Renters also hit by housing boom: BNZ
IT is not just aspiring firsthome buyers who will find it tougher to get on the ladder amid the booming housing market, the chief executive of the Bank of New Zealand has warned.
Speaking after the bank released its fullyear results, Angela Mentis said there were unintended consequences of a very strong housing market.
‘‘Really it is around the impacts to affordability.
‘‘As prices go up it is going to be harder for firsthome buyers, and we also know as housing prices go up, rents increase as well, so that is an unintended consequence.’’
Ms Mentis said BNZ had a record month for home lending in October and it was seeing that boost consumer confidence.
‘‘People feel confident when their house prices are going up and there is equity in their house and they are more confident to spend and invest and we are seeing that.
‘‘And we are also seeing many firsthome buyers who are in the market and buying, and that might be a little bit of fear of missing out in a rising market, and we have seen the investors come back into the market.’’
But Ms Mentis would not be drawn on whether the Reserve Bank should bring back lending restrictions at its next financial stability review on November 25.
‘‘We have been really prudent in our approach and our levels over the 80% lending [threshold] are still more conservative than they were preCovid.’’
Despite a challenging year in which the BNZ's net profit after tax fell $260 million to $762 million for the year to September 30, Ms Mentis remained upbeat.
She pointed to the latest unemployment figures out on Wednesday which showed the rate had risen to 5.3% — below the 6% the bank was expecting.
‘‘We have actually brought down where we think it is going to peak at 7.4% and even that might come in lower.’’
Ms Mentis said the economy had not felt the full force of the tourist shortfall yet which would happen over the peak of summer.
But she believed the shape of the economy would be different than preCovid times as many businesses had moved to digitise their offerings during the lockdowns.
‘‘I really believe it will be the SME [smallmedium enterprise] businessled growth that will be what drives New Zealand.’’
She said New Zealand also needed to leverage and benefit from its Covidfree status.
‘‘There will be industries who want to come to New Zealand because of our Covidfree status.
‘‘And our primary producers have never been more confident around being that primary lever to power the growth of New Zealand, and we are really seeing that in our record terms of trade.’’
The bank has put aside $300 million for credit impairments.
BNZ chief financial officer Peter MacGillivray said about 58% was forwardlooking.
That is lower than the 75% to 80% of forward provisioning that ANZ and Westpac have announced over the past week.
BNZ gave more than $6 billion in home loan support and $4 billion in business lending support during its 2020 financial year, helping about 30,000 customers.
Ms Mentis said more than 70% of mortgage and business customers had now gone back to preCovid terms and conditions.
It still has about 4700 customers on loan deferrals covering about 3% of its loan book.— The New Zealand Herald