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Property rules changing, high mortgage rates still key

2024 government changes to property market.

By Kelvin Davidson 8 July 2024

1 July has now come and gone, and so a wide range of property rule changes are now in play. Many of these have been covered widely in the media, but here’s what I think you need to know, and how they might impact the market in the next year or two.

First things first, what has changed?

  • The loan to value ratio (LVR) rules have eased – 20% (previously 15%) of owner-occupier lending can now be done at <20% deposit, while up to 5% of investor lending can be done at <30% deposit (previously 35%)
  • Debt to income (DTI) ratio caps now apply – most owner-occupiers need to keep their loans to a maximum of six times income, with investors at seven times income, although the banks also have a 20% allowance to lend outside those rules
  • The Brightline Test has been shortened to two years for all properties, meaning investors are exempt from capital gains tax if they’ve owned for at least two years before they sell

On top of that, first home grants had already been removed a few weeks ago, and of course, 80% interest deductibility for mortgaged investors started back again on 1 April. Also in the background is the gradual easing in the Credit Contracts and Consumer Finance Act regulations, which means that lenders don’t need to scrutinise your bank statements quite as closely as before.

So what might be the effects of these changes?

In regards to the shorter Brightline Test, some investors might feel more inclined to buy more properties, due to less risk of having to pay capital gains tax. But it might also mean that selling some properties becomes a more palatable option for those investors currently struggling with cashflow. To the extent that this happens, it’ll tend to add to an already-high number of available listings – great for prospective buyers.

Easing of LVR rules

The easing in the LVR rules means there’s now a bit more low-deposit finance available for both owner-occupiers and investors, although this might tend to benefit the latter a bit more than the former. This is because there’s already a decent amount of low-deposit lending flowing out to owner-occupiers (even at the previous tighter speed limits), but not much to investors. Of course, this might remain a relatively quiet area of activity, given that a lower deposit simply means a larger loan – not ideal when mortgage rates are still in the vicinity of 7%.

Debt to income (DTI) ratio caps

In regards to DTIs, these will play a significant role in the longer term, by tying house prices more closely to incomes over the cycle and slowing down the rate at which investors can build a portfolio. But these are issues for another day; right now the DTIs will do very little because high mortgage rates are already limiting how much debt people can secure.

What it could mean for property buyers

Overall, all of these changes seem quite supportive for the property market in the next 12-18 months, making it easier in net terms to get a mortgage and buy a house. (Also keep in mind that new-build properties are exempt from both the LVR and DTI regimes.) But often things are never as simple as they appear, and right now, high mortgage rates still dominate those other factors.

In other words, until mortgage rates start to fall, it’s going to remain challenging to buy property for most people. So when will mortgage rates drop more appreciably? For now, that’s probably still more likely to be 2025 than 2024, but the ongoing weakness of the economy could still bring down inflation more quickly than expected, and open the door for some rate falls later this year.


Kelvin Davidson
Kelvin Davidson

Chief Property Economist, CoreLogic -

Kelvin joined CoreLogic in March 2018 as Senior Research Analyst, before moving into his current role of Chief Economist. He brings with him a wealth of experience, having spent 15 years working largely in private sector economic consultancies in both New Zealand and the UK.

In his role with CoreLogic Kelvin’s focus is on keeping up to date with what’s going on in the property market and continually finding different ways for viewing and interpreting it. Kelvin’s economics background means that he knows his way around a spreadsheet, but more importantly he always puts more emphasis on providing the key insights and telling a story, whether his audience be clients or the media.