NZ's housing crisis to get 'worse and worse', senior economist warns

Source: 1News

New Zealand's housing crisis is likely to get "worse and worse", a senior economist is warning.

Infometrics' Brad Olsen this morning told Breakfast it will take years to build enough houses to make a difference to demand on the housing market.

Despite nearly 40,000 consents for homes being granted last year, there are concerns the market is still tens of thousands of houses short of meeting demand.

"We were expecting a bit of softness last year and it didn't come to eventuate, in fact it's gone the other way. You mention rocket ships, I mean this is very much the only way you can really describe it at the moment," Olsen told Breakfast host Scotty Stevenson of how the market is looking. 

"Our expectations on our new and much more optimistic forecast for the general economy also see those house prices still going up at a fast rate. 

"We expect that even in the middle of this year we could see house prices still rising at 15 per cent per annum. Now we might see those slow a touch to under double digits towards the end of this year but that's still going up nine-or-so per cent per annum.

"Things are only going to get a bit slower, but certainly not fall unless we have a big change in employment levels or something similar, the house prices scenario, and in fact the housing crisis seems set to get worse and worse."

Olsen said the market was hot, and looked set to continue for a while yet, so those who own a home are in a "great position".

However, those looking to buy will need to pull together "a fair whack of money" to reach their deposit at the moment, he added.

"Every day that you sort of wait it seems to get bigger and bigger."

Olsen said it's clear demand is the way to ease pressure on the competitive market.

"But lets be frank, we didn't build enough in the first half of the decade and so we're still playing five years catch up," he said.

"On the right path at the moment for us to construct more, to build more homes, but it's not going to be a click your fingers and we're finished sort of exercise. We've still got a few years yet before we build enough to really make a difference."