Economics forecaster Infometrics says renewed house price rises are a side-effect of the Reserve Bank's efforts to stimulate the economy

Economics forecaster Infometrics says renewed house price rises are a side-effect of the Reserve Bank's efforts to stimulate the economy

Renewed house price rises have been a side-effect of the Reserve Bank’s efforts to stimulate the economy and the ongoing surge in house prices is amplifying inequality issues within New Zealand, economics forecaster Infometrics says.

Infometrics chief forecaster Gareth Kiernan says job losses to date due to the Covid crisis have been "concentrated among segments of the population that are less likely to be homeowners".

"The ongoing surge in house prices is exacerbating the uneven effects of Covid-19 and amplifying inequality issues within New Zealand.”

Kiernan describes the housing market as one part of the economy "that has emerged unscathed from Covid-19".

"Demand for housing has been buoyed by a spike in returning New Zealanders and record low interest rates."

Infometrics is still expecting house price growth to slow during 2021, given clear signs that the influx of Kiwis has now slowed, "but a decline in property prices now appears unlikely".

Elsewhere in the economy, Kiernan says despite rebounding well from the initial lockdown and effects of the Covid-19 pandemic so far, the New Zealand economy remains vulnerable.

Infometrics is forecasting a "double-dip" recession to hit during 2021, as delayed job losses "punch a hole in consumer spending and drag economic activity lower".

"The next few months will be crunch time for the New Zealand economy," Kiernan says.

"The loss of international visitors will be keenly felt by tourism operators during the normally busy summer months, while retailers will also be hoping that spending momentum continues into Christmas.

"Other businesses are also likely to reassess their staffing requirements heading into the new year if there is any softness in demand conditions."

Infometrics is forecasting a decline in employment of 186,000 jobs by June 2021 compared with pre-pandemic levels.

"This outlook compares relatively favourably with fears of more than 300,000 job losses at the height of April’s lockdown. The government’s wage subsidy and other support can be viewed as successfully mitigating the effects of the pandemic response on the economy and job numbers," Kiernan says.

He says it is possible that job losses of this magnitude are not guaranteed if the economy maintains the momentum of the last few months.

"But if the unemployment rate does climb above 8% next year, Infometrics expects a contraction of more than 3% in both private consumption spending and GDP in the first nine months of 2021. Alongside job losses, declines in hours worked and weaker earnings growth will also constrain household spending."

Kiernan says the economy has been regaining momentum, and the question now is "if we can sustain this path ahead".

"Risks remain to our outlook, particularly due to the precarious position of the global economy, but our domestic performance means we’ve weathered the immediate storm as well as could be expected."

 

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38 Comments

"Demand for housing has been buoyed by a spike in returning New Zealanders and record low interest rates."

Returning NZers are buying houses in NZ? Is there any evidence or is this a case of 'I reckon'?

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It's been debunked previously by various commentators.

I'd imagine it would be difficult to prove.

Have a read of Ninnes' comments regarding immigration over the last 6 months or so, seems there hasn't been the flood of returnees expected

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It's bullshit and it's typically claimed by beneficiaries of the housing madness...

I also wouldn't mind betting that a lot of young people are going to move to Australia instead of doing a London OE. I did it an highly recommend it. I saved at three times the rate in the same job while living in Bondi.

White sand, events, sport, good coin and a transient population to be single and mingle!

What a great way to spend your 20s. That Bondi to Coogee walkway is a national treasure. Colour me jealous.

Yet keeps being conveniently ignored by others.

in regards to returning NZers ... If they have money and are planning to stay, commonsense suggests they may buy a house..??
https://www.stats.govt.nz/news/nz-citizens-migrating-home-in-record-numbers

Be nice if this supposed financial news website could get over it's fixation with housing. Everyone is well aware of the increases and effects but Chaston and co continue to roll out the same message from various commentators - who actually gives hoot?? How about some articles on exporters, importers and the Stock Markets?? Lazy

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"who actually gives hoot??" - Based on the number of comments below articles, most interest.co.nz care a lot about the housing market.

Considering the housing market is linked to consumption, the nation's savings, the wealth effect, and the financial health of SMEs, I think it's very important.

