Auckland's housing market has now been "lost from sight" by the rest of the country, with little chance that regional house prices will enjoy the kind of catch-up they have in previous economic cycles, according to BNZ chief economist Tony Alexander.
In the BNZ's monthly NZ Observer publication, Alexander looks at the recent Real Estate Institute monthly house sales figures, which showed strong price gains in Auckland, but flat patterns elsewhere.
"There is evidence of investors looking outside Auckland for yield. But this will only go so far," Alexander said.
"The way the world is changing toward economic activity concentrated in agglomerations (big cities) it does not seem reasonable this cycle that regions outside Auckland undertake the catch-ups which they did in the 2000s .
"This is the cycle when the Auckland hill runner went around the bend in the track and was lost from sight to those following," Alexander said.
He did think "a small catch-up" would occur as relative price attractiveness of residences outside Auckland attracted investors, some young buyers, and cashing – up retiring people.
Two years ago Alexander believed that the growth in house prices in Auckland would spread more widely, as was reported at the time.
"Over this year and through 2014 we expect to see the strength in Auckland and Canterbury spreading to other regions in the country as happened during the 1990s housing cycle," Alexander said then.
"This will involve some older people selling and shifting with cash for spending, and younger people leaving Auckland in particular for cheaper housing and a less traffic-impeded lifestyle elsewhere. These developments however will not stop the worsening housing crisis in Auckland for first home buyers and those at the lower end of the socio-economic spectrum."
In his latest monthly commentary Alexander also makes reference to developments in the construction industry – particularly with regard to some businesses apparently getting into trouble despite the buoyant levels of activity.
"There is more to being a good house builder than wielding a mighty hammer. One needs good governance, good financial management skills, willingness to pay an accountant to do the accounts properly and in a timely manner , effective use of invoice and stock financing, and knowing when to avoid over-trading," he said.
Those in the construction sector needed to be "quick enough" to realise that just because there was a lot of business coming through the door that did not mean trying to service it all.
"Businesses have grown strongly but without enough capital in some instances, and as the labour market tightens up we expect a new problem to be inability to deliver promised output because of inability to find not just appropriate tradespeople, but also truck drivers.
"Thus a rising tide does not necessarily lift all boats – or at least allow all to stay afloat.
"Be careful in any booming sector to make sure you can handle the growth, and be prepared to turn away some work else as an owner you may find yourself picking up the work you cannot find staff to do, and when that happens financial management risks going completely out the window.
"Keep in contact with your banker as these days banks have very good tools for helping you be aware of how your finances are tracking and delivering early warnings if things are looking stretched," Alexander said.