Efforts to tackle New Zealand’s housing shortage are racing ahead, and economists are predicting that it could take as little as a few years for supply to catch up to demand in Auckland.
Westpac acting chief economist Michael Gordon said that construction activity has been strong over the past several months, and the lack of population growth has provided a strong opportunity to make some significant gains in increasing housing supply.
“Locally, we have more evidence of the strength in housing construction,” Gordon said.
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“Building consents were up by almost 5% in April, and that took the total over the last year to almost 43,000 - that’s an all-time high, and over 18,000 of those consents have been in Auckland alone.”
“The high pace of building, plus the drop-off in population growth while the borders have been closed, means we’re now making quite significant progress in dealing with New Zealand’s housing shortage,” he explained.
“In fact, if the current trends continue, Auckland could eliminate its housing shortage within the next few years.”
Gordon said that we are not likely to see construction activity slow down over the coming 12 months, particularly given the easing of building restrictions as a result of Auckland’s Unitary plan.
When it comes to mortgage rates, Gordon said we should not expect to see any major fluctuations there either.
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“The strength in homebuilding is likely to continue over the next year, given the size of the existing pipeline of work,” Gordon said.
“For rates, we expect that floating and shorter fixed-term rates will be stable over the coming months. Longer term, interest rates are also rising in response to an improved economic outlook.”
“Based on our forecasts, taking a longer-term fixed rate (three to five years) will still be less expensive for borrowers than taking a short-term rate now and refixing later,” Gordon concluded. “However, the advantage is narrowing.”