Kiwi real estate prices set to soar due to booming immigration numbers

Published:  1 Aug at 6 PM
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The boom in house prices across New Zealand is causing governmental concern, as market experts predict double-digit rises by the end of 2013.

A combination of low borrowing rates, increased demand due to rising immigration and the short supply of suitable properties in popular locations may be the perfect storm for house prices in New Zealand. Auckland and Canterbury in particular are seeing a pickup in demand, resulting in price increases across the board.

Overheating is a concern for the Royal Bank of New Zealand, which is considering loan-to-valuation restrictions and the lifting of interest rates to cool the market before a bubble sets in. Real estate agents are predicting a 10 per cent rise this year, followed by at least another nine per cent in 2014.

Financial experts are betting on a rate hike in the autumn or later, saying it will be a departure from the bank’s usual concerns over financial stability. Mortgage lenders note a strong customer shift towards fixed rate loans which could, in the longer term, affect the impact of any rate rise.

Since the financial crisis struck in 2008, New Zealand real estate prices have remained relatively stable after a slight fall, with the recent increase in immigration considered a major contributor to the boom. The bank’s concern is that a rapid rise would threaten to spill over into the inflation rate and affect the country’s general financial stability.
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