A potential glut of new homes on the market means that real estate prices are unlikely to take off next year.
The construction market has been flat out, with the number of permits issued to build houses 49 per cent higher in the September quarter than a year ago. On top of that, apartment permit numbers increased 119 per cent.
"All we need now is people to occupy not just the apartments going up," says economist Tony Alexander, "but the dwellings which will be freed up as these (probable) renters of apartments by and large leave the places they are already in".
Writing in this month's New Zealand Observer, Alexander says that says such a big supply of homes coming onto the market means it's also hard to see rents rising much over the year 2000.
Higher interest rates should dampen real estate activity, but he believes that rising employment, incomes and confidence will be enough to offset this and allow real estate turnover to continue rising during 2000.
Alexander says the bank's view for many months has been that the upturn in homebuilding can't be sustained and there'll be a decent pullback before things take off again. A hint of that came through in the October NBNZ Business Outlook survey, which showed a sharp drop in expectations of higher residential construction. At a net five per cent positive, that's down from 20 per cent in September and an average of 28 per cent over the last year.
However, architects are bullish, with a net 21 per cent in a recent survey expecting more residential work over the next 12 months. That's up from a net 11 per cent in the June quarter.
