No stopping house prices

NZ .호주부동산

No stopping house prices

Bonjour Kwon 2013. 11. 13. 08:34

Wednesday November 13, 2013

15:03 NZ median house price rises to record in October

Auckland house prices climb over $5k in October

NZ median house price returns to March record

House prices are rising from already overvalued levels, especially in Auckland and Christchurch, according to the Reserve Bank.

But it was too soon to tell what effect its new speed limits on low deposit home loans were having on the housing market, the central bank said.

However, banks had "significantly" cut lending on low deposit loans and increased the costs of such borrowing.

In the central bank's latest Financial Stability Report, issued this morning, Reserve Bank governor Graeme Wheeler said the financial system "remains sound".

Banks were well capitalised and had strengthened their funding base, and bad loans continued to fall.

"Nevertheless, there are risks to the financial system and the Reserve Bank has taken steps to address these," Mr Wheeler said.

The main threat to the banking system was the risks posed by "imbalances" in the housing market. The speed limits on high loan to value ratio LVR loans were brought in last month to reduce the risks by slowing credit growth and cool house price inflation.

Households still had high and rising levels of debt and households and banks were heavily exposed to the housing market.

"Further, we have a situation where house prices are rising from already over-valued levels, particularly in Auckland and Christchurch," Mr Wheeler said.

House prices in Auckland are up 17% in the past year and 8% in Christchurch. But house prices in the rest of the country have risen a more modest 3%.

That was increasing the risk of a fall in house prices in the future that could mean "significant financial system stress" the Financial Stability Report said.

Both the OECD and IMF have said that New Zealand house prices are "significantly overvalued", with the OECD estimating prices are about 20% above historical averages.

The Reserve Bank also warned that some borrower may have trouble servicing their debt as interest rates start to rise again. The report suggests mortgage rates will be between 7% and 8% within two to three years.

That would hit fairly quickly because most mortgages are floating or on terms of less than a year. And the people who borrowed with small deposits would be most exposed to rising interest rates.

The early evidence showed banks had significantly reduced high LVR approvals, while increasing the cost of high LVR loans-charging borrowers more.

"However, it is too early to asses the impact of the measures on house price inflation," Mr Wheeler said.

Past estimates have suggested the new LVR rules would see house price inflation between 1% and 4% lower than it would be otherwise over the first year.

Even though the new speed limits were announced six weeks before they came into force, there was little sign that people borrowed more heavily to beat the new rules.

Mortgage credit approvals were only a little stronger in the period, as were house sales volumes, the Financial Stability Report said.

From early September, banks started to increase low equity premiums, forcing borrowers with small deposits to pay more to borrow. They also tightened up on how much they would lend and terms for pre-approvals of high LVR loans.

Banks were also less willing to waive low equity premiums or offer discounts to high LVR customers, the report said. Some banks had also cancelled outstanding high LVR pre-approvals.

There were some early signs that the tougher lending standards were having an impact on the housing market.

Seasonally adjusted, housing market loan approvals were 2.2% lower in October than September.

Reports from real estate agents and mortgage brokers also suggested there was a "material drop" in buyer interest and house sales volumes in the past month.

But the bank said it would take a few months for the market to settle down and then they could get a better view of the impact of the LVR speed limits.

The LVR limits were not expected to have a "material" impact in slowing down the building of new homes.

"House prices remain high enough for construction to be profitable once developments are approved," the Financial Stability Report said.

As well, many people buying newly built homes are not high LVR borrowers with small deposits, so "buyer demand for new construction should continue," the report said.

The bank also warned about the high debt levels in the dairy sector and New Zealand's total high levels of overseas debt.

Deputy governor Grant Spencer said the dairy sector was enjoying record export prices. But its high level of debt made it vulnerable to a fall in commodity prices or a rise in interest rates.

If farmers continued to be cautious that would help reduce the risks, Mr Spencer said.

Growth in farm debt had been modest and farm land prices remained below pre-global financial crisis peaks.

But a return to pre-2007 credit growth and spending by the dairy sector would "present risks to financial stability" the report said.

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