Treasury forecasts housing downturn

Treasury economists estimate that residential investments has already fallen to zero for the year to March, although the way statistics are completed mean it is not yet clear that has happened.

The economic tables accompanying Finance Minister Michael Cullen’s sixth Budget also predict residential housing investment will fall to negative over the next two years.

Investment in the sector was already weaker during the second half of last year than the Treasury had forecast. However the officials say there may have been a catch-up earlier this year.

“The continued buoyancy in house sales (a leading indicator of residential investment) may also portend a short-term resurgence in residential investment, although the increase in house sales may merely reflect the mortgage rate war in late 2004.”

And the Budget’s economic outlook goes on to say that the Treasury may have been too pessimistic.

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