Constraints to the construction sector will be the biggest challenge facing housebuilding and KiwiBuild targets, economists have said.
Speaking at the Breakfast with the Economists 2018 event, chief economists from New Zealand’s biggest banks shared their outlook for New Zealand’s housing market over the next twelve months. The result was a mixed picture across Auckland, Wellington and Christchurch, with high construction costs and low resources being identified as a key barrier to increasing housing supply.
“We have to give the government credit for trying very hard to solve the housing crisis, and we do see the KiwiBuild programme contributing to a higher level of housebuilding over the next couple of years,” said ASB chief economist Nick Tuffley.
“But there is a huge amount of work to do, and the problem with construction is actually finding the resources to do it. Constraints to the construction sector will definitely be the biggest challenge to KiwiBuild.”
Tuffley says there will likely be some shifts in the way housebuilding is undertaken, and there is some potential for introducing new, innovative and more productive ways of building homes at a lower cost. Earlier this year, the government invited companies to set up off-site manufacturing factories to build KiwiBuild homes, suggesting that it may rely on prefabricated builds to help deliver on its promised 100,000 homes.
With consumer confidence declining, Tuffley says KiwiBuild will still be a good initiative to get more first home buyers onto the property ladder.
“In terms of house prices, they are now down to being approximately nine times the median income of New Zealanders, which is an improvement on the previous ten,” he said. “When you get outside of Auckland, that number drops to five. We’re still facing the challenge of trying to get people into the market, and KiwiBuild will help realise some of that.”