06 May, 2021
New Zealand house prices have risen significantly in the past 12 months. This has raised concerns at the Reserve Bank of New Zealand – Te Pūtea Matua about the risk this poses to financial stability. Central banks responded swiftly to the global economic shock caused by COVID-19, making it cheaper for households and businesses to borrow. These initiatives were complemented by the support provided by Government policies and helped to avert a more serious financial crisis, but also had the flow-on effect of boosting asset prices. In our case, with strong population growth and limited housing availability, house prices climbed from already elevated levels, and debt levels rose with them. This has led to pockets of vulnerabilities as some households have borrowed a lot compared to their income to buy homes at historically high prices.