Kiwis teeter atop debt mountain
Sunday 15 February 2004
The residential property market is close to sinking under the weight of its own mortgage debt.
By The LandlordReserve Bank figures show mortgage debt has ballooned in the past two years, from $67.9 billion in December 2001 to $86b at the end of 2003.
If New Zealanders keep borrowing at the same rate, total mortgage debt will exceed $100b in 12 months.
That is leading to concerns that many households are so loaded with debt that even a small rise in interest rates or reduction in their disposable income could mean they struggle to meet repayments.
The problem is becoming acute because the debt mountain is not spread evenly across households.
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It’s full steam ahead for the Stevenson Group’s $800 million, 361-hectare industrial and residential development in South Auckland – despite the uncertainties of the post-Covid-19 era.
Periods of house price decline are rare and "short-lived", says economist Tony Alexander, amid forecasts of a drop of 10%-15% this year.
The Reserve Bank says the commercial property sector is vulnerable to the Covid-19 crisis. But PMG Funds' chief executive believes that while there’ll be short-term pain, the biggest long-term impact will be structural change.
Mortgage lending fell to its lowest level on record last month as the property market ground to a halt during the Covid-19 lockdown.