Auckland housing crisis is investor-driven, not due to shortage: NZIER
By Pattrick Smellie
May. 28 (BusinessDesk) - There is no housing shortage in Auckland, where prices continue to rise strongly thanks to investor activity, says the chief economist for the New Zealand Institute of Economic Research, Shamubeel Eaqub.
At a briefing in Wellington for the institute's quarterly economic predictions, Eaqub said the fact rents are not following Auckland house prices up indicates price rises there are being driven by property investors rather than a shortage of supply which has seen the government fast-tracking the creation of Special Housing Areas and changes to urban limits.
“There is no housing shortage in Auckland,” said Eaqub. “If there’s a real shortage of houses you would see both house and rental prices rising. In Auckland, that’s not happening.”
In Christchurch, where there are real housing shortages, rents are rising.
Eaqub also pointed to a six month falling trend in house sales, which tend to be a leading indicator for new building consents.
Building consents have been steeply rising, but could be expected to fall as much as 30 percent in coming months, based on the historical relationship between the two indicators.
That had potential to take much of the puff out of the New Zealand economic recovery, he said, noting that even without that fall, growth tapers considerably in NZIER's forecasts to below 2 per cent annually from 2018, slower than the 2.1 percent forecast for the year to March 2018 in the May 15 Budget.
Eaqub also suggested public discourse on high levels of immigration was occurring as a "conversation devoid of facts", especially as it related to the impact of migration on Auckland house prices.
The main driver for high levels of inward migration is currently the number of New Zealanders either returning to the country or not leaving for Australia, thanks to economic recovery on this side of the Tasman and more difficult economic times across the Ditch.
The effect of that was much more diffuse and regional than a very large number of new migrants arriving and settling in one place.
Meanwhile, cities like Auckland, where high income, high skill professionals have shown some of the strongest job growth in the latest economic cycle, migration is an important source of skills to underpin ongoing economic growth.