Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


S&P warns of risk NZ property market over-heating

Standard and Poor's warns against NZ property market over-heating

Feb. 28 (BusinessDesk) - New Zealand's banking system is at risk from property prices overheating if the country's exports stop being worth so much or the kiwi dollar falls out of bed, says the international credit rating agency, Standard & Poor's.

S&P issued a report on the New Zealand banking sector saying "significant risk remains of a sharp correction in property prices."

The rating agency, which assesses country and business credit-worthiness, noted the recent jump in Auckland and Christchurch property prices and suggested New Zealand is still vulnerable because of the run-ups in value seen in the mid-2000's, before the global financial crisis, let alone the latest appreciations.

On balance, S&P thinks these risks are unlikely to be borne out, saying "we expect that strong asset quality ratios are likely to be maintained at levels supportive of banks' current ratings, on the back of a benign economic outlook and stable property prices."

It also predicts that property prices won't rise much from where they are now, even if the New Zealand economy stays on an even keel.

"Our base case scenario sees real estate prices continuing to stabilise at current levels over the medium term, and such an occurrence having a stabilising effect on asset-quality ratios."

In part, that outcome will depend on the state of the world economy, S&P says. With New Zealand banks funding about 37 percent of their lending from sources offshore, the country remains vulnerable should global financial markets seize up in another crisis.

However, S&P warns about a scenario where the world economy strikes trouble and the New Zealand dollar, along with export prices, falls sharply.

"In our view, such a scenario, in conjunction with a rise in unemployment, could increase the risk of a significant in banks' credit losses on the back of a build-up in housing prices and domestic credit over the period that preceded the global financial crisis."

Such a turn of events "would have a material impact on the financial strength of the balance sheets of New Zealand banks", although the four largest banks are all subsidiaries of Australian banks and retain their owners' AA-minus credit ratings.

New Zealand-owned Kiwibank is rated A+, while The Co-operative Bank and Heartland Bank carry BBB-minus rates., TSB Bank is slightly stronger, with a BBB-plus rating.

S&P's assessment comes at a time of growing government concern about a pick-up in residential housing prices, which is worsening New Zealand's housing affordability problem.

Finance Minister Bill English used a speech yesterday to outline the government's desire to see the Reserve Bank of New Zealand use new macro-prudential tools to control banks' lending and capital adequacy ratios.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

BusinessDesk: APN's NZME Sees Future In Paywalls, Growth In Digital Sales

APN News & Media has touted a single newsroom concept for its NZME unit in New Zealand, similar to what Germany's Die Welt uses, saying an 'integrated sales proposition' is helping it win market share, including ... More>>

Labour Party: Global Milk Prices Now Lowest In 6 Years

The latest fall in the global dairy price has brought it to the lowest level in six years and shows there must be meaningful action in tomorrow’s Budget to diversify the economy, says Labour’s Finance spokesperson Grant Robertson. “Dairy prices ... More>>

BusinessDesk: NZ Inflation Expectations Creep Higher In June Survey

May 19 (BusinessDesk) - New Zealand businesses lifted their expectations for inflation over the next two years, sapping any immediate pressure on the Reserve Bank to cut interest rates, and prompting the kiwi dollar to jump higher. More>>

BusinessDesk: Lower Fuel Costs Drive Down NZ Producer Input, Output Prices

May 19 - Producer input and output prices fell in the first quarter, mainly reflecting lower fuel costs and weakness in prices of meat and dairy products. More>>

Media: Fairfax Media NZ Announces Senior Editorial Team

Fairfax Media New Zealand has today confirmed its new editorial leadership team, as part of a transformation of its newsrooms aimed at enhancing local and national journalism across digital and print. More>>

Science: Flavonoids Reduce Cold And Cough Risk

Flavonoids reduce cold and cough risk Research from the University of Auckland shows eating flavonoids – found in green tea, apples, blueberries, cocoa, red wine and onions – can significantly reduce the risk of catching colds and coughs. The research, ... More>>


BusinessDesk: RBNZ House Alert Speech The Catalyst For Government Action

Prime Minister John Key all but conceded that pressure from the Reserve Bank of New Zealand for concerted action on rampant Auckland house prices was one of the main catalysts for the government's weekend announcements about tightly ... More>>

BusinessDesk: How To Fall Foul Of The New Housing Tax Rules: Tips From IRD

Just because you rented out your investment property doesn't absolve you from paying tax, says the Inland Revenue Department in a summary of commonly made mistakes by non-professional property investors when it comes to their tax liability.More>>

Legal: Superdiversity Law, Policy And Business Stocktake Announced

Mai Chen, Managing Partner at Chen Palmer New Zealand Public and Employment Law Specialists and Adjunct Professor of Law at the University of Auckland, today announced the establishment ... More>>

Housing: More House Price Gains Expected

House price expectations remain high, with a net 56% of respondents expecting house prices will increase. Fears of higher interest rates are fading, consistent with the RBNZ’s signals this year. Affordability and a lack of houses for ... More>>

TDDA: State-Of-The-Art Drug Testing Laboratory To Open In Auckland

World leading drug testing agencies, The Drug Detection Agency (TDDA) and Omega Laboratories, open New Zealand laboratory More>>

Network: Bigpipe Launches Ultra-Fast Broadband Into Wellington

Bigpipe Launches Ultra-Fast Broadband into Wellington Naked broadband provider Bigpipe has extended its national reach, announcing today, the launch of its unlimited UFB offering into Wellington. The Spark Venture business is giving Wellingtonians the ... More>>

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news