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NZ banks' housing lending continues rising as a percentage of their overall lending as business and agriculture lending heads in the opposite direction

NZ banks' housing lending continues rising as a percentage of their overall lending as business and agriculture lending heads in the opposite direction
Home loans

New Zealand banks are continuing to increase housing lending as a share of their total lending, as lending to businesses and the rural sector continues reducing.

KPMG's June quarter Financial Institutions Performance Review (FIPS) shows 63.87% of bank loan portfolio composition was housing lending in the June quarter this year, up from 58.69% in the March 2019 quarter. 

Over the same time period, business lending has reduced to 19.88% from 22.59%, and agriculture lending has dropped to 12.50% from 14.19%.

While the super low interest rate environment of the Covid-19 era, and now reversed decision by the Reserve Bank to remove loan-to-value ratio restrictions encouraged a housing lending boom, housing lending was growing at the expense of business and rural lending before the pandemic began.

Banks do, of course, have lower capital requirements for housing lending than other forms of lending, which potentially incentivises housing lending over other forms of lending. 

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13 Comments

Outstanding housing debt extended to one third of NZ households totals ~$317.00 billion - not much different to that owed by Evergrande in USD. 

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Sorry but that has to be the most pointless and intentionally misleading comment ever made on this website. You should be more responsible with your commenting.

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Why?

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Haha. Basically sum up this website and NZ in general with that comment.

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How?

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This is such a terrible trend - yet nobody cares!

You can't keep adding debt to non-GDP related area before you eventually have a banking crisis.

 

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There was a time when lending for investors in residential property was viewed as business lending, and interest rates for were the same as business rates. Business rates are higher due to increased risk. Now investors in housing get the same rates as owner occupiers - despite yields on residential property being at historic lows. 

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I do have difficulty understanding why banks would lend at such low rates for investors to buy rentals, considering rentals are a business too. 

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Because residential properties are pledged to banks for mortgage credit and the RBNZ capital risk weights are still low.

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Because its only a legitimate business when it suits property investors, then its not a business when it also best suits property investors.

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The dashboard from RBNZ alone doesn't say much but perhaps we will have more context if it is compared to RBA's data.

I think it is actually a good thing that consumers are actually spending less on personal loans and investing in real assets.

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I think it is actually a good thing that consumers are actually spending less on personal loans and investing in real assets.

No it's not. Bidding up prices on housing stock while debasing the money supply through credit creation is quite destructive. 

I know you're just trolling but thought I would point it our anyway. 

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After looking and increasing chances of lock-down after every few months and minimum wage touching all time high, with increasing prices of basic commodities (housing/food/power) it doesn't make sense to start new business. Even many businesses are heading toward shutdown, the only lucrative business in NZ is housing be it a investment property or rental investment.

Amazing to see team of 5 million running toward property market. 

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