Sharechat Logo

NZ house prices, credit growth need more cooling, S&P says

Wednesday 13th September 2017

Text too small?

The New Zealand housing market needs to cool further and credit growth needs to slow to remove risks to the wider banking system, Standard & Poor's says. 

In an update on New Zealand's banking sector, the credit rating agency noted risks from house price inflation and credit growth had stabilised this year, with the third round of the Reserve Bank's loan-to-value ratio restrictions biting into demand for residential property investor mortgages and banks tightening their own credit since late 2015. While that was a start, S&P director of financial institution ratings Nico de Lange told a webcast that the agency needed to see that trend continue before it could comfortably say risks to the overall banking system had abated. 

"It's more of a longer-term prospect, not within the next 12-to-18 months, and the key drivers will be house prices and credit growth that contribute to it," de Lange said. "Given the current environment, we're of the view that there still needs to be some cool down in these factors to take it to the next level." 

New Zealand's rapid house price appreciation has been a concern for the Reserve Bank for several years, prompting it to reach into its macro-prudential toolkit and impose restrictions on highly leveraged lending as a means to strip out property demand exacerbated by a shortage of housing stock. 

The most recent imposition of LVR restrictions on investors combined with banks dialling back their willingness to lend has seen the turnover in house sales plummet in the past year, causing house prices to plateau. Real Estate Institute figures on Friday will be the last steer on the property market before the Sept. 23 general election, which is evenly poised for either major party to win the Treasury benches. 

Andrew Mayes, associated director of financial institution ratings at S&P, told the briefing that the downtrend had occurred a lot longer before the election was announced. Still, as the polling day draws closer and parties announce housing policies, "that degree of uncertainty does increase in the minds of households" but, Mayes said he didn't see it as a main driver behind the slowdown and didn't anticipate activity to ramp up once it was over. 

New Zealand's four biggest banks, ANZ Bank New Zealand, Westpac Banking Corp, Bank of New Zealand and ASB Bank are all rated AA- by S&P.

(BusinessDesk)

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: NZ shares rise as Pushpay rebounds, Precinct gains, Sky TV drops
NZ dollar hovers near 69 US cents amid global trade jitters; domestic GDP looms
NZ organic sector worth $600M, exports leading growth, OANZ says
OPI Pacific Finance debenture holders get $3.9M from Octavia 'dividend'
NZ Treasury says first go at living standards framework to be ready for Budget 2019
Toyota NZ's vehicle sales soar to new annual record, revenue hits $1.4B
NZ first-quarter current account turns to surplus as tourism stays strong
NZ consumer confidence cools broadly in June quarter
Comvita buys 20% stake in Uruguay's Apiter for US$6.25M to secure propolis supplies
Synlait will invest $250 million to develop Pokeno site's first spray dryer

IRG See IRG research reports