Christchurch the solution for national growth

4 September 2018

Christchurch’s strong economic fundamentals, available land for development and strong rebuild platform sees the city well placed to offset capacity constraints in other parts of the country.

After strong performance during the rebuild phase, the Christchurch and Canterbury economies are still experiencing growth as the city transitions away from the rebuild.

When combined with the geographical advantage of Christchurch over many of New Zealand’s other major urban centres, Christchurch can absorb significant growth without the challenges of other major centres.

Dr Peter Fieger, ChristchurchNZ’s Senior Economist says: “There are some vulnerabilities emerging in the city’s economy as rebuild activity continues to slow.

“We will see economic indicators soften further over the coming twelve to eighteen months as the transition out of rebuild led activity continues.

“As with other cities in New Zealand, continued global uncertainty may suppress business confidence and a significant global shock would have a negative impact Christchurch’s visitor economy and affect overall investment and growth. However, with strong economic fundamentals, Christchurch is well placed to respond to these challenges.
“Christchurch is unique amongst large cities in New Zealand in that it can absorb significantly more growth without the associated urban growth pains of unaffordable property prices and congestion. Christchurch’s housing stock and commercial property is affordable and we have strong greenfield supply. Our strongest sectors such as manufacturing and knowledge-intensive services continue to perform well and a tight labour market has meant a good supply of job opportunities.

“Christchurch clearly has the capacity and platform for growth. Acting on this is the key to the city’s future success. There is a clear and urgent need to tell the story of Christchurch as a city open for business, ready for growth and offering an attraction lifestyle and meaningful work for residents and migrants”, he said.

The ChristchurchNZ Quarterly Economic Report issued today shows healthy growth in many sectors, particularly within the visitor economy, and continuing high workforce participation levels.

The areas of focus in today’s quarterly economic update:

Economic growth
Christchurch’s economic activity remains at a high level, but growth continues its gradual tailing off from the highs of 5.5 percent in 2014, to 2.0 percent in the year to June 2018.

The value of economic output reached $20.7 billion in the year to June 2018, representing 8.5 percent of New Zealand GDP, down slightly from 8.6 percent in the year to June 2017.

Workforce
Christchurch and Canterbury labour market indicators have converged with New Zealand figures as they return to normal after scaling up to meet rebuild requirements.

In the June 2018 quarter, 4.7 percent of the Christchurch labour force were unemployed, compared to 4.0 percent for Canterbury and 4.4 percent for New Zealand. This is the first time in six years the Christchurch unemployment rate has exceeded the national level and reflects continued contraction of construction spend.

The workforce participation rate (the number of people over the age of 15 and in the workforce) remains high at 72.2 percent compared with the New Zealand rate of 70.6 percent.

Migration remains at a very high level, with Christchurch seeing a net gain of 544 people in the June 2018 quarter and 526 for Canterbury. The New Zealand net gain was 7,547 people.

Housing
An increased supply of housing and comparatively steady demand has seen an easing of rents in Christchurch and Canterbury in recent years. However, in recent months Christchurch rents have slightly increased – although at a lower rate than nationally. Private sector mean weekly rents in Christchurch were $367 in June 2018, 0.8 percent higher than June 2017.

The strong supply of houses has continued to soften house price growth within the city and region. The median house price in Christchurch was $430,000 in June 2018, with the average for the quarter 0.7 percent lower than June 2017.

Central City
Christchurch’s central city has not fully recovered from the earthquakes, with employment and resident population and guest nights within the four avenues still well below pre-quake levels.

New central city retail and hospitality developments over the last year have generated strong growth in retail sales. However, the traditionally quieter winter period, along with rapid growth in supply and the altered shopping habits of residents in the post-quake period away from the central city present a short-term risk of supply exceeding demand.

The expected opening of several other large developments within the city over the coming months, including Turanga (Central Library), Hoyts cinema complex, the central city Farmers Market and the Ballantynes extension will likely to attract more people into the central city.

However, maintaining the recent momentum in central city development is dependent on increasing demand for central city retail and hospitality offering, residential and commercial property. This is critically important over the next 12-18 months as the city moves beyond the current investment phase to investment driven by confidence in Christchurch and the central city’s economic future.

Visitor economy
The region’s visitor sector has been undergoing a strong recovery, outperforming national rates, led by international tourists and a broadening season.

Domestic guest nights in Canterbury grew 4.8 percent over the June 2018 quarter, compared to the same quarter the previous year. International guest nights in Canterbury grew 14.0 percent comparing June 2017 to June 2018. Nationally international guest nights were down 1.1 percent over the quarter.

In Christchurch specifically, guest nights have increased by 16.3 percent over the past year, making up 57.6 percent of total guest nights in Canterbury, compared to 54.0 percent during June 2017.

-ENDS-

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