Investment property loans aren't so risky: S&P

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Friday 5 March 2004

Loans on investment properties are no more risky than loans to owner-occupiers, S&P says.

By The Landlord

Although there are warnings on both sides of the Tasman about the implications of the growth in lending for residential investment, ratings agency Standard & Poor’s says the evidence shows that loans to investors are no more risky than loans to owner-occupiers.

While its comments relate to the Australian market, the environment in New Zealand is very similar.

"There has been a great deal of hype recently regarding the growth in lending for residential investment and the impact that it may have on the Australian economy, the level of household debt, the performance of residential property markets and the quality of bank balance sheets," S&P says.

And like our own Reserve Bank governor Alan Bollard, the Reserve Bank of Australia has issued repeated warnings to borrowers not to over-extend themselves on housing. Where Bollard has so far raised interest rates only once, the RBA has hiked its key interest rate twice in recent months.

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