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


NZ doesn’t face US-style property bubble, price growth eyed

NZ doesn’t face US-style property bubble though price growth eyed, says S&P

March 6 (BusinessDesk) – New Zealand’s housing market is unlikely to mutate into a US-style bubble, says Standard & Poor’s, although rising prices are at the upper level of the credit rating agency’s tolerance, it told a briefing in Auckland today.

“We continue to believe there’s some underlying demographic features that mean we don’t have a US-style bubble in the property market,” S&P senior director Peter Sikora told the NZ Capital & Credit Markets briefing.

He said annual growth in property values of 9.6 percent, was “the upper range of our tolerance” but there were signs the market has stabilised, helped by the Reserve Bank’s speed limits and higher capital requirements for banks.

Last month state-owned valuer Quotable Value said the annual pace of property values slowed to 9.6 percent in the year ended Jan. 31 from 10 percent a month earlier, and suggested restrictions on low-equity home lending may have started to bite.

The Reserve Bank introduced loan-to-value mortgage lending restrictions from Oct. 1 on concern rapidly accelerating house prices in Auckland and Christchurch may lead to an asset bubble and cause financial instability. The central bank is expected to start hiking interest rates from next week to cool the economy as inflation accelerates.

S&P still has what Sikora called a ‘negative risk trend’ on New Zealand because of “the material dependence of the economy to external borrowing.” Yet the nation was unlikely to be punished for running a high current account deficit in the same way India or Indonesia have, he said.

New Zealand’s current account deficit widened to $8.8 billion, or 4.1 percent of gross domestic product, in the year ended Sept. 30, according to government figures, and is expected to deteriorate over the coming three years as households recover appetite for credit, forcing banks to seeking funding overseas.

S&P’s Sikora said key risks from offshore were a hard landing for China’s economy, which had a low probability but with “a potential impact that could be material.” There was also a chance of Eurozone crisis contagion though that wouldn’t have such an impact on New Zealand, he said.

Last year Reserve Bank governor Graeme Wheeler singled out a potential downturn in China’s economy as the biggest threat to New Zealand, due to the increasing reliance by local exporters on the world’s second biggest economy.

Government figures last week showed a trade surplus of $306 million in January, a record for that month, as exports into China almost doubled, cementing its status as New Zealand’s biggest market.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Solid Energy: Plan To Shut Unprofitable Huntly East Mine

Solid Energy, the state-owned coal miner in voluntary administration, plans to shut down its unprofitable Huntly East mine and lay off 65 staff after deciding the site stands "no chance whatsoever" of finding a buyer. More>>


E Tū: Merger Creates NZ's Biggest Private Sector Union

E tū has been created by the merger of the Engineering, Printing and Manufacturing Union and Service and Food Workers’ Union. It represents more than 50,000 working New Zealanders in industries as diverse as aviation, construction, journalism, food manufacturing, mining and cleaning. More>>


Internet: NZ Govt Lifts Target Speeds For Rural Broadband

The government has lifted its expectations on faster broadband speeds for rural New Zealand as it targets increased spending on research and development in the country's information and communications technology sector, which it sees as a key driver for export growth. More>>


Banks: Westpac Keeps Core Government Transactions Contract

The local arm of Westpac Banking Corp has kept its contract with the New Zealand government to provide core transactions, but will have to share peripheral services with its rivals. More>>


Science Investment Plan: Universities Welcome Statement

Universities New Zealand has welcomed the National Statement of Science Investment released by the Government today... this is a critical document as it sets out the Government’s ten-year strategic direction that will guide future investment in New Zealand’s science system. More>>


Scouring: Cavalier Merger Would Extract 'Monopoly Rents' - Godfrey Hirst

A merger of Cavalier Wool Holdings and New Zealand Wool Services International's two wool scouring operations would create a monopoly, says carpet maker Godfrey Hirst. The Commerce Commission on Friday released its second draft determination on the merger, maintaining its view that the public benefits would outweigh the loss of competition. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news