April 21, 2023
An unexpected gain of 52,000 foreign migrants over the past year and higher immigration forecasts this year and next threatens to increase the country’s housing shortfall and push up rental prices, economists warn.
The number of consents issued for new dwellings to be built was 18% lower in the three months to February than a year earlier. The overwhelming anecdotal feedback from Tony Alexander's monthly survey of businesses around the country is that architects are laying off staff, contractors are becoming easier for builders to find, and the builders don't want to find them because orders flowing in for new dwellings to be built are falling away sharply.
Supply is also shrinking due to fast-rising interest rates – The Monetary Policy Committee increased the Official Cash Rate (OCR) by 50 basis points, from 4.75 percent to 5.25 percent recently in April, resulting in increases in lending rates from all the major players.
Although a surge in new workers will be welcomed by a labour market, higher demand for housing will clearly place upward pressure on house prices and rents within already chronically undersupplied housing markets. In the short term, rising immigration is likely to have the biggest impact on rents as most migrants tend to lease rather than buy property in their first 1-3 years while they transition through the settlement period.
If New Zealand is going to keep pace with rising immigration levels into 2023 and beyond, which are inevitable and planned, then the housing market will rely on a surge in new developments across the major capital cities. However, with the construction industry constrained and at near capacity, it is hard to see anything but an undersupplied housing market for several years to come – putting increased pressure once again on housing prices and affordability. There are already signs that the recent fall in housing prices might be smaller and more short-lived than expected.
Our advice – don’t try to pick the bottom of the house price cycle – if bank calculations allow take advantage of the absence of investors and current lower prices NOW to secure a property before the rest of the market wakes up to the changes ahead. Get in touch with us today - we have a number of preferred building specialists who are able to start almost straight away and are prepared to sharpen their pencils now.
Source:
KEY2
