Oct 5, 2009
Housing shortage will see house prices rise
With increasing speculation around an Auckland housing shortage, developers can expect a more level playing field as the property market stabilises and house prices shift upwards.
The New Zealand Herald states “the collapse in home building caused not so much by softening demand, but by the property financing sector implosion” as one reason for the shortage. However, Infometrics NZ maintains the cause is construction rates not keeping pace with population growth.
“The persistently low level of residential construction activity in Auckland over the past few years has led to a shortage of property in the region. These under-supply issues are set to provide good support for property prices over the next 12 months.”
Bank of New Zealand Chief Economist, Tony Alexander, agrees.
“Unlike other countries, New Zealand did not enter the recession with an oversupply of homes… Even if home building picked up by the end of the year, it would not be back to sufficient levels until 2011, or the end of 2010 at a pinch.”
Other factors that have contributed to the sector’s lack of supply are fewer people leaving the country and more returning from overseas due to the recession. The qualified purchaser pool also contracted, due in part to banks wanting as much as 50 percent equity from borrowers during the height of the global recession.
There have been positive repercussions for the property sector. According to Alexander, house prices have stabilised and will continue to rise gradually.
“Now we are simply looking at an environment over the next few years where prices rise relatively gradually under pressure from above-average population growth, below average interest rates for the next 12 to 18 months, and a shortage of dwellings.”
The future is looking positive as the property sector gains momentum. As the credit rationing of the previous 18 months begins to ease and the relatively scarce new housing stock is taken up, developers will be well-placed to capitalize on the upward surge in demand and price.