House prices could keep increasing by around 5% to 7% a year for the next three years, according to the BNZ’s latest Economy Watch report prepared by the bank’s economists.
“At its most basic, there are too many people chasing too few homes,” the report said.
“Until such time as there is less demand, or enough houses are built to meet current demographic needs, then there will remain upward pressure on the prices of the housing stock.
“At this stage excess demand rules!” the report said, which would keep upward pressure on house prices.
“We think house prices nationally could keep inflating at around 5% to 7% per annum over the next three years,” it said.
But it also warned that there could be significant regional differences, with house prices in Christchurch potentially declining.
In the immediate aftermath of the Christchurch earthquakes, both rents and house prices moved steadily higher,” the report said.
“However, while the good folk in Christchurch may be disappointed about the pace of the rebuild, there has categorically been a lot of it.
“Indeed, so much so that the prospect of a future oversupply now looms.
“At this stage the possible oversupply of land is more immediate, but in time, given the land availability, it looks likely that demand for housing will be met.
“This is already being reflected in house price inflation which has fallen to zero from a peak of around 19% in late 2013.
“The possibility of house prices actually falling is now very real,” the report warned.
But not so in Auckland.
“There certainly seems very little chance of Auckland’s demands [for housing] being met any time soon,” the report said.
You can read the BNZ’s full Economy Watch report here.
Our free Property email newsletter brings you all the stories about residential and commercial property and the forces that move these huge markets. Sign up here.
To subscribe to our Property newsletter, enter your email address here. It’s free.