measures taken by the ecb. however, the very low interest rates around the world are also associated with risks. the longer a low interest rate phase persists, the greater the potential danger of speculative price developments and misallocations. investors searching for yields could place increasing amounts in real estate, and this can lead, in particular, to a rise in real estate prices and thus, to a distorted pattern of incentives. momentum in the domestic residential mortgage and real estate markets remains exceptionally strong. mortgage lending continues to grow briskly compared to the economy as a whole. in addition, real estate prices, already at a high level, continued to rise. as a result, risks for financial stability increased further. my colleague, jean - pierre danthine, will give you an assessment of the situation in the financial sector from the point of view of the snb. monetary and investment policy the minimum exchange rate provides us with new challenges for our monetary policy but also for our investment policy. i would therefore like to close with a few words on our foreign currency investments. as you know, in the months may to august, in particular, we had to purchase large quantities of foreign currency in order to enforce the minimum exchange rate. consequently, the snb ’ s foreign currency investments have significantly increased. also, we cannot exclude the possibility that we will have to intervene substantially again. from the beginning we made it clear that enforcement of the minimum exchange rate was associated with risks. we are endeavouring to reduce the balance sheet risks through suitable diversification of our foreign currency investment. however, the exchange rate risk on the foreign exchange reserves is based on monetary policy considerations and the snb is therefore obliged to bear it. my colleague, fritz zurbrugg, will talk about the management of the foreign exchange reserves in his remarks. through its monetary policy, the snb serves as a buffer for the swiss economy and cushions the effect of severe shocks. because it has a long - term focus, it is in a position to carry substantial risks. this means we can react flexibly in exceptional situations in order to fulfil our mandate, which is to ensure price stability while taking due account of economic developments. bis central bankers ’ speeches

- damaged housing stock. in auckland, the shortage has been growing over a much longer period, with weak or declining rates of house building since 2005. while the trend in people - per - dwelling in auckland has been moving steadily upwards since 2005, demand for home - ownership has accelerated in more recent times due to the ready availability of cheap credit and a growing trend amongst renters to become first home buyers. the recent growth in net immigration is also adding to the excess demand situation. plans to increase the housing supply are well underway. residential building consents are trending upwards in christchurch and auckland, and indeed in the rest of the country. the residential consent process has improved in christchurch and efforts are being made to streamline planning and consents in auckland via the government / council accord and the unitary plan. however, meeting the combined three year targets of christchurch and auckland would require a major mobilisation of national construction resources. in all likelihood, the build will be stretched over a longer period. expanding housing demand through easy credit will do nothing to speed up the housing supply response. it simply adds to housing demand, pushes up house prices and makes housing less affordable. the reserve bank has introduced lvr restrictions on bank mortgage lending aimed at moderating house price inflation by reducing the effective demand for housing. this is intended to reduce the build - up of systematic risk in the new zealand financial system. it will also potentially reduce the extent of interest rate increases, and hence exchange rate pressure, that may be needed in the coming cycle. references bloor, c and c mcdonald ( 2013 ) “ estimating the impacts of restrictions on high lvr lending ” reserve bank of new zealand analytical note, 2013 / 05 grimes, a and a aitken ( 2006 ) “ regional housing markets in new zealand : house price, sales and supply responses ”, centre for housing research aotearoa new zealand, department of building and housing, and housing new zealand corporation, wellington. new zealand productivity commission ( 2012 ), “ new zealand productivity commission inquiry into housing affordability ”, final report, april 2012. new zealand productivity commission ( 2013 ) “ the effect of auckland ’ s metropolitan urban limit on land prices ”, research note, march 2013. bis central bankers ’ speeches