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Central bank measures cool overheating New Zealand housing market: study

Xinhua, April 5, 2016 Adjust font size:

Homes in New Zealand's largest city of Auckland, one of the least affordable cities in the world, became slightly more affordable, according to an independent report out Tuesday.

However, the improvement came with a warning that it might be short-lived.

Lower interest rates and the Reserve Bank of New Zealand's (RBNZ) loan-to-value ratio restrictions were making Auckland homes more affordable, according to the Massey University Home Affordability Report.

Report author Susan Flint-Hartle said the "modest" annual improvement in affordability of 3.1 percent was "good news for policy-makers intent on moderating the persistent inflation of Auckland house prices."

But she warned the respite was limited for first homebuyers in Auckland, home to a third of New Zealand's population.

"Despite the small improvements we've seen over the past few quarters, Auckland remains 59 percent less affordable than the rest of New Zealand, and that is a record high," Flint-Hartle said in a statement.

The report, which covered the period from December 2015 to February 2016, showed Auckland's median house price fell by 15,000 NZ dollars (10,225 U.S. dollars) to 750,000 NZ dollars (511,275 U.S. dollars), but the figure still represented a climb of 75,000 NZ dollars (51,127 U.S. dollars) over the past 12 months.

Lower interest rates had also contributed to the overall improvement in housing affordability, and should continue to do so in the immediate future.

"The Reserve Bank governor reduced the official cash rate by 25 basis points to a new low of 2.25 percent in March, which will flow through to consumers and be reflected in the data for the next quarter," Flint-Hartle said.

"He also signalled a possible further drop later this year due to flat inflation figures and a worsening international economic output," she said.

"While that reduces borrowing costs for homebuyers, improving affordability in the short-term, it remains to be seen whether lower mortgage rates will also push up house prices in the longer-term."

The RBNZ has repeatedly warned that Auckland's soaring home prices were a risk to the nation's financial security. Endit