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RBNZ assessing whether more housing market restrictions needed

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New Zealand's central bank said it is watching the nation's booming housing market to decide whether further restrictions are needed to curb demand.

[WELLINGTON] New Zealand's central bank said it is watching the nation's booming housing market to decide whether further restrictions are needed to curb demand.

"The Reserve Bank is closely monitoring developments to assess whether further financial policy measures would be appropriate," it said Wednesday in Wellington in its semi-annual Financial Stability Report.

"Imbalances in the housing market continue to increase, contributing to financial stability risk." Governor Graeme Wheeler last month cut the official cash rate to a record-low 2.25 per cent and said further easing may be required as inflation undershoots his 1-3 per cent target.

At the same time he's wary that lower borrowing costs could further stoke housing demand, posing a risk to lenders and the financial system if there was to be a sudden collapse in property prices.

The New Zealand dollar rose as much as 1 per cent after the RBNZ's comments. It bought 68.23 US cents at 9:15 am in Wellington.

The housing market is picking up after a brief lull, with prices nationally rising 12 per cent in April from a year earlier, according to Quotable Value New Zealand, a government property research company. That's the first rise since November.

The RBNZ in 2013 put a limit on the amount of low-deposit home lending banks could undertake, and on Nov 1 last year it specifically targeted Auckland investors, who it estimates are responsible for more than 40 per cent of sales in the city.

It now requires them to hold a deposit of at least 30 per cent of a property's value to get a mortgage.

The tighter lending rules - and new government regulations implemented Oct 1 to tax capital gains on property held for less than two years - helped slow the Auckland market late last year.

Since they they have picked up again, rising 1.5 per cent in the three months ended April. Prices in the capital city Wellington have gained 2.9 per cent in the same period.

"Auckland prices remain stretched relative to incomes and recent data suggest that price pressures are re-emerging," the RBNZ said.

"House prices have also begun increasing strongly in a number of regions across New Zealand." Reducing the imbalance between housing demand and supply in the Auckland region remains essential if house price appreciation is to be contained over the longer term, the bank said.

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