Skip to content

Hard landing in store for New Zealand property market

The global credit crunch, as it has been called, continues to worry property market specialists and economists in New Zealand. The problem lies with the effects this crunch has had on the New Zealand bank's funding costs.

Implications will cause a new era of financial markets to be considered. One such implication is that of the increase in funding costs that banks pay and therefore charge mortgage rates. According to Reserve Bank Governor Alan Bollard, as reported by the New Zealand Herald, "This occurs at a time when New Zealand's property market is already slowing due to the effects of past policy tightening." He later continued, "While we are projecting the property slowdown to be of the soft landing variety, there is obviously some risk of a more pronounced slowdown."

There is interest by foreign property investors in the country though. That interest comes mainly from overseas buyers from Southeast Asia. Many of the properties that would have traditionally been purchased by those from the UK or Australia are now being purchased by Asian buyers.

Some specific developments are attracting buyers from Singapore and Hong Kong. Several factors make this interesting including the country's capital growth potential and the draw that New Zealand has for the second home market. The country boasts a strong economy, a stable political situation as well as high employment, moderate levels of inflation and offers no inheritance tax or estate duty tax.

Related