The Unassuming Economist

The IMF’s latest report on New Zealand says that:

“The housing market is cooling but managing housing-related risks remain challenging.
Rising house prices were associated with rapid household credit growth through 2016. Given the slower rise in income, house price-to-income ratios reached unprecedented levels, especially in Auckland where the surge in house prices has been stronger. Household credit growth has moderated in 2017 while household debt continued to rise from already high levels. Given the underlying shortages in housing supply, the moderation in house prices is expected to be slow.

Affordability concerns have also become more pressing, especially for first-time home
buyers. The deterioration in housing affordability because of high house prices as measured by housing cost to income has been partially offset by lower interest rates. Lower income groups remain more adversely affected by declining housing affordability. Rising house prices pose increasing difficulties for first-time home buyers entering the home market as it increases the length of time needed to save for a mortgage down payment regardless of the level of interest rates, and lead to higher debt servicing requirements as they need to have a larger mortgage than in the past.

The housing policy agenda is ambitious and appropriately focuses on closing key gaps
on the supply side and in the tax system. Housing supply shortfalls have contributed to the runup in house prices, reflecting supply constraints amid strong demand fundamentals, including rising net migration, lower interest rates, and stronger income growth. While demand-side drivers have stabilized, they remain robust, and improved housing affordability requires eliminating supply bottlenecks. Supply and demand sides reforms are complementary, and the success of the housing policy agenda will depend on well-coordinated progress on all fronts.

Lastly, improving the availability of housing affordability and other related statistical data is important. Further effort to compile and regularly release key housing related indicators such as house prices, housing costs, housing ownership and affordability measures would help to
enhance analysis and inform policy decisions.”