Much of New Zealand's household savings have gone into real estate investments due to low interest rates in the previous decade and strong capital gains in property prices. Housing assets are 5.7 times household disposable income. Since 2009, house sales have slowed and prices declined due to low mortgage rates. The demise of the debt-fueled housing bubble will likely continue as long-term mortgage rates rise, foreshadowing a return to low sales and prices. New Zealand's subprime market is undeveloped but its property market is more leveraged than the U.S. counterpart, exposing homeowners to interest rate risk. A recovery in immigration may revive the housing market as New Zealand is a destination for British expats.
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