House prices predicted to drop after the general election. Yeah nah

A correction in house prices is looming as the number of homes being built reaches a record high, says economic forecaster Infometrics

It predicts house prices will continue to rise, but only until December 2017.

After that they could fall by 11 percent over the period until September 2019, particularly in the regions outside Auckland.

Infometrics chief forecaster Gareth Kiernan said despite very strong house price growth right now “you are going to get to a position where you do have an oversupply of property at the same time as population growth will be slowing”.

Earlier, Infometrics predicted that building approvals would increase rapidly, rising to about 40 percent up on current numbers by 2018.

Consents to build residential homes numbered 13,917 five years ago, 28,387 now and were forecast to reach 40,044 annually by June 2018, it said.

However, Mr Kiernan cautioned that the number of consents was shooting up from a “very low base” after the global financial crisis.

Infometrics expects a 17 percent increase in house prices over the next two years, followed by an 11 percent drop from 2019. But that would still result in an increase over current prices, Mr Kiernan said.

But he said those figures did not apply to Auckland, where it estimates there is a current undersupply of about 32,000 houses. The city had also experienced the country’s most spectacular price increases.

Hard to see how Infometrics can predict a drop in Auckland house prices when there is an under-supply of 32,000 houses now, no sign that demand will reduce, and supply isn’t meeting current demand.

Sure, inroads are being made in addressing the backlog, but until that is cleared, the pressure on the market will remain.

This is mostly just spin, as they contradict themselves by saying the drop will happen in 2019, and in the end the over-all movement remains an increase over today’s prices.

Or perhaps it’s bad journalism.  We need to allow for that too.



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