Why house price growth will continue

Tuesday 28 January 2020

House price inflation is unlikely to radically slow this year after a strong end to 2019, according to leading economist Tony Alexander.

By The Landlord

In his latest note to the market, the former BNZ chief economists points to a market fundamentals that will keep house prices rising through 2020.

"Net migration numbers are strong and only slowly falling," Alexander said. 

"Interest rates look like staying low for ages. The jobs market is strong. Consumer confidence is good. Export commodity prices are firm. World growth looks okay if unspectacular. Fiscal policy is easing. Capital gains tax plans got squashed.

"Rents are rising strongly, especially at annual review time now. Airbnb is taking up more housing stock," he added.

Advisers and market commentators predict a strong start to 2020.

According to the latest REINZ data, December was the busiest final month of the year for house sales for three years.

The REINZ House Price Index increased by 6.6% nationwide last year.

Alexander believes house price inflation is increasing across the country, with the exception of the centre stretch of the North Island, and top of the South Island.

He predicts only a geopolitical shock or major international event could jolt the housing market at this stage.

"Without a shock like a Middle East war or rapid and deadly spread of the new SARs variant, chances are prices will keep rising firmly this year – helped by the media once again discussing the housing market most days. FOMO [fear of missing out] beckons."

Comments from our readers

On 28 January 2020 at 11:12 am jimmynz said:
Ahhh Tony, your comment "...helped by the media once again discussing the housing market most days. FOMO [fear of missing out] beckons." is just SO true.
On 28 January 2020 at 11:57 am PaulusDNZ said:
Not to mention the compounding effects over time of population growth.
On 28 January 2020 at 5:38 pm Peter L said:
While the costs of new-builds inexorably rises (red-tape, OSH, bureaucratic obstacles) then the price of existing houses will always rise alongside them.
On 28 January 2020 at 8:10 pm Good Hamish said:
I don't think we have seen the true pressure of the Healthy Homes bill in the regions. Many old bungalows will become legally unusable overnight in 2021. Anything under 200k may not be economical viable to improve.

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