• The Reserve Bank of New Zealand reports a subdued housing market with high interest rates, according to Kerry Watt.
• Residential property makes up over half of New Zealand households' wealth, influencing financial stability and economic growth.
• Global housing market trends show changes in the US, Australia, and India due to various economic factors.
• In Canada, cryptoasset ownership is expanding, presenting new challenges and opportunities for financial stability.

The Reserve Bank of New Zealand (RBNZ) has recently reported that the housing market in the country is currently subdued, with interest rates remaining at elevated levels. This comes after significant price rises and falls over the last four years.

The bank's Director of Financial Stability Assessment and Strategy, Kerry Watt, stated that house prices are a stretch for many prospective buyers and are hovering around the top of their estimate of sustainable levels. Banks are currently facing competitive pressures to attract a limited pool of creditworthy borrowers.

The capacity of borrowers to take on more debt is increasing as monetary policy is eased. However, the weaker economic environment means households are exercising caution. Watt added that the level of interest rates is still high by recent standards and lending growth has been low over the past year. It is uncertain when and how much demand for new borrowing will pick up.

Residential property makes up over half of New Zealand households' wealth and the housing market directly influences financial stability, affects consumer confidence, and shapes economic growth. Understanding the dynamics of the housing market is crucial for the bank, as home loans account for more than 60 per cent of total bank lending.

Global Housing Market Trends

In the context of global economic trends, the housing market in New Zealand is not the only one experiencing changes. The US housing market, for instance, has seen a 5% annual gain, according to the latest S&P CoreLogic Case-Shiller Home Price Index. The average 30-year fixed mortgage rate has been below 6.5% since mid-August but has slowly crept back up, landing at 6.54% the week ending October 23.

In Australia, the property market has hit a fresh milestone. The combination of being underwater and losing a job is enough to trigger defaults. This is the other key reason house prices matter so much. In India, geopolitical developments are influencing trade relationships and disrupting supply chains.

Nations and multinationals are emphasizing resilience, diversification, and self-sufficiency. India has huge potential as an export hub and investment destination in light of the China Plus One strategy, especially in the manufacturing and services sectors, where it has competencies and comparative advantage.

Cryptoassets and Financial Stability

In Canada, the ownership of cryptoassets is broadening, primarily as a speculative investment rather than a method of payment. In 2021, about 13% of Canadians owned Bitcoin, up from 5% in 2020. The median holding of Bitcoin was about $500, mostly for investment purposes. The significant volatility in the prices of these unbacked cryptoassets as well as high transaction costs have been key obstacles to their wide acceptance by merchants as a method of payment.

Interconnections between unbacked cryptoasset markets and the financial system appear limited but are expanding rapidly. Institutional participation in these markets has grown in recent years. However, estimating the growth of institutional investments in these assets and related infrastructure is difficult due to the lack of readily available and consistent data on the exposures of financial system participants to these markets.

Discussions with industry participants suggest that portfolio exposures remain small. Cryptoassets have generally become more accessible to investors in recent years through the emergence of closed-end funds, crypto exchange-traded funds and listed companies dealing in or mining cryptoassets.