Property market at risk of 'sharp correction'

ROB STOCK
Last updated 05:00 01/03/2013
mortgage
SHARP CORRECTION: Standard & Poor's says there is a significant risk of a property crash in New Zealand.

Relevant offers

Money

Government must step in to solve insurance commission abuses Brexit: How it could affect your Kiwisaver Insurance advisers earn up to $340k a year switching customer insurance policies - FMA How to avoid the five pitfalls of switching insurer NZ online shopping grows 4 per cent: Nielsen Auckland 12-yr-old launches petition over Countdown caged eggs Chinese-owned Marlborough Wine Estates Group to list on NXT Brexit vote proves costly for KiwiSaver members Debt-to-income ratios could cause market meltdown, pundits predict Brexit brings some benefits for Taranaki people

Financial ratings agency Standard & Poor's says there is a significant risk of a property crash in New Zealand.

S&P, which has come in for criticism over its failures to adequately assess risk on many investments in the run-up to the Global Financial Crisis, said its "base case scenario" was for medium-term real estate prices continuing to stabilise at current levels.

But credit analyst Nico DeLange said: "We are of the opinion that a significant risk remains of a sharp correction in property prices occurring given the uncertain short-to medium term outlook for the global economy."

Such an event would have a flow-on impact on the ratings of New Zealand's banks.

DeLange said: "This could potentially lead to a build-up of economic risks, resulting in the lowering of the economic risk score of New Zealand to ‘4' from ‘3'. Such a change could have a direct impact on the stand-alone credit profile of New Zealand banks, and the issuer credit ratings of banks in New Zealand."

Earlier this week, Finance Minister Bill English indicated new rules that could take some of the heat out of housing market could be in place by mid-year.

Ad Feedback

- Fairfax Media

Comments

Special offers

Featured Promotions

Sponsored Content