The latest report from a major bank has predicted continuous economic growth, but challenges are bound to arise
The New Zealand economy is set to continue growing, but challenges such as the continuing slowdown in the housing market are to be wrestled, according to the latest report from Westpac.
“The New Zealand economy is now into its seventh year of expansion. While we do expect the growth to roll on, there are a number of areas in which the economy is throttling back,” Westpac chief economist Dominick Stephens said.
According to the report, the housing market momentum continues to fade. This, combined with a run-up in debt levels will dampen household spending.
“Among the biggest changes in the economic environment over the past year has been the rise in borrowing rates and a related slowdown in the housing market – borrowing rates are still at low levels,” the report said.
However, mortgage rates were creeping higher and further increases are to be expected over the coming year, the report said. “We’ve also seen the number of house sales fall 25% over the past year, and the number of unsold homes has been creeping higher. This suggests that there is more housing market weakness to come.”
The report went on to say that house price inflation is predicted to remain weak. “In fact, we expect that house prices will be flat over 2017 as a whole, and that we’ll see only muted rises over the next few years,” Stephens said.
Another factor which challenges the economic landscape is the levelling off of residential construction activity.
“Capacity in the sector has become stretched and firms are reporting increasing difficulties finding staff. These conditions have seen building costs rising rapidly, especially in Auckland. At the same time, many developers have found it harder to access credit, which is providing a brake on building activity. This has been reinforced by the slowdown in house price inflation, with developers cautious about building in a softening market,” Stephens said.
“The New Zealand economy is now into its seventh year of expansion. While we do expect the growth to roll on, there are a number of areas in which the economy is throttling back,” Westpac chief economist Dominick Stephens said.
According to the report, the housing market momentum continues to fade. This, combined with a run-up in debt levels will dampen household spending.
“Among the biggest changes in the economic environment over the past year has been the rise in borrowing rates and a related slowdown in the housing market – borrowing rates are still at low levels,” the report said.
However, mortgage rates were creeping higher and further increases are to be expected over the coming year, the report said. “We’ve also seen the number of house sales fall 25% over the past year, and the number of unsold homes has been creeping higher. This suggests that there is more housing market weakness to come.”
The report went on to say that house price inflation is predicted to remain weak. “In fact, we expect that house prices will be flat over 2017 as a whole, and that we’ll see only muted rises over the next few years,” Stephens said.
Another factor which challenges the economic landscape is the levelling off of residential construction activity.
“Capacity in the sector has become stretched and firms are reporting increasing difficulties finding staff. These conditions have seen building costs rising rapidly, especially in Auckland. At the same time, many developers have found it harder to access credit, which is providing a brake on building activity. This has been reinforced by the slowdown in house price inflation, with developers cautious about building in a softening market,” Stephens said.
