New Zealand housing market showed robust growth towards the last quarter of 2002. At that point of time, the lending rate hovered around 6% and it has climbed upwards ever since to reach the current level of 10%. But from 2002 to till date the growth is based on economic fundamentals, meaning the supply was based on the demand and the home prices were not blown out of proportion as it was in other booming economies during the same period.
Towards the third quarter of 2007 there was a kind of pessimism that the New Zealand housing market would envisage a slump and this was mainly due to the recent collapse of many financial institutions. Experts believe this will not affect the growth in housing market because the culprits of the banking crises are the institutions themselves. Moreover, they further add that New Zealand Banks have very little exposure to the US sub prime market.
In the recent survey of World Bank’s Ease of Doing Business Rank, New Zealand stands first in registering property, this shows there is an obvious participation from the government to sustain growth in the housing market. Government’s other initiatives like property linked immigration, etc. has helped the industry to look ahead with optimism.
The Reserve Bank’s increase in housing loan interest rates is balanced time to time by the supply in the industry. Besides, another survey by Standard & Poor’s, a credit rating agency found that over the September quarter arrears in “prime” loans, dropped to 1.78 per cent from 1.86% at the end of June. The proportion of riskier sub-prime loans in arrears was 11.82%, a big drop from 15.27% in June. With economic fundamentals at their side, New Zealand’s housing market will continue to grow at a steady pace.