Housing shortage likely to force prices to rise

Fairfax Media

PRICE RISES AHEAD: Housing construction is at its lowest since records began in the mid-1960s.

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Housing construction is at its lowest since records began in the mid-1960s.

With migration tipped to bring in 25,000 residents this year, experts say a housing shortage will push up house prices.

Councils around New Zealand authorised the construction of 14,175 new houses in the year to the end of June, 40 per cent down on the previous year and 57 per cent fewer than in the 2004 period, Statistics New Zealand said.

Auckland and Canterbury were the hardest hit, with just 2242 consents in Canterbury, down 41 per cent on the previous year.

Canterbury Master Builders Federation president Graeme Earl described the figures as "very frightening for the industry".

With job losses across building trades and several building firms having closed, Earl said the industry was pinning its hopes on a quick end to the recession and Government efforts to boost home building.

With construction also down in other countries, builders had nowhere to go, he said.

This week, Parliament passed the Building Amendment Bill. It will fast-track plan variations and allow multiple consents for replicated house designs. The changes will take effect next year.

"Reducing building delays and costs is an important first step, but it doesn't go far enough," Building and Construction Minister Maurice Williamson said. "Everyone in the sector is going through tough times homeowners, developers and builders so there's more to be done."

He said the Government was looking at other measures, including reducing the amount of building work requiring consent and removing necessary regulations.

Earl said the new law would "certainly help", as would reports of improving consumer confidence.

The building consent data suggests improvement, with the steep drop-off in numbers flattening in the past three months.

Public sector projects such as construction at Christchurch Airport and AMI Stadium are helping with employment, with almost as much money spent in the past year on commercial and public construction as on house building.

Massey University property professor Bob Hargreaves said the long lead-in from buying land to completing a home meant pressure on the housing supply would keep rising and boost house prices.

"It's going to be a while before any substantial building happens, you cannot just turn the tap back on, that's the problem," he said.

Westpac senior economist Donna Purdue blamed the housing market downturn and last year's high interest rates for "crippling" home building.

"We are way under-building for what our population says we should be doing, particularly with the rise in immigration. We expect that shortage to continue."

Purdue said that with consents flattening and short-term interest rates down, there were signs construction would pick up this year or next year.

Bank of New Zealand chief economist Tony Alexander said that unlike other countries, New Zealand had not entered the recession with an oversupply of homes.

"You need around 23,000 consents each year to house a growing population; 14,000 is just not enough, especially with net migration at twice the usual."

Alexander said even if home building picked up by the end of the year, it would not be back to sufficient levels until 2011 "or the end of 2010 at a pinch".