New Zealand house-building costs shoot ahead of inflation

Shocking rise in house-building costs – up almost 8%

Despite the Government’s “comprehensive plan” to address the housing crisis, economists at the ANZ say there is still a whole host of problems across the housing market. These include the usual suspects of excess demand, insufficient supply and lack of builders.

It also reports that building costs are up 5.6 per cent across the country, and up 7.6 per cent in Auckland — which adds more than $50,00 to a $700,000 house in the Super City.

The rise, well above the 0.4 per cent inflation figure, hasn’t escaped the attention of the Reserve Bank.
It wrote on  July 21 that house price inflation “remains  excessive and has become more broad-based across the regions, adding to concerns about financial stability”.

Is price gouging going on as companies push prices to the limit of what the market can bear?
Meanwhile, the Reserve Bank is looking at ways to mitigate risks to the country’s financial stability due to  the boom in house prices.

And in a totally unrelated development, the share price of Fletcher Construction (FBU) has risen more than 22 per cent during the past 52 weeks;  from $7.66 a year ago to $9.40. Doubles and triples all round.

House prices to soften

Infometric says house prices across the country will rise by 17 per cent before  starting to slide by 11 per cent in the two years to September 2019.

Despite Auckland’s estimated 32,000 shortfall in available housing,  the economic forecasting firm’s chief forecaster Gareth Kiernan says   there could  be some softening to house prices in the Super City and in regional property markets around Auckland.

He predicts a 39 per cent increase in the number of new dwelling consents over the two years to June 2018, taking consents to an all-time record high of 40,044 a year.

Negative rates

Regular readers of this column may remember that I have reported on negative interest rates charged by banks in countries such as Japan and Sweden.

Although New Zealand’s banks are far from introducing such a measure, the OCR is trickling down with talk of it dropping to 1.5 per cent next year.

However, in the UK, the NatWest Bank has written to its customers saying it may charge them for looking after their savings. It’s the new topsy-turvy world of banking — where borrowers are rewarded with historically low interest rates, and savers are penalised.

Chinese buyers

Real Estate firm Ray White has signed a deal with  Chinese firm Lianjia to market New Zealand property via its network of  6000-plus branches in more than 25 cities across China.
Carey Smith,  Ray White’s  chief executive in New Zealand, says the deal  is an initiative led by its Australian arm.

Lianjia will co-list Ray White’s properties in Mandarin on its websites.

Canada

Foreigners  buying a home in Vancouver, Canada, will have to pay a 15 per cent tax on the price of the property. The provincial government   is targeting foreign buyers saying they are distorting the local market.