Fitch sees only muted risks to New Zealand covered bonds from house price increases in Auckland that reached 17% over the past year, saying that they are well positioned should any correction occur, although the central bank has stepped up measures aimed at taking some heat out of the market.

In a report published today (Tuesday), the rating agency highlighted that residential property prices in Auckland increased 56% from June 2011 to June 2015, compared with 20% for the rest of New Zealand. Fitch cited increased immigration, low rates and a slow supply response to heightened demand as having been key drivers of the rise in New Zealand’s largest city.

In October 2013 the Reserve Bank of New Zealand (pictured) introduced a loan-to-value (LTV) ratio “speed limit” capping the proportion of mortgage lending with LTV ratios above 80% to 10% of new monthly loan originations. According to Fitch, this did not supress Auckland house price inflation significantly, and in June the Reserve Bank proposed additionally limiting investment mortgage loans with an LTV ratio above 70% to 2% of total investment loan commitments for Auckland, while easing the speed limit in the rest of the country by increasing the relevant cap from 10% to 15%.

Fitch said it does not predict a property price correction in New Zealand and further does not feel that a decline in property prices would pose significant risk to cover pools. While noting that 44% of assets backing New Zealand covered bond programmes are secured on Auckland properties, Fitch said that cover pool assets are characterised by low LTV ratios – with a weighted-average LTV ratio of 47% – and relatively low exposure to investment loans.

“The low LTV ratios provide a significant buffer against a decline in property prices,” it said.

The rating agency nevertheless in June reflected the “ramp-up” in residential property prices in Auckland by increasing its market value decline assumptions for houses from 54.9% to 57.7% and for apartments from 60.4% to 63.5%.

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