THE PROPERTY MARKET IN NEW ZEALAND
The New Zealand puzzle: low population, high property prices (and high rents).
House prices continue to be driven by strong regional growth. Auckland region has the country’s most expensive housing with a medium price of NZ$1053,848, followed Wellington Area, with a medium price of NZ$740.737/Wellington City$764,020. Christchurch Central and North is $583,768. “House prices across the country continue to hold up with 14 out of 16 regions experiencing a year on-year price increase. Otago’s record price for January was driven by a strong increase in Clutha and the Central Otago District – up 53.4% and 39.4% respectively,” REINZ 2018.
Growth increases until 2018 before declining later in the forecast:
June year annual average real GDP growth is forecast to lift from 2.9% in 2017 to 3.2% in 2018, and then decline to 2.8% in 2019 and 2.5% in 2020. Key drivers of growth are expected to steadily return to their long-run average levels. Growth in goods exports is forecast to pick up in the 2018 June year owing to a recovery in soft commodity prices as trading partner growth gains traction and dairy supply growth slows. Rising terms of trade are expected to support business investment growth, while previous high population growth boosts residential investment growth. However, the decline in net migration from previously elevated levels and softening real income growth in 2017 are expected to lead to slower private consumption growth, while real public consumption growth moderates as inflation rises and growth in government spending slows. The slowdown in GDP growth over the last two years of the forecast reflects lower net migration inflows, a steady rise in interest rates and the levelling-off in the terms of trade after a period of increases.
Annual growth in the labour force is expected to slow from 1.9% in June 2017 to 1.1% by June 2020. A relatively solid outlook for GDP growth is expected to support employment growth, which encourages people to seek work, and the participation rate is projected to rise from 68.4% in the June quarter 2017 to 68.9% in June 2019.