Housing crisis: all eyes on the housing market ahead of the Reserve Bank’s next report

“When you see a 30% movement in house prices in 12 months, you have to raise your eyebrows as to where the path the path will be over the next 12 to 24 months,” Bagrie said.

“House prices have continued to rise, but now we have inflation on our doorstep and interest rates are rising, so a different trajectory, I think, for the housing market over the next two or three years. . ”

The official spot rate (OCR) rose for the first time in seven years in October. With banks following suit and raising mortgage rates, inflation rising and the RBNZ tightening its lending restrictions, Bagrie said regulators and banks “get the upper hand” to curb things before a crash. becomes inevitable.

“The financial system is a pretty important part of your overall economy, and you want it to be resilient. Most of the time it is, but of course when you go through crowded house price cycles. , you may start to see points of vulnerability rising… The debt in New Zealand is about $ 500 billion – that’s about 1.5 times the size of the economy. “

The financial stability report itself will not be an exciting read, he said, because “it is not the Reserve Bank’s job to alarm.” But there will be one particular word to watch out for.

“They’ll use terms like ‘vulnerability’… Does that mean the outlook for house prices over the next two or three years is down? The answer is we don’t know. we know is that it’s a question of balancing the risks. “

Some indicators of housing affordability, such as employment, income and the declining proportion of interest-only loans, actually suggest that house prices may continue to rise, Bagrie said.

“It’s not one-way traffic.”

October’s financial stability report will be released at 11 a.m. on Wednesday.

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About Robert Valdivia

Robert Valdivia

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