Ratings agency Fitch has joined its rival Standard and Poor's in warning about a bubble in New Zealand property prices that could eventually burst and undermine the strength of the Big Four Australian-owned banks there."Challenges are increasing for New Zealand's major banks with strong asset growth and fierce price competition potentially leading to asset bubbles," Fitch said in a report into "New Zealand Banks Operating Environment". "This in turn may impact bank financial strength and place negative pressure on Viability Ratings," it said.Last month, Standard and Poor's warned that a significant correction in New Zealand house prices could weaken the credit profiles of ANZ NZ, Westpac NZ, CBA's ASB and NAB's ASB. House price inflation in the two biggest cities of Auckland and Christchurch is running at over 10 per cent and annualised credit growth has quadrupled to over four per cent in the last 18 months.Fitch said New Zealand's high household debt, which is over 140 per cent of disposable income and rising again, and low savings rate could "pose a risk to the financial system if asset prices decline or the unemployment rate increases.""Potential asset quality pressure could contribute to weaker future earnings, and ultimately impact capitalization," it said.Fitch pointed to strong growth in higher loan-to-value ratio mortgages during the last year, while leverage remained high in dairy farming.  It said, however, that the banks' strong capital levels and healthy profits provided a buffer against a moderate downturn. The four banks are all rated AA- by Fitch with stable outlooks. Only a material housing or economic downturn would affect these profitability and capital levels. Fitch welcomed planned moves by the Reserve Bank to introduce macro-prudential controls. "Any additional regulation which limits the creation of asset bubbles, and ensures strong banking balance sheets, will be viewed positively by Fitch."