House price boom set to

Treasury has given Finance Minister Grant Robertson an early Christmas present in the form of a rosy economic outlook for the next four years, although skyrocketing house price growth has forced the Government into announcing a housing package early in the new year.

The forecasts came in the form of HYEFU – Treasury’s December forecasts. It’s a time when Treasury gets to say what it thinks the economy will look like over the next five years.

There’s still a lot of economic pain. And inequality will only deepen as incomes, house prices and the economy as a whole grow at different speeds.

Don’t expect a bargain in the housing market any time soon – in fact, housing will only become more unaffordable, with prices rising at double the rate of wages.

Before the election, Treasury was forecasting a brief dip in house prices. Having been proved well and truly wrong, it’s now expecting rampant house price growth over the next five years.

Next year prices are expected to grow four times faster than wages and five times faster than the economy as a whole, rising 8.5 per cent.

House price growth will slow but will run at about twice the speed of wages and the economy as a whole for the next four years. Treasury is pegging growth of above 5 per cent a year every year until 2025. The one exception is 2022, when it’s forecasting 4.5 per cent growth.

Responding to those figures, Robertson said the Government would be announcing new housing policies early next year, having been given policy advice from the Reserve Bank and Treasury. Housing Minister Megan Woods might also be looking at ways of increasing housing supply.

Wages are expected to grow 2.3