seeing a 10% increase on your $665,000 property compared with the same 10% gain on a $250,000 property.
The lower deposits on new builds make more sense when you start looking at the numbers.