These debt markets appear to work well, although borrowing locally means paying rates that have traditionally been higher than in other OECD countries, even Australia. The New Zealand rates contain a premium that reflects exchange risk and the liquidity risk that is inherent in a small remote market such as New Zealand.
While the estimated magnitude in the euro area of the impact is rather small, the sheer size of the housing market and wealth implies that a 10% permanent decrease in house prices in the euro area as a whole would decrease consumption by approximately 1%.