Taranaki,/Manawatu/ Wanganui and Otago/Southland are expected to do the best with good economic prospects.
Infometrics director Gareth Kiernan says in the last five or six years Taranaki has been doing well in oil and dairy with no signs of that changing in the near term.
Manawatu is successful with education through Massey University based in Palmerston North and it has also been doing well with meat prices. It is has also seen a big improvement in population growth wih a 23% fall in the number of people leaving the area last year.
Otago and Southland are successful with dairy and coastal Otago has seen a big improvement in population, attracting the most international immigrants in seven years as well as experiencing a sizeable drop in the number of people heading overseas.
Kiernan says the outlook for provincial areas is the best it has seen since it started doing Housing Outlook reports.
He also looked at how tax policy changes will impact on the housing market, saying they will be a contributing factor in the forecast reduction in house prices of 4.1% by June 2011
Kiernan says tax changes took momentum out of the housing market in late 2009 and early 2010.
He believes that alongside interest rates, net migration and lack of a convincing economic recovery so far have kept buyers cautious.
Infometrics forecasts that tax policy will knock 13% off house prices compared with no change.
Kiernan says overvaluation of housing with prices currently 20% above the long term trend will also be a major impediment to further house price rises.
Overall, the message was that the outlook for incomes, economic growth and population growth suggests provincial areas may fare the best in the property market over the next two years.
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