Reserve Bank warns house prices could resume climb on supply shortage

The Reserve Bank has warned New Zealand’s house prices could resume the recent rise as supply shortages continue.

On Thursday Reserve Bank governor Graeme Wheeler left the official cash rate at 1.75 per cent, as widely expected, saying the global economy continued to face a number of risks.

Wheeler welcomed a fall in the New Zealand dollar, and indicated house price rises had moderated partly due to lending restrictions, but warned price increases in the housing market could resume.

“It is uncertain whether this moderation will be sustained given the continued imbalance between supply and demand.”

At the end of February, New Zealand’s average house price was more than 50 per cent above the last peak in 2007, although prices rose just over 1 per cent three months, with Auckland and Hamilton prices easing.

On Wednesday, Finance Minister Steven Joyce warned that a number of factors, including rising interest rates, an improved performance of other countries as well as an increase in supply could cool the housing market.

Joyce, who became Finance Minister in December, talked up the volume of construction, saying there was the largest amount of work in progress of all time.

sourced : http://www.stuff.co.nz/business/money/90751089/reserve-bank-to-make-decision-on-official-cash-rate-today