No wonder the NZ dollar is going up, as strengthening commodity prices join solid domestic data to make for a pretty consistent good-news story.
Stressing the risks
Elsewhere, much analysis and discussion has gone into looking at the vulnerability of property investors relying on capital gain should interest rates rise strongly or house prices fall.
In its Financial Stability Report last week the Reserve Bank of New Zealand cast the net wider, taking a detailed look at the vulnerability of house owner-occupiers to 7 per cent or 9 per cent mortgage rates, taking into account household income and expenditure data from Statistics NZ’s Household Economic Survey and surveyed debt-to-income ratios.
It concludes around 4 per cent of all borrowers (representing 6 per cent of the stock of mortgage debt) and 5 per cent of recent borrowers (9 per cent of the stock of debt) could not meet essential expenses (would be in “severe stress”) if mortgage rates were to rise to 7 per cent.
At 9 per cent mortgage rates (admittedly pretty hard to envisage in the current low-inflation global environment but far from unprecedented over New Zealand’s history), 7 per cent of all borrowers and 18 per cent of all recent borrowers (representing 29 per cent – almost a third – of the stock of mortgage debt) would be in that situation.