Property market at risk of 'sharp correction'

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

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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.

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- Fairfax Media

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