New home loan restrictions are creating a wave of uncertainty within the Tauranga property market as new home builders and potential home owners begin to feel the financial pinch.

One home building franchise is already calculating a significant drop in new home builds this year, stating a lack in client interest and financial pressure after the Reserve Bank announced changes to the loan-to-value ratio in August.

GJ Gardner Homes Tauranga managing director Shane McConnell in front of a new home build in Ohauiti. Photo: Bruce Barnard.

The changes, which came into effect on October 1, see mortgages with an LVR of more than 90 per cent still restricted to five per cent of new lending, while total new lending for LVRs of more than 80 per cent are restricted to 10 per cent.

Applicants now must have a deposit that is 10 per cent or more of the property's purchase price, replacing the existing requirement for a 15 per cent deposit on lending above $200,000.

Income caps are $80,000 for one buyer and $120,000 for two or more buyers.

GJ Gardner Homes Tauranga managing director Shane McConnell says the company was originally on target to exceed last year's 40 new homes built, until the new restrictions came into play.

'We have definitely had some deals we have lost because clients are concerned with what the new rules are going to do.

'The first of this year we had good strong numbers and we thought we would easily exceed that, but the way it has tracked over the last three months we have thought maybe not.”

Shane admits new home buyers are feeling the pinch as they bear the brunt of the Reserve Bank's restrictions, thanks largely to a house-price inflation situation predominantly in Auckland and Christchurch.

'They are getting lending approvals now but it gets withdrawn later on. They are staying back and thinking ‘What's the point of having a go because I would not have enough for a deposit'.”

Master Builders Federation chief Warwick Quinn is also concerned about the impact of the Reserve Bank's restrictions, saying other building firms are reporting similar issues.

Talks with numerous builders during the last few weeks are consistent with the federation's own estimate that 15 per cent of new builds, or about 3000 homes, could be affected in the first year following the changes.

Warwick says it is unclear at this early stage how the impact on new construction will be affected long term, but restricting supply is counterproductive to the Reserve Bank's initiatives when an increased number of affordable homes is required to assist with stabilising house price growth.

'After five years of recession many building firms are still under financial stress and we cannot afford to have these businesses fail when New Zealand requires as many skills as it can to respond to Canterbury and the long term demands in Auckland.”

Shane says the loss of potential clients and dramatic drop in enquiry levels also leaves the franchise facing a degree of uncertainty.

'It doesn't put us in jeopardy. What it does is it's very hard to plan for growth; it makes it difficult to commit to having more staff and investing in more resources and infrastructure.”