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

 

Oil: 2014 New Zealand Petroleum Summit

Simon Bridges: Our abundance of energy and minerals resources provides us with unique opportunities to build the New Zealand economy.

Over the past three years the Government has made significant changes to how the sector is regulated. More>>

ALSO:

Scoop Business: NZ Dollar Catches Breath After "Goldilocks" Slump

The New Zealand dollar edged up following its dramatic slump yesterday after the Reserve Bank confirmed speculation it intervened in the currency market last month and PM John Key suggested a “Goldilocks” level far lower than at present. More>>

ALSO:

Biosecurity: Kiwifruit Claim To Hold Officials Accountable For Psa

Kiwifruit growers have joined forces to hold Biosecurity NZ accountable in the courts for its negligence in allowing 2010’s Psa outbreak that devastated New Zealand’s kiwifruit industry and exports. Foundation claimants representing well ... More>>

ALSO:

Poison: Anglers Advised Not To Eat Trout In 1080 Areas

With the fishing season opening in just a few days (1 October 2014), anglers are being warned by the Department of Conservation(DOC) not to eat trout from pristine backcountry waters and their downstream catchments, where the department is conducting 1080 poisoning operations. More>>.

ALSO:

Quotas: MPI Swoop On Suspected Fraudulent Fishing Activity

Ministry for Primary Industries (MPI) compliance officers swooped on a Hawkes Bay fishing enterprise today to secure evidence in an investigation into suspected fraudulent activity... “The investigation involves activity throughout the commercial supply chain – catching, landing, processing and exporting.” More>>

ALSO:

Scoop Business: Fonterra Slashes 2015 Milk Payout, Earnings Tumble 76%

Fonterra Cooperative Group cut its forecast 2015 milk price payout by about 12 percent, citing weaker global dairy prices and said there is a risk of further declines given strong global milk production. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand

Mosh Social Media
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news