Demand 'will spur housing shortage'

A housing shortage looms as migration leaps and house-building halves.

Property experts say increased demand is likely to boost house prices, especially in Christchurch. The real estate slump, the credit crunch and the recession have pushed home-building to 54 per cent of that two years ago, Statistics New Zealand figures show.

Canterbury has been one of the most affected regions, with 180 consents for new houses in May, compared with more than 400 in May 2007.

The building downturn has led to the collapse in the past year of Canterbury building companies such as David Reid Homes (Canterbury), Canterbury Homes, Balmoral Homes, Phoenix Homes (2004) and Southern Homes, while others have laid off staff.

Meanwhile, 11,200 more people shifted to New Zealand than left in the year ended last month. The surplus of immigrants over emigrants was more than double that of the previous year.

Auckland University professor of property studies Larry Murphy said the trend would at first slow and halt falling house prices, and then begin to push them up.

In Christchurch, the large number of cashed-up buyers from countries such as England would boost buying demand, he said.

"There are a multitude of knock-on effects. You will start to see an increase in occupancy and we will see prices pick up again," he said.

ANZ National Bank chief economist Cameron Bagrie said the market was "rapidly moving towards there being a housing shortage".

While building had dropped off, the amount of construction during the boom would prevent the shortage being too severe, he said.

Prices would rise eventually, but increasing unemployment would temper that in the short term, he said.

Lincoln University property lecturer John McDonagh said the supply of new homes had dropped quickly because developers "got into strife early on".

"If the demand is still there and supply drops off, prices will start to go up, but not just yet," he said.

The Statistics New Zealand figures show councils gave consents for 12,621 new houses in the year to the end of May, down from 23,133 two years earlier. Apartment consents were down from 2825 to 1834 in the same period.

Government Statistician Geoff Bascand said that for the first time in over a decade more money was being spent on commercial construction than on building houses.

- © Fairfax NZ News