The Admirals' Blog

If you would like to post a blog article, please email your text to:


Go Back

Update on the New Zealand Housing Market - 09 May 2014

Speech by:  Grant Spencer, Deputy Governor & Head of Financial Stability, Reserve Bank of New Zealand.

Housing market and credit cycles are part of the economic landscape and, although they can be moderated through sound policy, they cannot be eliminated. When pressures become excessive the cycle can be damaging for the financial system and for the broader economy. This is why we monitor housing closely and why housing is a key factor influencing our monetary and financial policies.

House price pressures in New Zealand since late 2012 have been driven by supply shortages and by strong demand supported by easy credit.

On the supply side, progress is being made with national dwelling consents now up to an annual rate of 22,000. In Auckland, progress is being made in freeing up the supply of buildable land and improving the consenting process. And in Canterbury, the replacement of severely damaged homes is well in train after a slow start. However, the shortage remains large – with around 50,000 new homes targeted in Christchurch and Auckland over the next three years. This is a task that is likely to take considerably longer than three years to complete.

On the demand side, pressure has been moderated by the LVR restrictions and will be further restrained as monetary policy brings interest rates back to a level more consistent with a strongly growing economy. Interest rate increases are expected to have a greater effect than in the previous cycle due to the high levels of existing debt and a high proportion of floating rate mortgages. However, many uncertainties remain around the housing market outlook, particularly regarding the future impact of the increasing net migration inflow.

Over their first six months, the LVR restrictions have had a dampening effect on housing that is broadly in line with expectations. The easing or removal of the LVR restrictions will depend importantly on the restraining impact of interest rate increases and any renewed pressure arising from the net immigration.

Achieving greater stability in the housing market will contribute greatly to maintaining financial and price stability, and to achieving sustainable economic growth.


Grant Spencer’s presentation was insightful giving us all a greater appreciation of all the various economic factors that are carefully balanced by the Reserve Bank to deliver a strong economic outlook for our country.

John Dawson, Chairman, The Admirals’ Breakfast Club

Facebook Twitter

Post a comment