by Paul McBeth
There are at least eight reasons why the housing market will be "challenged" over the coming year.
BNZ chief economist Tony Alexander says that housing construction, in particular, looks set for a large downturn in the face of oversupply in many parts of the country.
Writing in this month's New Zealand Observer, he says the reasons people aren't likely to rush into buying or building in the near future include:
1. Rising student debts delaying house buying and encouraging emigration.
2. Net emigration, now getting worse.
3. Upcoming cuts to state house rentals that will depress private rentals.
4. An oversupply of rental accommodation.
5. A probable short-term oversupply of apartments.
6. Householders have probably completed their adjustment of debt to income ratios to the international norm (our household debt to income ratio is currently 104 per cent, up from 60 per cent in 1992)
7. House prices, on average, are still about three per cent above the trendlines.
8. Interest rates may rise a bit further.
Alexander says people appear to be showing a growing preference for financial assets over housing.
"That's good for portfolio diversification and good for capital availability for business borrowers. It is not good for the housing market, and the chances are prices will fall further over the coming year."