The Economist magazine this month rated New Zealand’s home prices as 66 percent overvalued when compared to rents, second only to Canada in the 21 markets measured. … Using income as a measure, the magazine concluded New Zealand homes were 22 percent overvalued.
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The Bank of New Zealand came to a similar conclusion, finding that homes were 25 percent overvalued when compared to long-term trends.
Record-low interest rates are helping fuel ever-larger mortgages, money that ultimately comes from offshore. New Zealand’s household debt levels are high by international standards and are a big part of the reason why two major credit agencies last year downgraded the country’s sovereign credit rating. ..
The situation hasn’t alarmed the government or the Reserve Bank enough yet to intervene, unlike in Canada, where the government has recently tried to cool its housing market by imposing restrictions on mortgages.
Many worry, however, that damage is being done.
Story here. Thanks to Scot Bathgate.
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