New Zealand may eliminate housing shortage within years: Westpac

NEW Zealand may be able to eliminate its housing shortage by the middle of the decade amid record levels of home building and declining population growth, according to Westpac Bank.

New Zealand needs to build an average of 26,000 homes a year over the next 5 years to address the existing shortfall and keep up with population growth, Auckland-based senior economist Satish Ranchhod said in a research note Tuesday (May 10).

"Right now, consent issuance is running at nearly double that pace, with around 50,000 new dwellings consented over the past 12 months," he said. "Although shortages of materials and labour are putting a brake on how quickly housing developments are being completed, we're still looking at a period of rapid home building over the next few years."

House prices are starting to fall as the Reserve Bank ramps up interest rates to curb inflation. As the supply of homes increases, Westpac expects prices could drop 10 per cent this year after rising 26 per cent in 2021.

At the same time, population growth has slowed dramatically because the border was closed to immigrants. As the border re-opens, it is likely more New Zealanders will leave than immigrants arrive in the near term, Ranchhod said.

When border flows normalise, Westpac estimates net immigration will reach 30,000 a year, down from 60,000 a year in the 5 years through 2019.

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Homebuilding will likely ease by the mid-2020s as house prices fall, encouraging more people to buy rather than build, the bank said, preventing over-supply. BLOOMBERG