25 Jul 2016

House building consents predicted to rise

1:06 pm on 25 July 2016

Approvals to build houses will increase rapidly and exceed 40,000 a year by 2018, an economics consultancy predicts.

Infometrics said consents to build residential homes were 13,917 five years ago, 28,387 now and are forecast to reach 40,044 annually by June 2018.

"This growth will be driven by the rapid lift in house prices nationally and Auckland's massive undersupply of housing," said Infometrics chief forecaster Gareth Kiernan.

14072016 Photo: Rebekah Parsons-King. Hobsonville is booming. Around 20% of the homes being built here will be affordable homes.

Photo: RNZ / Rebekah Parsons-King

This could put intense pressure on the construction sector and lead to cost increases, he said. There was already a shortage of subcontractors which was raising prices.

The cost of building a house would rise 5.2 percent annually over the three years to March 2019 - well above the Reserve Bank's target of 2 percent annually across all types of consumer prices.

"These cost pressures are a necessary evil that will encourage the flow of more resources into building sector," said Mr Kiernan.

"But even with these additional incentives, we see a risk that activity will struggle to expand to the extent that we are predicting, which would further exacerbate cost pressures."

The undersupply of housing in Auckland was possibly as large as 32,000 dwellings so the increase in building would not rectify the region's housing shortage in the short-term, he added.

Mr Kiernan forecast an 11 percent drop in house prices from September next year to September 2019.

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