Is it time to batten down the hatches?

It has been smooth sailing for the New Zealand economy this year but there are worrying signs that the big banks are preparing for a storm.

News that BNZ may shed hundreds of local jobs comes as a KPMG report found bank profits fell in the March quarter despite record levels of lending.

Margins are clearly getting thin. Too thin for at least one West Auckland property development.

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This week Jon Sandler - the developer who has pulled the pin on a 91-unit Avondale apartment complex - partially blamed increasingly restrictive bank lending for the move.

Read more:
BNZ plans restructure, won't say how many jobs could be impacted

Local banks have been given the hard word from their head offices in Australia where they are becoming increasingly nervous, he said.

We've already seen significant new lending restrictions introduced this year for residential property.

Those restrictions have been forced on the commercial banks by a Reserve Bank which is eager to ensure they aren't financially exposed to a serious property crash.

But what's been notable is the extent to which the banks have been ready and willing to adopt new rules.

There was none of the push back you'd expect if the Reserve Bank's risk assessment was wildly out of line with the commercial judgement of the mortgage lenders.

In fact we've seen the banks go further than required in some circumstances.

Following their Australian parents all the local banks have voluntarily ceased lending to foreign property buyers.

It seems clear the banks have shifted their appetite for risk to a more conservative position.

That could be problematic for those hoping to see a surge in new building of low and medium-cost units in Auckland.

We appear to have a funding issue at that end of the market.

The prudence of the banks is heartening on one level - we need the major banks to stay strong through any economic downturn that may eventuate.

That strength was a blessing for Australasia during the Global Financial Crisis.

But its also a little worrying to consider just what they are bracing for.

Do they see a significant property market correction coming? There's no shortage of commentators and economists who have delivered similar warnings.

A long range weather forecast is one thing, watching the biggest ships the sea batten down for a storm is another thing altogether.