The News Corner
DEMAND FOR NEW HOUSES TIPPED TO RISE
(article taken from stuff.co.nz "Business Day")
House prices could rise quickly next year as an expected pick-up in demand and a shortage of building activity causes a squeeze in supply.
New forecasts by building industry analyst BIS Shrapnel predict that demand for new houses will increase towards the end of this year as the economy improves.
Coupled with the lower than average number of houses being built – building consents last year were around half of the peak reached in 2004 – increased demand would cause a squeeze on supply and push up prices.
BIS Shrapnel senior analyst Adeline Wong said Auckland in particular had seen "severe under-building" of new houses in recent years, which was likely to lead to a shortage as a strengthening economy increased demand.
"When demand starts to come back then the price levels will start to grow quickly again because you have a tight supply on one hand and greater demand on the other."
House prices in December were 0.9 per cent down on a year ago, and 5.8 per cent below the peak in 2007.
Ms Wong predicted prices, which have been flat in recent months, would begin to turn towards the end of this year, with "strong growth" in 2012 of 4 per cent to 6 per cent.
A rise in demand is also likely to drive an increase in building consent applications, which fell below 1000 in December for the first time since 1965.
Ms Wong predicted a strong pick-up in consent applications in the latter months of the year to the end of March 2012, before more gradual growth over the next two years to around 25,000 dwellings a year.
Registered Master Builders Federation chief executive Warwick Quinn said that after several years of falling activity there were concerns in the building industry about its ability to cope with a return to the levels of a few years ago.
Building consent applications hit 30,000 in 2004 but were just over 15,000 last year. Thousands have left the industry or moved overseas to work.
"We're concerned with our long-term capacity because we have lost a lot of apprenticeships and tradespeople."
This, coupled with increased licensing for the industry which come into place in March 2012, would further hit capacity.
Mr Quinn said forecasts of a return to new build consents of 25,000 would be welcomed. That level was more sustainable than the 30,000 peak which had strained the industry.
"We think anything between 20,000 and 25,000 is quite manageable. Anything less than that puts pressure on our capacity in the sector and anything more than that we struggle to get resources."
