IMF declares warning of unsustainable rise in the housing prices in New Zealand

New Zealand remains the only developed country to be able to curb the coronavirus pandemic cases and keep it within a manageable range. This management of the pandemic has resulted in faster economic recovery of the country than its counterparts. However, the plentitude of fiscal and monetary measures and stimulus has resulted in raising the prices for the properties in the country.

IMF issued a warning when the New Zealand’s Real estate institute released a report stating that the median prices for households meant for residential uses soared by (23%) in the month of February. The median prices recorded in the biggest city of the country Auckland saw a rise of more than 24% settling at USD (573745.92).

The concerns regarding financial stability of the people have become the talk of the talk due to rising demand for housing in the country. These concerns are accompanied by the low interest rates and shortages in supply of housing which have led to rise in the prices.

The IMF said that the unsustainable housing prices in relation to household income, stringent credit policies, higher mortgage rates could trigger a clear-cut correction of these problems. A comprehensive policy is the need of the hour, involving rising supply of housing and weakening the speculative demands for housing.

The government when criticized said the indirect consequences of the stimulus has resulted in more investments in the properties as against investments in housing thereby decreasing the supply of houses.

The growing concerns have made the government ask Reserve Bank of New Zealand (RBNZ) to review the potential impacts of monetary policies before implementing and considering the housing prices. RBNZ had cut back its mortgage lending and withdrew any liquidity prospects.