15 July 2013

Auckland’s housing market boosting wider economy

Strong house price growth across the Auckland region is boosting other parts of the economy including construction, finance and real estate industries, according to latest economic figures for the region in the first three months of this year.

Economic activity is now more sustained and broad based, with 17 out of 20 sectors recording gains in the quarter. Auckland grew at a rate of 3.2 per cent in the year to March; along with Christchurch, these two cities are underpinning growth across the country, said Geoff Cooper, Auckland Council’s chief economist. Mr Cooper said activity in Auckland’s construction, finance and property sectors will likely spill over into other parts of the region’s economy, and with time, other areas of New Zealand.

“Auckland house prices continue their upward march, which is buoying consumer confidence and further stimulating demand,” Mr Cooper wrote in the latest Auckland Economic Quarterly, released today.

“We’re already seeing a pick-up in activity across the finance, property and real estate and construction services sectors. As building work gathers pace, it will act as a catalyst for growth in various downstream sectors, particularly domestic manufacturing and retail.”

The median Auckland house price was $562,000 in March 2013, up 12.5 per cent from March last year. Signs that migration is rebounding, amid the slowing Australian economy, are likely to support house prices in the medium term.

Some 4,764 residential building consents were lodged with Auckland Council in the 12 months ended March 31 this year. While that’s down from the 10-year average of 6,631, it is up from the year-earlier figure of 3,976. This represents the early stages of a construction upswing in Auckland, which will need to continue before house prices ease.

Auckland’s consumers are among the most optimistic in New Zealand, spurred on by activity in the housing market. Westpac McDermott Miller reports a consumer confidence score of 119.0 for Auckland, well ahead of the national average of 110.8, and up 13.7 per cent from Q1 of last year. Retail sales rose 1.1 per cent from the final three months of 2012, and new car registrations increased again to just shy of the 10-year average.

Still, lack of job growth continues to weigh on Auckland’s recovery as unemployment remains high at 7.3 per cent. With business employment intentions in positive territory and economic activity looking more sustained, job seekers have more reason for optimism in the year ahead.

To read, and subscribe to, the latest Auckland Economic Quarterly, click on
http://www.aucklandcouncil.govt.nz/EN/planspoliciesprojects/plansstrategies/theaucklandplan/economicdevelopmentstrategy/Pages/home.aspx

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