Construction ‘Reset’ Needed To Help Housing Market In 2022

Housing

House prices surged and the public housing waitlist ballooned in 2021 – and with record construction demand set to continue in 2022, one economist says some big-ticket projects may need to be dropped to help keep house building on track

In recent years, predicting where the housing market will head has proved a fool’s errand.

In its half-yearly update at the end of 2020, the Treasury projected house prices would rise by 8.5 percent in the year ending June 2021; instead, they grew a whopping 29 percent, defying the Covid-19 pandemic and sparking further concern about overheated numbers.

So even though a number of economists and commentators are predicting a cooling market in the coming year, it is little surprise Housing Minister Megan Woods is reluctant to gaze too precisely into her crystal ball for 2022 when speaking to Newsroom.

“The short answer is we know there’s headwinds coming, but no one’s entirely sure what that’s going to mean – when you think about only a year and a bit ago, people were prophesising the crash of the housing market and we saw the absolute opposite happen.”

Infometrics principal economist Brad Olsen is among those expecting house price growth to “flatten back quite considerably” in the face of rising interest rates and government policy changes, albeit offering little consolation to aspiring homeowners still looking at prices up 30 percent on pre-pandemic levels.

Woods is positive about what she describes as “green shoots” in the market, with both record numbers of consents and an increase in the construction of multi-unit dwellings which offer both a more dense and affordable option for Kiwis.

But the wider picture is not an entirely rosy one as National housing spokeswoman Nicola Willis points out, with the public housing waitlist roughly tripling in the last three years and the number of people in emergency housing also booming.

Woods is similarly concerned about those numbers, but gives short shrift to the idea that the problem is entirely one of Labour’s making.

“I think [the waitlist] for the first time in a decade reflects real need: if you imagine that all these people suddenly just somehow were created post-2017, then you’re certainly burying your head in the sand to what the situation actually was like before.”

“Today, the average house is nine and a half times the average income, so for someone trying to save up a deposit to enter the market … for a median house of $925,000 they’re looking at $185,000 deposit – that’s a huge amount of money to save, particularly in a market where price inflation is outpacing wage growth.”

One of the policy changes which…