thepeel
Joined: 08 Aug 2004
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 Posted: Tue Nov 27, 2007 10:11 pm Post subject: New Zealand Housing Boom Ends |
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During the past five years, a constellation of factors drove an unprecedented housing boom in New Zealand. The boom fizzled out this year but left behind a set of factors that raise the risk of housing sector weakness spreading to the rest of the economy.
In some respects, New Zealand looks more vulnerable to a housing-led financial crisis than the U.S.: New Zealand (NZ) exhibits higher household indebtedness (debt to disposable income: 160% in NZ vs 131% in US, 2007) a larger current account deficit as a share of GDP (8% in NZ vs 6% in US, 2007), a higher share of housing in household assets (72% in NZ vs 39% in US*, June 2007), stronger house price inflation (median home price: US$266,964 in NZ vs US$238,000 in US, September 2007) and a higher benchmark interest rate (8.25% Overnight Cash Rate in NZ vs 4.50% Fed Funds Rate in US, November 2007) with a more justifiably hawkish central bank.
This brief discusses the rise and fall of the New Zealand housing market, its outlook, and how the US crisis might throw the match that lights New Zealand's financial tinderbox. |
http://www.rgemonitor.com/blog/economonitor/229134
Spain and Ireland will be next. |
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