Kiwi housing is 'riskiest in the world' - Business Day - The Press
After adjusting for inflation, house prices here have risen more than 50 per cent in about five years.

The combination of overvalued property and highly indebted consumers makes the New Zealand, Danish and British economies "especially vulnerable" as central banks tighten interest rates around the world, the credit rating agency said.

"For overall vulnerability, New Zealand ranks first, Denmark second and the UK third as the most exposed countries. Japan, Germany and Italy are the least vulnerable," head of global economics Brian Coulton said.

New Zealand also ranked near the worst, at number two behind Norway, for vulnerability because of high household debt levels ? at almost 160 per cent of disposable income, up from 100 per cent seven years ago.

Economies "where housing looks overvalued, and households overstretched, will be more vulnerable from shocks to interest rates (going up), incomes and asset prices," the report says.

Fitch said prices were particularly high relative to rents in New Zealand and the UK, and the high prices relative to rents make housing less attractive to landlords.

An ASB Bank survey released at the weekend reported consumers were more pessimistic about whether it was a good time to buy a house, suggesting record-high interest rates were slowing demand for property.

Reserve Bank Governor Alan Bollard last week raised the benchmark interest rate for the fourth time this year to a record 8.25 per cent and said that may be sufficient to constrain inflation.

A net 14 per cent of 600 people surveyed said it was a bad time to buy compared with 3 per cent in the previous survey in April. Home-loan interest rates began rising in early April.

The chief economist at ASB Bank, Nick Tuffley, of Auckland, said the housing market "is likely to enter a period of slowing momentum."

A net 32 per cent of those surveyed expect house prices will rise in the next 12 months compared with 55 per cent in the April survey.

The number of new housing consents issued remained high in June, in apparent defiance of rising interest rates.

Figures from Statistics New Zealand (SNZ) show 2574 new units authorised last month, the highest number for at least two years and a 29 per cent rise from the 1994 in June 2006.

The value of consents issued for all residential buildings was $692 million last month, compared with $564 million in June 2006.