New Zealand's central bank on Wednesday announced measures to cool Auckland's red-hot property market, saying a potential real-estate bubble posed a significant risk to the economy.
House prices in the South Pacific nation's largest city have skyrocketed in recent years, resulting in Auckland being named as the world's ninth least affordable major city in an international survey released this year.
Reserve Bank of New Zealand Governor Graeme Wheeler said the median house price in Auckland was up 60 percent since 2008, including a rise of almost 17 percent in the past year alone.
He said the boom contrasted with the rest of New Zealand, where prices have edged up just 3.2 percent in the past 12 months.
"Prices in the Auckland region have become very stretched, increasing the risk of financial instability from a sharp correction in prices," he said in a report released Wednesday.
To cool the market, Wheeler said the central bank was targeting property investors in the Auckland region, who account for about a third of new mortgages.
He said the reform meant Auckland property investors -- those who do not intend to live in the house they buy -- would need a 30 percent deposit to get a mortgage, up from 15 percent.
Meanwhile the loan-to-value ratio in the rest of the country will be dropped from 15 percent to 10 in a bid to encourage investment.
"The objective of this policy is to promote financial stability by reducing the rate of increase in Auckland house prices, and to improve the resilience of the banking system to a potential downturn in the Auckland housing market," he said.
Wheeler said factors driving the price rise included low interest rates, increased investor activity and record immigration -- with Auckland the favoured destination for most migrants.
Industry data for March put the average house price in Auckland -- a city of 1.5 million -- at NZ$711,000 (Aus$698,000, US$527,000), higher than the Aus$680,000 (US$543,000) in Sydney, Australia's most expensive city, which has a population of 4.6 million.