Housing market healthy not feverish: NBNZ
New Zealand’s housing market should continue to enjoy solid growth for a relatively long time but it isn’t in danger of overheating, according to National Bank.
Monday, November 11th 2002, 4:11PM
by Jenny Ruth
"House prices have been growing at a steady clip – around 6% on last year," the bank says. The number of days it takes to sell a house has dropped from 71 a year ago to 55 last month and the higher turnover has brought about a perception that the housing market has been performing extremely well, it says.
"However, we’d prefer to describe activity in the housing market as strong or healthy rather than feverish."
It notes growth in New Zealand house prices is nowhere near the 18% annual average in Britain and also lags well behind house price growth in Australia and the US.
Domestic house price inflation is nowhere near where it was in the previous booms of the 1970s, 1980s and mid-1990s. While housing prices rose much faster than incomes in the mid-1990s, in the past five years house prices have been rather flat while incomes have risen steadily, the bank says.
Factors supporting the market currently include the strong domestic economy, net immigration of 37,000 since September last year and a tight labour market – figures this week showed that while unemployment rose to 5.4% in the September quarter, that reflected increased participation in the labour market. And ANZ Bank’s survey shows growth in job advertisements is accelerating.
The buoyant agricultural sector has also supported the housing market. "Although topping off now, high commodity prices have contributed to consumer wealth and hence expenditure on housing," National Bank says. Low interest costs and rising rents are other contributors.
"Interest rates are expected to stay low over the next 12 months, the labour market will continue to bubble – but will not boil over, and positive net migration will keep up the demand for houses."
The high level of building consents should lead to increased supply and reduce the pressure on prices while high consumer debt levels, now exceeding incomes by about 20%, should ensure that housing market growth doesn’t become excessive, the bank says.
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