The Deputy Governor of the Bank of New Zealand said that if the coronavirus pandemic keeps New Zealand’s borders closed, New Zealand’s out-of-control housing prices may rise due to low net immigration.

Geoff Bascand told the Financial Times that if housing prices cool faster than expected, it may affect the Reserve Bank of New Zealand’s forecast of a rapid interest rate hike next year.

If New Zealand moves slowly Reopen the border He added that more and more residents are migrating abroad, which may curb population growth and reduce the demand for housing.

Baskender’s comments underscore the central bank’s Forecast inflation Because reopening from the pandemic blockade will affect the supply and demand of goods.

“If population growth remains very slow, the real estate market may adjust more quickly,” said Baskander, who is expected to step down in January after serving as a deputy for nearly a decade.

A faster cooling of housing prices will affect the Bank of New Zealand’s interest rate decision, as well as the global economic outlook, the intensity of domestic demand and the pressure on production capacity from New Zealand. Tight labor supply, He added.

If the government delays the relaxation of border restrictions, the Omicron coronavirus variant will pose additional risks to immigrants.

Bank of New Zealand Raise interest rates In November, interest rates were raised by 25 basis points to 0.75%, which was the second rate hike in months since the economy began to overheat. The bank expects that interest rates will reach 2% by the end of 2022 and reach a peak of 2.6% by December 2023.

The Bank of New Zealand also predicts that with the relaxation of border restrictions, the number of net immigrants will gradually increase to about 24,000 per year, but this will depend on the reopening of international travel. Net migration is currently slightly negative.

Lower migration will Reduce demand for housing But it will also reduce the supply of labor. “In terms of inflationary pressures, it will be interesting how this will work,” Baskander said.

Once the current construction projects are completed, New Zealand’s housing stock is expected to balance for the first time in decades, making net migration even more important.

The central bank predicts that by the end of 2022, the annual growth rate of house prices will slow from 30% at the end of 2021 to 6%. Starting from the end of 2022, it expects house prices to fall slightly.

Baskender said that in the next two to three years, given rising interest rates, slowing population growth and continued housing construction, it is difficult to see what will support housing prices.

According to CoreLogic’s house price index, New Zealand house prices have risen sharply in the past two years, with a year-on-year increase of 28.4% in November.Although the government introduced price increases Stricter tax policy Rental income and capital gains, as well as the Bank of New Zealand’s tightening of loan-to-value ratio restrictions to levels previously implemented in 2016-2017.

The Bank of New Zealand believes that the current level of housing prices is unsustainable and poses a threat to financial stability. It is consulting on new residential mortgage restrictions, which will include two tools: the debt-to-income ratio limit and the lower limit on interest rates that banks must use to test whether borrowers can afford mortgages.

It plans to use the lower interest rate limit as a transition tool when needed, because DTI restrictions will take longer to implement. Baskender said the lower limit on interest rates can be implemented “relatively quickly, possibly within three to four months.”

Although New Zealand’s headline inflation rate is close to 5%, the Bank of New Zealand believes that the public’s expectations for future inflation have been adequately anchored and insists that it does not have a high appetite for any policy that puts it at risk.

Bascand stated that the public is beginning to expect signals of rising inflation “will become an important factor in our decision-making.” “If we think [expectations] It is becoming unstable, which will be a concern. “

Baskender acknowledged the risk that high inflation may affect public expectations. “We believe that there is a risk that wage and cost pressures may rise and lead people to believe that inflation will increase further,” he said. However, rising mortgage interest rates will offset this concern as they begin to affect the real estate market.