Auckland to boom in 2014

00:41, Jan 30 2014

New Zealand's most populous region will boom in 2014, but the foundations of the good economic times are not sustainable, Auckland economists agree.

ASB economist Christina Leung said Auckland was predicted to "have a great 2014, economically, because of the housing construction booming and all of the services that go along with it."

However, the increase in Auckland's economic activity was not necessarily sustainable, because the housing and building service industries were inward-looking and, unlike agriculture, were not export-focused.

"For the Auckland region, 2014's activity will be concentrated in the services," Leung said.

Household spending and employment in Auckland were set to rise on the back of more building consents for housing, which had shrunk after the global financial crisis.

"We saw underbuilding across Auckland during that time, which is finally turning around now and will boost demand for professional services as well," she said.


Auckland Council chief economist Geoff Cooper said the housing construction market was finally catching up to demand. The construction, building and manufacturing industries would have a stellar 2014, creating more jobs.

However, in the long term, Auckland needed to look outward.

"It [housing construction] is a domestic market," Cooper said.

"It isn't the market that is going to make this city more competitive, more wealthy or increase the incomes of its residents, it's more about allowing people to live here.

"In the export-orientated tradeable sector, Auckland still has a long way to go."

Auckland's gross regional product grew 2.4 per cent last year and Cooper said the boost in building, construction and related manufacturing industries would propel the region even higher in 2014.

"Once you strip out Christchurch, you have only one city that is growing particularly strongly, while the rest [of New Zealand] is not growing, and that's Auckland," he said.

"Standout industries will be based on the housing sector supply response. We have just over 6000 residential consents, the highest since 2008," he said.

November had been a standout month for housing consent approvals with 779 new consents approved, the highest monthly figure since 2006.

"Over the last two years we have seen high housing prices and now we are finally seeing the supply side finally pick up and respond to that, which we hope will lower prices," he said.

However, the increase in housing supply, which will fuel the region's growth, could be offset by Kiwis returning from Australia, Cooper said.

Net migration to Australia from Auckland for the year to November 2013 was 9652, down from 13,420 over the previous 12-month period.

"There's no free lunch here, when people come into a city they bring skills, idea and education but at the same time they need housing and infrastructure, so that's always a challenge," he said.

Leung said migration inflows would add to housing pressures in Auckland and would probably result in house prices rising because of "an acute supply constraints in the Auckland housing market."