Tony Alexander predicts

He doesn't expect it will be this year but has no doubts about it coming, Alexander told LFG Group's conference in Christchurch last week.

“There's a two-year-plus queue of people who have been holding off buying – at some point they're going to get activated,” he said.

Interest rates also look like they've peaked, although he sees “zero scope” for rate cuts any time soon.

As well, net immigration is surging again – it was 72,300 people in the year ended April, something no economist had expected, and that will put pressure on house rentals.

Stressing that nobody should expect accuracy from anybody's near-term forecasts, Alexander highlighted how wrong all economists were about what would happen to house prices during the covid pandemic.

And just as none of us had lived through a pandemic before, none of us have lived through a post pandemic period either, so we don't know how people will react.

Official data confirmed NZ was technically in recession about an hour after Alexander finished speaking.

He said typically in a recession, you wouldn't expect people to splurge on overseas travel or on dining out, but because our borders were closed for so long and we endured lockdowns for long periods, particularly in Auckland, when all restaurants and cafes were closed, people are now determined to travel and to eat out.

Alexander noted he hasn't seen a recession before in which jobs continued to grow and job security remains as high as it is currently.

Businesses who laid off staff during the first lockdown, discovered it was difficult to hire them back afterwards and the continuing shortage of labour means firms are “hoarding” labour now.

During the surge in house construction, too many inexperienced and over-confident people entered the construction sector and are now at risk of going bust – Alexander said he expects this process to continue for about two years and that will mean people will feel it isn't safe to purchase off the plan.

That will put more pressure on existing housing stock, he said.

“At some point, the emphasis will shift from renting to buying houses.”

When prices do start to move, Alexander expects the action could be confined to the major cities and that there may have been some over-building in the regions.