The spurt of increased house sales has clearly ended and the home building industry will soon face some months of decline.
That's the view of BNZ chief economist Tony Alexander, who expects rising interest rates and the "obvious unsustainability" of a recent surge in dwelling permits to generate a string of negative monthly growth figures.
Alexander, writing in this month's NZ Observer, points out that dwelling consent figures for July were the highest for any July since the early 1970s. A big chunk of that was for apartments and he's doubtful how the Auckland market in particular can absorb all the new construction.
ASB Bank economist Rozanna Wozniak says the strong rise in dwelling consents sends mixed signals to consumers and the Reserve Bank.
In ASB Bank's latest quarterly housing report, she says the rise sends a signal of caution to the Reserve Bank, carrying upside risks for future rises in building costs.
"However, given a slowing in the rate of population growth during the last few years, the increase in the supply of houses should keep house price pressures modest."
Other projections for the market (a summary):
On residential sales:
Alexander: The growth spurt has clearly ended. Activity looks firm when sales totals are compared with last year, but seasonally adjusted data shows a pullback from the euphoric growth levels of late 1998/early 1999. However, sales should improve over the coming 12 to 18 months.
Wozniak: Some improvement over the coming summer. The recovery should continue through 2000, with increased confidence in the sustainability of economic growth offsetting the impact of rate rises.
On house prices:
Wozniak: A rise of around 4-5 per cent nationally looks achievable during 2000. However, in the regions, economic performance could generate some significant regional differences. Migration should be less of a dampening influence on the housing sector (the net outflow of migrants peaked in year to May).
Alexander: House prices should rise but only slowly, given the surge in supply at a time of mild consumer confidence and migration outflows.
