The property Institute has described a Reserve Bank proposal to introduce "debt-to-income" (DTI) mortgage assessments as "disastrous", and having the potential to do "significant damage" to Auckland and the wider economy.
Reserve Bank governor Graeme Wheeler wants Finance Minister Bill English to include DTI assessments as a tool to manage the heated housing market.
The Reserve Bank already has in place loan-to-value ratio (LVR) restrictions across the country, whereby property investors must have a minimum 40% equity for new properties.
Property Institute chief executive Ashley Church said if DTI assessments were introduced, the Reserve Bank would have the power to restrict what New Zealanders could borrow for a mortgage relative to their income.
"The number of new homes being built, the very thing that Auckland needs most, would plunge as the number of people earning enough to buy them would dwindle to a trickle," Mr Church said in a statement yesterday.
Yesterday, Queenstown joined more than 60 Auckland suburbs in having median house values above $1million, government agency Quotable Value reported.
Mr Church said Mr English confirmed the Reserve Bank had asked for DTI assessment powers but had indicated the Government would not grant them lightly as they represented a "significant policy change which has never been tested in New Zealand".
Mr Church said the "probable consequences of such a policy would be disastrous" and could "kill off" construction of new homes and also lead to dramatic rent increases as property investors looked for ways to increase income, to be able to buy more property.
While the British "wisely chose" to use DTI assessments to protect those most at risk in a market crash, it was not implemented as a blunt tool to curb house price inflation, he said.
"Our Reserve Bank already has that ability, in the form of the LVR restrictions.
"You’d have to question why they would want this tool unless they want to kill the market, something they’ve repeatedly tried, and failed, to do," Mr Church said.
Other analysts speculated earlier this week that if DTI assessments were adopted by the Reserve Bank, it would not be until the second half of next year at the earliest.