PHOTO: ALDEN WILLIAMS/STUFF – Economists at Westpac said recent weakness in the housing market could go on for some months
Reserve Bank governor Adrian Orr has warned there is a risk of a correction to house prices, with asset prices unlikely to return to a “steady state” after the recent rise.
In an interview with Q&A broadcast on Sunday evening, the Reserve Bank governor said there were “big risks” to the central bank’s forecasts that house price increases would continue but at a rate of around 1 per cent.
The Reserve Bank remained concerned that if it removed loan to value ratios, there was a risk that lending would increase, meaning prices would rise faster than expected.
“On the downside risk, asset prices very rarely smoothly transition back to some steady state level.”
READ MORE VIA STUFF