A resurgence in property prices means LVR "speed limits" are likely to stay in place, Standard & Poor's says in a report that predicts banks will continue to post strong earnings growth while trading in the shadow of a "heightened risk" of a future property crash.
"The relatively low level of credit losses over the next two-to-three years will continue, underpinning the strong profitability performance metrics of the New Zealand major banks," the company says.
The report focuses on the property market and the risks that banks face in lending to that market. The increase in median house prices as at the end of January was higher than S&P expected. The Reserve Bank intends to ease, or remove, LVR restrictions when house price inflation moderates but S&P doesn't see it happening any time soon.
"It is our view that the removal of the LVR speed limit restrictions over the short term is unlikely," S&P says.
