Housing shortage to turn to surplus: Kiwibank

AUCKLAND: The ongoing construction boom and the net loss of population as borders open will likely mean New Zealand will finally be rid of its longrunning housing shortage in about a year, Kiwibank says.

In its annual look at the state of the housing market, Kiwibank senior economist Jeremy Couchman said the country would ‘‘start accumulating a surplus of housing’’ over the coming years as projected building activity outstripped rising demand.

‘‘Despite all the disruption from Covid, despite the lack of materials and despite the difficulty finding staff, StatsNZ estimates a total of over 41,000 homes were built in the year to June 2022,’’ he said.

‘‘That is by far the largest addition to Aotearoa’s housing stock in the data going back to 1991.’’

To put the gain in homes in context, the peak in construction during the mid2000s managed to produce only a net 30,000 homes,

Mr Couchman said.

‘‘Looking at the 2018 census data, 41,700 dwellings was roughly the same as the number in the whole Southland region.’’

At the same time, new housing demand had slowed to a trickle as population growth hit the lowest rate since the 1980s.

‘‘Supply is catching up in part because Covid restrictions at the border has seen population growth slow to a trickle — a rare positive from Covid,’’ he said.

‘‘Net migration, the main swingfactor in population growth, posted a sizeable 11,500 outflow of longterm migrants from New Zealand’s shores in the year to June 2022.’’

Overall population growth slowed to just 0.2%, the lowest rate since 1986.

‘‘The seismic shifts we’ve seen in housing supply and demand drove down New Zealand’s housing shortage to an estimated 23,000 homes, still large but massively down from a revised 57,000 shortage estimated last year.

‘‘The current yawning gap between supply and demand points to New Zealand’s cumulative housing shortage disappearing over the next 12 months.’’

A growing surplus of houses ahead was likely to weigh on New Zealand’s housing market and generate a slow recovery in house prices, he said, noting that the housing market was already in retreat.

‘‘Credit conditions have tightened dramatically, in large part due to the RBNZ embarking on aggressive interest rate hiking to tame multidecade high inflation. And the RBNZ isn’t done yet.’’

Kiwibank saw the official cash rate reaching 4% by year end.

Mr Couchman noted that sales activity this year was down by about a third compared with a year ago.

‘‘House prices have recorded falls in every month in 2022 so far. We have downgraded our house price forecast and now see house prices fall by 13% by the end of the year.

‘‘Our forecast would take house prices back to where they were at the start of 2021,’’ Mr Couchman said.

However, he warned that some indicators suggested the Covidera trends in housing supply and demand were about to change.

‘‘The outlook for house building has dimmed. And with our border fully reopened, positive net migration next year should see demand lift off lows.

‘‘There is significant uncertainty around demand and supply analysis at present.’’ —