On July 1, the Reserve Bank of New Zealand implemented new debt-to-income (DTI) ratios, significantly impacting those looking to buy both residential and investment properties.

Under these new regulations, owner-occupiers can only borrow up to six times their household income, while property investors face a limit of seven times their annual household income.

But these DTI changes aren’t hitting every corner of New Zealand in the same way. Different regions are feeling the pinch in different ways, according to realestate.co.nz's analysis, and location is playing a crucial role in this. While these DTI rules are national, the gap between what people earn locally and what they need to borrow under the new rules varies a lot. For example, the national average house price over the last year was $902,988. To get a loan covering 80% of that, you’d need a household income of $120,398, assuming a 20% deposit.

In places like Queenstown, where the average price is $1,953,091, you’d need an income of at least $260,412 to get an 80% loan. Other expensive spots like Waiheke Island, Wanaka, Rodney, and North Shore City have similar high-income requirements. Even in Auckland, only four out of nine areas have average incomes high enough to meet the DTI rules. In Papakura, for example, you’d need at least $108,796 a year to get an 80% loan. On the more affordable end, the Bay of Plenty had the lowest average asking price at $432,604, requiring an income of $57,681 to meet DTI requirements.

The new DTI rules are supposed to stop people from getting in over their heads with debt. But many experts say they won’t have a big effect right away, especially with interest rates being so high. 

Even with the new limits, banks are still careful about how much they lend. They’re more likely to lend around 5-5.5 times your income with stress testing rates in the mid 8s, instead of the maximum allowed. It’s very possible that the full impact of DTI ratios may only be felt if interest rates decrease significantly, which would enable banks to lend closer to the maximum ratios permitted. Clients also need to keep in mind that these DTI requirements are in addition to the usual debt servicing rules that banks have been using for years, which will still apply. 

So, while the new DTI rules are a big deal, they might not make a big splash right away. It all depends on what happens next with interest rates and how banks handle things.