Despite increasing storm clouds and general concern about the New Zealand economy’s prospects, Infometrics’ latest economic forecasts show GDP growth holding up well throughout the next year. The economic consultancy predicts 3.1% growth in the year to June 2020. A recent resurgence in residential building consents, particularly in Auckland, is pivotal to that outcome.
There is much coverage in the media of housing affordability, frequently expressed as the ratio of median house price to median income. This measure can be extremely misleading as it takes no account of the actual cost of servicing a mortgage, which is much more relevant to most buyers.
New Zealand is at the mercy of international economic trends more than at any time since 2011, according to Infometrics’ latest economic forecasts. On the domestic front, net migration is slowing, the housing market has softened, and the tight labour market means that capacity pressures are inhibiting further growth.
Infometrics’ new estimates of regional GDP show that Auckland was the fastest growing region in the year to March 2018, expanding by 3.9% (see Graph 1). Auckland has regularly been towards the top of the regional league table throughout the last seven years. Its growth during 2018 was underpinned by a strong services performance, with industries such as professional, scientific, and technical services, financial and insurance services, and retail trade all expanding by more than 5.0%
Stephen Barclay’s departure as head of the KiwiBuild unit makes it even less likely that the scheme will be able to progress at the rate hoped for by the government. Mr Barclay was appointed in May last year, when KiwiBuild was a largely autonomous unit within the Ministry of Business, Innovation and Employment. But the unit’s transfer to the new Ministry of Housing and Urban Development has led to an employment dispute and, ultimately, his departure.
Infometrics Christmas Carol 2018 – sung to the tune of Happy Xmas (War is over) by John Lennon and Yoko Ono.
Despite various opinion pieces recently, the New Zealand property market is not heading for a crash. Given the sheer inertia of demand pressures in Auckland, we also think chances of a substantial correction are slim. This article lays out an answer to the question asked by Slade Robertson’s opinion piece in the NZ Herald this morning: are we heading for a crash or correction?
Consolidation in New Zealand’s residential construction industry has resumed since 2011 as building activity has recovered from the Global Financial Crisis. In 2017, the 100 largest firms made up almost 40% of consents, although that figure slipped to 37% in the March 2018 year. We had expected this trend of consolidation to take place, but it contrasts with a declining market share for the top 100 firms in Australia. Does this apparent fragmentation of the market in Australia foreshadow a similar change for New Zealand?
New Zealand’s provincial economies are poised to drive growth in the economy, building on the recovery in dairy prices during 2016, according to Infometrics latest economic forecasts. Spending activity in the regions is comfortably outpacing activity in the main centres, with commodity prices for most exports holding at high levels.
Gareth Kiernan, Infometrics Chief Forecaster, is available to present his insights into building & property, infrastructure and transport sectors, as well as the New Zealand economy in general. We offer national level insights, as well as a strong focus on individual regions.