This will provide banks with more scope to manage the existing pipeline of pre-approved lending. Based on our experience with the existing LVR speed limit, it is expected that the actual flow of high LVR lending to Auckland investors will settle well below 5 percent as banks adopt a buffer to ensure compliance.
Furthermore, it is an encouraging sign that a number of small firms, among both manufacturers and non-manufacturers, plan to increase fixed investment reflecting the recent improvement in business sentiment. The current recovery is similar to the previous two recoveries in that it greatly depends on the recovery of the world economy, particularly the economies of the United States and China.