WELLINGTON May 14 A strong New Zealand housing
market, rising rural sector debt, and a sharp slowdown in China
are among the major risks to the country's financial system, but
tighter lending rules for banks are helping to reduce the risks
and will need to stay in place for some time, the central bank
said on Wednesday.
The Reserve Bank of New Zealand (RBNZ) said house prices are
overvalued in some areas, which along with increasing demand,
lack of supply and low interest rates, have led to households
becoming more indebted and more vulnerable.
"The restriction of high-LVR mortgages appears to be having
the desired effect of moderating house price pressures and
reducing the risk of a severe market correction," RBNZ deputy
governor Grant Spencer said in the bank's six-monthly financial
He said the restrictions would stay in place at least until
late this year to ensure the housing market did not get a
renewed boost from strong immigration.
The report reiterated comments made last week in speeches
by Spencer and the Governor Graeme Wheeler.
The report also renewed warnings in previous reports about
the risks from a slowdown in China, the country's biggest export
market, the impact of a sharp fall in prices on some
highly-indebted dairy farmers, and New Zealand high external
However, it also said the financial system was in its
strongest condition since the global financial crisis and the
risks had eased since the previous report.
The full report is available at www.rbnz.govt.nz