Expect housing boom to continue, banks say

AUCKLAND: House prices are skyrocketing, and this is just the beginning, new bank economist reports say.

At ASB, senior economist Mike Jones now thinks the RBNZ will hold off cutting the OCR to negative territory.

But he said that the housing boom will not let up.

‘‘Having initially lauded the housing boom for helping to rescue the recovery, it’s quickly become a headache for the RBNZ, regardless of whether it believes it’s responsible,’’ Mr Jones said.

‘‘We think it will get worse. We’ve been calling for LVR restrictions to be returned and they now will be, in March. But we suspect this will slow rather than stall house price acceleration.’’

A report from economists at ANZ also released yesterday agreed the odds of interest rates being cut in to negative territory was less likely.

‘‘We now expect a more gradual easing in the OCR to 0.25%, and it is looking less clearcut that a negative OCR will occur at all,’’ wrote ANZ’s chief economist Sharon Zollner.

‘‘Weighing up all the possibilities, we still think a negative OCR is more likely than not, but there are a number of risks that could change the landscape.’’

Outside of the travel and tourism sectors, much of the ground lost earlier in the year had already been recovered, with many parts of the domestic economy rebounding faster than expected after the lockdown, Westpac chief economist Dominick Stephens said in his report.

At the head of the pack, businesses linked to the building industry were reporting strong demand. There had also been lifts in manufacturing activity (including exports) and gains in the retail sector.

‘‘Against this backdrop, we’re now seeing a rise in the number of businesses who are planning to take on new staff,’’ Mr Stephens said.

Underpinning this resilience in domestic activity has been New Zealand’s success in curbing the spread of Covid19, he said.

‘‘That’s meant most restrictions on activity have been lifted sooner than anticipated and has left New Zealand sitting in a much better position than many other countries.’’

Globally, the economic gap between countries that have controlled the virus and countries that have not is was wide as ever.

‘‘New Zealand is lucky to find itself in a relatively Covidfree part of the world. Long may that last, because Asia’s resilient economies have backstopped our agricultural exporters in an otherwise difficult situation.’’

On top of that, a massive amount of monetary and fiscal stimulus had been rolled out since the start of the year.

‘‘That’s given demand in some key parts of the economy [including the housing market] a powerful shot in the arm.’’ — The New Zealand Herald

❛ We think it will get worse. We’ve been

calling for LVR restrictions to be returned

and they now will be