Boom and bust?

The building boom currently underway is clearly having a serious impact on supply, so much so that cities like Hamilton and Auckland are showing significant gap changes between supply and demand:

  • Auckland supply is now greater than at any time in the last five years, compared to July this year, when supply dipped well below last year.
  • Hamilton was at a all-time low in March and now has more supply than 2017 or 2018

However, supply is not equal to demand in many of our biggest cities as years of under-investment has seen a shortage of properties driving rental and sales prices up. The current boom is having small impacts so far.

Private Rental Listings shows the number of listings I expect if 2.5% of private rentals are listed at any one time (Inventory). Plus the over-supply(+ve Surplus) or undersupply (-ve Surplus)

The NZ Regions Rental Inventory chart shows supply in relation to an expected balance of 2.5-3% of existing rental homes being up for rent at any one time. While Hamilton is increasingsupply there is still a lot of demand to use up, 1.8% of properties being advertised is well below the 2.5% I would expect for balance, ie where supply meets all demand. Auckland is just keeping up with population increase, remaining just below 3% of active bonds (existing rentals)

Wellington and Taurangacontinue to fail to meet demand despite an incredible construction effort. There is still plenty of room for more homes, I estimate a shortage of about 450 public rental homes in Wellington and 250 for both Tauranga and Hamilton.

Note that Housing New Zealand arecontinuing to build at subsidised housing at a frantic rate, completing about 2,500 homes since the change of government and continuing at pace - here is a local Naenae development with 37 homes:

IMG 0294 copy

Government interference in the construction industry (or any industry for that matter) tends to suffer from over-hyped expectations. These expectations create a boom with an inevitable bust - just look at Christchurch in the chart above, 2016-17 was the result of an overbuild for a market that was not there anymore. I expect the same will occur for the rest of the country over the next couple of years.

Jonette 2011