Investing.com - The Reserve Bank of New Zealand on Wednesday warned of increased vulnerabilities in the housing market in the past six months as among the top risks to future financial stability.
In the latest biannual Financial Stability Report, the RBNZ noted that credit to the household sector is growing rapidly and the household debt-to-disposable income ratio now stands at a record high 165%. This is up from 160% in the previous FSR report published in May.
The rise in the ratio is largely due to continued increase in the share of mortgage lending. The increase could undermine the resilience gained as a result of the RBNZ's loan-to-value restrictions on mortgages that have reduced the share of risky loans on bank balance sheets and improved bank resilience to house price falls.
Other concern related to the housing market is Auckland's house price-to-income ratio that at 9.6 is among the highest in the world. The RBNZ said that despite softening in Auckland prices in recent months, it is uncertain whether this will be sustained.
"There is a significant risk of further upward pressure on house prices so long as the imbalance between housing demand and supply remains," the RBNZ said.