WELLINGTON, June 3 (Reuters) - New Zealand is considering new ways to slow fast-rising house prices, with the government talking to the Reserve Bank about income-related restrictions on mortgage lending.
Soaring house prices already spurred the central bank to tighten lending rules and recently indicated it was assessing whether further tools might be necessary.
Finance Minister Bill English said discussions have started but there has been no formal response yet.
New Zealand's rate of house price growth is second only to Qatar's, according to the International Monetary Fund, in large part due to an influx of foreign investors and migration.
Data released by government property valuer QV on Wednesday showed house prices had risen 12.4 percent in the year to May. In the country's largest city, Auckland, prices had risen 15.4 percent to an average of NZ$956,000 ($652,000)
Macroprudential tools place limits on the amount of low-deposit lending banks can do, while the new tools could specifically limit housebuyers to a certain level of borrowing based on their income.
Banks can already take income into account when deciding whether to lend to property buyers, but the adoption a debt-to-income test by the RBNZ could make it obligatory.
In May the central bank noted that debt-to-income restrictions could be an option but underscored it would be a new tool and would require changing the existing memorandum of understanding on macroprudential tools signed in 2013 between the central bank and the finance minister.
The RBNZ has cut its official cash rate to a record-lows 2.25 percent in part due to low inflation, but this has added momentum to rising house prices by encouraging more people to borrow to invest in property.
English offered no specifics about the debt-to-income limits. "We'll wait and see what the analysis tells us. I just don't want to pre-judge the discussions with the bank," he said.
Analysts have noted that while macro-prudential tools can help curb a hot housing market, the best solution is to increase supply.
On Thursday, the government said it planned to require local authorities to free up land for housing in another bid to help cool the market.
