The property market needs to cool further while credit growth needs to slow to remove risks to the wider banking system, according to S&P credit rating agency.

S&P noted risks from house price inflation and credit growth have stabilised this year. These were evidenced by the loan-to-value ratio restrictions biting into demand for residential property investor mortgages and banks tightening their own credit since late 2015, a report from the NZ Herald said.

The agency wants to see that trend continue before it could comfortably say risks to the overall banking system have abated, S&P director of financial institution ratings, Nico de Lange said during a webcast.

“It's more of a longer-term prospect, not within the next 12-to-18 months, and the key drivers will be house prices and credit growth that contribute to it,” de Lange said.

“Given the current environment, we're of the view that there still needs to be some cool down in these factors to take it to the next level.”

The slowdown in the property market was driven by Reserve Bank’s imposition of LVR restrictions on investors combined with banks dialling back their willingness to lend, the report said.

The NZ Herald said Real Estate Institute figures on Friday will be the last steer on the property market before the general election.

The downtrend occurred long before the elections – which is not a main driver of the slowdown and will not ramp up activities once over, S&P associate director of financial institution ratings Andre Mayes told the NZ Herald.