Thursday 11th September 2014
|Text too small?|
The Reserve Bank's moves to hike interest rates and impose restrictions on low-equity home loans has helped slow the pace of house price increases, the central bank says.
House price inflation has dropped to an annual pace of 6 percent from a peak of 10 percent in September last year, reflecting the central bank's four interest rate increases and the imposition of restrictions on high loan-to-value ratio mortgage lending, the bank said in in its September monetary policy statement.
Rapid increases in house prices in Auckland and Christchurch, New Zealand's two biggest cities, were a headache for governor Graeme Wheeler last year, who was trying to cool a heated property market without having to resort to interest rate hikes for fear of fuelling demand for an over-valued currency.
Since then, the bank's actions have contributed to a cooler housing market, though the central bank is closely monitoring the impact 11-year high migration inflows are having on the property sector.
"Our projection takes a view that net immigration is having a more muted and more lagged effect on house prices than in past cycles," the MPS said. "This, along with higher interest rates, strong construction activity that increases housing supply, and falling net immigration is behind the expectation that house price inflation will continue easing over the forecast horizon."
House affordability has been a heavily politicised topic in recent years after a lull in property development after the collapse of the local mezzanine finance sector left a funding gap for new construction and created a supply shortage in Auckland, while the Christchurch quakes demolished large tracts of housing stock in the Canterbury city.
The government yesterday tasked the Productivity Commission to revisit housing, with an investigation into how local authorities can improve processes and regulation of land supply and development capacity.
The Reserve Bank said private lenders have lifted their floating rates in line with hikes in the benchmark official cash rate, though fixed rates, particularly two-year mortgages, have only edged up as competition for borrowers remains strong.
Fixed mortgage rates have become increasingly attractive to borrowers, and the central bank said just 29.9 percent of mortgage holders were on floating rates in July, down from a peak of 63 percent in April 2012.
No comments yet
Further Contract Win Strengthens Scott Technology’s Position In Mining Sector
China’s Assertiveness Is Becoming a Problem for Its Friends, Too
New Talisman - Chairman’s Address to AGM 2020 August 6, 2020
T&G reports its 2020 Interim Results
Gold price hits $2,000 for first time on Covid
TruScreen strengthens its market presence in central and eastern Europe
Refining NZ announces non-cash impairment
Ryman Healthcare COVID-19 update Victoria
Talisman Quarterly Activities Report to 30 June 2020