Bank questions housing market sustainability

On the one hand is low interest rates and a lack of supply to push prices up. On the other, a patchy labour market and Kiwis’ reluctance to take on debt make another housing boom unlikely.

Affordability is still stretched although incomes are rising gradually, the report says. “The trend recovery in consent issuance in several regions is consistent with a recovery and strengthening in the construction sector. This looks set to be boosted by an envisaged return to net permanent and long-term migrant inflows, as the situation in Europe deteriorates and the Australian labour market weakens. In turn, this could create further regional divergences.”

Of the ten gauges the report uses to predict the future activity of house prices, only one is truly pointing up: Interest rates.

Affordability, especially in Auckland, and serviceability are putting towards prices going down – “deleveraging continues but at a more moderate pace”.

Keeping prices steady or slightly down are migration, although the report says that may be changing, and global conditions – “prices are generally lifting more in New Zealand than elsewhere”.

Keeping prices steady or slightly up are a shortage of listings, a lack of new housing stock and the number of building consents and house sales.

The report says on balance the housing market may be at a crescendo. “Is the momentum building in Auckland sustainable?”