Expensive home prices in Auckland have reached New Zealand which may result to more cuts in interest rates. Reports reveal that the Reserve Bank of New Zealand (RBNZ) has been dealing with home price inflation to the booming property acquisitions in Auckland.
RBNZ fears that it might result to borrowing because there are already a huge number of indebted households in the area. But it appears that home owners in Auckland is losing since the home prices in the area is far too high and the local market seems to be eager to get a seaside home to nearby regions.
"In the past 12 months things have come to a point where there's this Auckland exodus," said Ross Stanway, the CEO of Realty Services Ltd, according to ETRealty. Stanway owns real estate and property management companies in Central North Island.
The situation is a problem for the central bank since they cut interest rates in order to offset the effect of the decreasing prices of New Zealand dairy export products and the slowdown of China which is their biggest market. Aside from the worry about China's real estate, the home prices in Auckland also add upward pressure to the bank.
"I think the inflation that's starting to occur outside of Auckland will be part of the reason they (the RBNZ) will feel too nervous to cut rates any further," said Craig Ebert, senior economist at BNZ.
House price increase was observed in Waikato which accelerated to nearly 20 percent at the later months of 2015 while in Tauranga, prices rose for over 18 percent especially that it has many beach-side homes. Due to the expensive homes in Auckland, sales are down in December 2015 which is 19.3 percent lower than in November. This is recorded as the lowest for four years, NZ Herald reported.
In an effort to cool down the Auckland market, RBNZ tightened a range of home lending rules which includes setting loan-to-valuation ratios which is specifically targeted by the city. But this might not solve the problem of the limited housing supply which cannot meet the high demand and the immigration levels of New Zealand from last year.
