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Warnings of a potential collapse in the housing market in New Zealand have emerged in a banking report from Moody's Investor Services in Sydney.
A leading Auckland apartment realtor is also warning that "a chill" is about to descend on the market and is suggesting to homeowners that
now might be a good time to sell "with our masters in Wellington hellbent on making you suffer".
Reserve Bank figures show that over half of the amount loaned in fixed-rate mortgages is up for review within two years, increasing repayments.
The stark warning of a possible collapse is contained in Moody's Banking system Outlook on the New Zealand banking system.
Among the problems the report lists is the cost of household indebtedness and debt-servicing costs in relation to interest rate rises.
It points out the Reserve Bank's official cash rate was having little effect on slowing economic growth due to competition in fixed rate mortgages.
"This could potentially lead to a collapse in the housing market should refinancing occur in a high interest rate environment."
Moody's told its global clients that the Reserve Bank has progressively raised the cash rate, the present 8 per cent being the third increase in 2007 - and the 12th since it started raising rates at the start of 2004 - in a bid to slow the growth in house prices.
But its monetary policy lever had a delayed impact due to the prevalence of fixed-rate mortgage loans.
The high interest rates had also underpinned demand for the kiwi dollar, adversely affecting export companies and raising the risk of an abrupt slowdown.
The Reserve Bank's latest figures on mortgages show that of the almost $136 billion in housing loans in New Zealand, 24 per cent are up for review before the end of May next year, and a further 30 per cent in the year following that.
The difference in interest paid on a $200,000 loan at 7.5 per cent two years ago and 9.5 per cent today is $4000 a year or just over $75 more a week.
Auckland realtor, City Sales, has sent letters to apartment owners suggesting now might be the time to sell if they were overcommitted and warning that further interest rate rises could be on the way.
"It's that New Zealand madness again," says the letter signed by sales manager Rowena Tinone. "It may be a time for caution ... "
The warnings in the Moody's report are in contrast to Quotable Value statistics which show average housing values rose 12.2 per cent nationally in the past year to $378,672 and showed higher growth in values last month in Auckland, Wellington and Hamilton than in May.
BNZ economist Tony Alexander found no favour with suggestions that housing prices would fall on average.
"The market is still going to remain very well supported by good wages growth, a tight labour market, what we believe is a backlog of owner-occupier buyers, a perceived structural shortage of dwellings in New Zealand, continuing increases in construction costs, and a Government focus on improving home affordability by boosting demand from low-income buyers rather than improving supply."
Housing Minister Chris Carter would not say that he would actually welcome a downturn in the housing market but he outlined progress he was making on addressing housing affordability.
The minister confirmed that he planned to introduce legislation before Christmas that would empower territorial authorities, if they choose, to impose requirements on developers to provide a portion of affordable housing in their projects - following Australia's example.
Commenting on a move in Australia to free up Government land for housing, Mr Carter said he was working with Auckland councils to get a report on what land within the wider city limits was available for housing.
He said the former social welfare home at Weymouth had been bought by Housing NZ and its development would include a mix of private, low-income and first-home ownership options, as it would in the project on the former Hobsonville air base.