BIS central bankers’ speeches  3  Zealand, the average price-to-income ratio is about half Auckland’s level (figure 6). Similarly, rental yields have fallen materially in Auckland, and are currently at historic lows of below 3 percent. While low interest rates explain much of this downward trend, rental yields in the rest of New Zealand have remained well above Auckland yields (figure 3).
Auckland is increasingly being seen as a regional (Asia-Pacific) centre, and this no doubt accounts for a part of the stretch in price-to-income ratios. However, good long-run fundamentals do not make Auckland immune to a correction. International evidence shows that the further house price-to-income ratios deviate from historical norms, the greater the potential for a sharp and damaging correction.