Skip directly to main content.

Research and Policy

Quarterly Housing Market and Housing Assistance Monitoring Report - September 2007 quarter

Executive Summary

    The Economy

  1. All the signs are that the economy is in a holding pattern, with no clear signs of either a strengthening or worsening in performance.  GDP growth is steady at a little over 2% a year, year-on-year employment growth is similar, and business confidence is broadly unchanged from the levels recorded earlier in the year.
  2. This means that the economy is still experiencing capacity constraints.  Capacity utilisation, as measured by NZIER's Quarterly Survey of Business Opinion (QSBO), eased slightly in the year to September 2007, but it remains at historically high levels.  The QSBO also showed that skilled labour, in particular, is still difficult to find.  The unemployment rate continues to fall slowly.
  3. The Reserve Bank is therefore concerned about the prospects for inflation, even though the annual rate of increase in the CPI has fallen steadily, from 4.0% in March 2006 to 1.8% in September 2007.  The Bank is concerned that inflation will increase again because of a weakening dollar and higher food prices.  As a result, the OCR was left unchanged at 8.25% in October.  Observers are divided between those predicting further increases in the next 12 months and those of the view that the next move will be downwards, albeit not for some time to come.

    The Housing Market and Sector Activity

  4. The latest Real Estate Institute of New Zealand (REINZ) data indicate that the trend in the number of house sales is now clearly downwards, but the average number of days to sell has yet to change markedly.  The number of housing units for which consents were issued was also down significantly in September 2007, compared to a year earlier.  
  5. The evidence is mounting that the market is now entering a decline, but it is still too early to say this with certainty.  House prices, for example, are still somewhat higher than they were a year ago, even though they do not appear to have moved much for six months.  In addition, the level of net migration into New Zealand, which tends to have a strong bearing on house price increases, has been reasonably steady for the last two and a half years.
  6. Because house prices are still rising at a brisk tempo, at least when measured year-on-year, the often quoted Massey University Home Affordability Index continues to indicate falling homeownership affordability.  Interestingly, however, the decline in affordability in the latest quarter was relatively small for New Zealand as a whole, and several regions experienced improvements. 

    Housing Assistance

  7. In aggregate, the value of assistance provided to low-to-moderate income households in the form of the Accommodation Supplement (AS - for private sector renters, council renters and owner-occupiers) and Income Related Rents (IRR - for tenants of state houses) has been growing at a slower rate over the last two years. 
  8. Largely as a result of the buoyancy in the economy, the number of people on unemployment-related benefits receiving the AS has declined.  However, increases in accommodation costs relative to incomes have meant that the number of non-beneficiaries receiving the AS has increased.  In total, just under 250,000 people receive the AS, and this has fallen by 1% in two years.  During the same period, the value of payments increased by 7%, but there was almost no increase in the last 12 months.  
  9. By contrast, because HNZC's Social Allocation System (SAS) tends to prioritise those on very low incomes, the number of people on IRRs has been increasing over time.  For this reason, the amount of IRR assistance has also been increasing steadily.  Between September 2006 and September 2007, the cost of IRR increased by 8.4%.  In the previous 12 months the cost increased by 9.2%.

    HNZC waiting list

  10. Having dipped below the 10,000 level for the first time in June 2007, the number of people on the waiting list for a state house stayed below that mark in September 2007, when it stood at 9,955.  During the last two years there has been a fall in the number of people on the waiting list in every main category: principal location, priority group and ethnic group.

Skip page tools.

Note: You are reading this message either because you can not see our css files, or because you do not have a standards-compliant browser. Although the content of this site will be accessible in any browser, please consider upgrading to a web-standards compliant browser such as Mozilla to fully experience the design of this site.

Top.