House price values have sky rocketed in Auckland of the past year and it’s created a lot more million dollar suburbs. Property owners are aware they have tens of thousands more equity in their homes however contrary to the the action they took back in 2006-7 consumers have not gone on a spending spree. Back then there was a desire to spend their newfound ‘wealth’ on new boats, bachs, decks and that resulted in a 15 percent increase in mortgage lending. Domestic inflation was at that time pushed up to 4 percent a good two percent higher than what RBNZ prefers for stability.
This time around mortgage lending has grown slower at less than five percent per year so property owners are less reluctant to borrow more against their homes. The good news is consumption growth in the economy has grown and it’s due to employment growth and income growth which is far preferred however inflation is less than one percent and that is lower than the RBNZ likes.
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