I'm not saying the housing market isn't important - obviously it is. What I'm saying is why does this site have a fixation with it? Constant re analysing of the same issue by different commentators, each with their own (often debunked) predictions.

I think interst.co likes to troll the commenters.

I literally only come here for the comments on housing articles.

I don't know about that. Not everyone is fixated with house price predictions. The authors share varying opinions and so do the readers. And considering the housing market is related to issues such as monetary debasement, sound money, and the health of the economy, it's a very important issue.

The authors are constantly rehashing the same argument. The commentators here are constantly posting the same arguments for and against the reality. IMO it's just flogging a dead horse and it's freaking boring

Entitled to your opinion. But no one forces you to come to this website.

They are running a business and have wages to pay, of course they should focus on where the traffic is. There are several services you can pay a lot for if you want. Also I bet they get a laugh out of the comments as well.

That may be the case Te Kooti - have you been threatened with legal action by the Editor recently?

You have lost me, why would the editor take such action?

Took an educated guess as to who was getting charged in the NZF Foundation case - Chaston wasted no time in threatening me with legal action.

I know nothing about that and whether he did so justifiably. From my perspective, we read and comment at their discretion and their rules.

Tim:

You have no right to name accused that may or may not be protected by a court order.

If you draw us into legal action,. I will sue you for damages.

Act responsibly please.

If you do that again, I will ban you forever.

Final warning.

David Chaston
FYI Te Kooti

I'm with Interest, they have to be very careful and there is no upside vs plenty of downside for them. Why would they take any risk?

I joined this site specifically because it gave info about real estate. Thought that had always been the case.

I do like the housing articles and discussions but I would be interested in some more articles on investment alternatives too.

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The housing market is the economy.. farmers can't pick an apple if they have to pay someone a decent salary. Reliant on offshore slave labour because kiwis are too 'lazy'. Noone talks about the fact that kiwis have to live and pay the cost of living here.

This website is simply a machine to maximise ad impressions.

Once you start seeing it as such the same housing garbage being rehashed every day with provocative headlines will make more sense.

>This website is simply a machine to maximise ad impressions.

True of any website that is not trying to sell you a product.. you are the product.

Unless you're a subscriber (no ads) or use Brave (or any other inherent-ad-blocker browser) or......

Legislate a steady non-appreciating housing market jacinda, that will work not. What is clear to me is if labour and green pair up that will be a disaster for renters, developers, and first homebuyers. Notice I didn't say investors because as we have seen this govt has stuffed up the Golden opportunities they have had. The flat market from 2017 to 2019 and the covid crisis could have been the chance to get house prices in hand. Listening to ardern spouting superlatives and wistful thoughts on climate change objectives you just know she is floundering and hoping to catch a few votes. When it comes to it the actions they take will make everything including housing and cost of living more pricey. Good luck with affordable.

Not a v or a w but a k shape as Mauldin wrote a while back. Showing some gain and a good third lose

Side effect? Seems to be their only plan. They are hoping the economy might recover as a side effect of rising house prices.

“We’re got to wait ... for the enormous crash that’s coming next year, when the reality of the situation is no longer smothered" - Wellington property tycoon Sir Bob Jones ( who became a billionaire last year), as per today's article on Stuff.co.nz.
He also added: "Investing in residential property is a stupid thing to do; I’d rather be flogged, 30 lashes every hour than having to own a residential property.”
He is sitting on nearly quarter of a billion cash, ready to roll.
I am not saying that he is right, but I would tend to listen to the likes of him more than to many amateur residential housing investors who feel very smart as they appear to have just discovered the big "secret" of leveraging.

Investors, sure. But what of us mere mortals trying to escape the rental cycle?

Sorry, but you are Kotkin's 'New Serfs' in the neo-feudalism that's right around the corner.

As per title to stimulate the economy, This is a known correct statement in the past 5years or so. Even by IMF papers in NZ? economy is on FIRE, so what RBNZ need to do? if the flame forecast to be dim a bit - spray can with accelerant.. and will keep on doing so, it is what they've been mandated to do after all.. NO it's not & never a side effect; it's their primary duty on this. The largest the FIRE flame? the larger of trickle down warmth side effect for all nearby habitants.. aka NZ economy.