Game’s over for Auckland
ANZ’S chief economist says ‘‘the game’s over’’ for Auckland’s housing boom, and warned New Zealand’s largest city is now heavily exposed to the risk of rising interest rates.
While Auckland has a major shortage of new houses being built at a time of record migration, Cameron Bagrie said the real driver of house prices were low interest rates.
With mortgage rates already climbing, Bagrie said higher borrowing costs would trump the supply shortage.
‘‘I think the big driver is interest rates, and interest rates are heading up,’’ Bagrie said.
‘‘We’re in a fundamentally different market now, so I think the game’s over.’’
While ANZ expected that there would be only a gradual increase in interest rates over the next two years, in which case Auckland house prices would tread water, Bagrie said it was ‘‘game on’’ if inflation expected.
If that were to happen, the Reserve Bank would be forced to ‘‘play party pooper’’ by raising the cost of borrowing.
Last week Reserve Bank governor Graeme Wheeler left the official cash rate at 1.75 per cent, as was widely expected.
Bagrie said there was clearly a supply shortage in Auckland, but argued that it was interest rates, rather than shortage, which were the main driver of rising prices. rose faster than