Owners spend up housing equity
Thursday 30 September 2004
Red-hot house prices have fuelled a multibillion-dollar spending spree in the past year as homeowners tapped into their new-found property wealth to pay for cars, holidays and home appliances.
By The LandlordA report published by Westpac yesterday found the net value of New Zealand homes had risen by $89 billion since 2001, largely because of booming house prices.
As a result, Westpac estimated that homeowners borrowed up to $2.7 billion against the value of their homes in the year to June for a spend-up which powered strong economic growth.
The Reserve Bank has increased official cash interest rates five times this year to combat just this type of housing-market-fuelled consumer spending that is threatening to reignite inflation. At least one more interest rate rise is expected this year, pushing home mortgage rates up toward 9 per cent.
Westpac senior economist Nick Tuffley said compared with smaller house price booms in the 1990s, this peak had shown a "dramatic tapping into the equity windfall" by homeowners.
According to the report, a $1 increase in New Zealand's housing wealth increases annual household spending by about 8 cents, compared with 7c in Australia and 5c in the United States.
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The Government announced its long awaited tenancy law reforms today and they mean that landlords will no longer be able to get rid of tenants without reason.
There’s no sign of a slow-down in Wellington’s property prices with Trade Me Property’s latest data showing that asking prices continue to rise solidly.
Vacancy rates in the commercial property sector are set to increase as changing economic conditions dampen demand.
LVR restrictions were never meant to be a permanent feature of New Zealand’s housing market and ANZ economists argue that some further relaxing of them could soon be on the cards.