27 Mar 2014

Auckland construction 'ramping up'

9:22 am on 27 March 2014

House construction in Auckland is not keeping up with the city's population growth but one economist thinks the required building lift will happen.

Westpac Bank says over the last five years 13,640 too few dwellings were built in Auckland and more 9169 houses need to be built per year to meet new demand.

A house under construction in Auckland.

A house under construction in Auckland. Photo: PHOTO NZ

That's a 53 percent increase on what was built in the last year, where only 5986 houses were constructed.

Westpac chief economist Dominick Stephens says Auckland has been underbuilding since 2008 and the number of people per house has been rising. He says it is now higher than it was in the late 1990s.

Mr Stephen believes the underbuild is partly due to the global financial crisis and subsequent recession where many property developers became insolvent, which has left the some in the sector cautious.

However, he believes the required lift in construction activity in Auckland will happen with the price signals there to make it worthwhile for developers to undertake more work.

Mr Stephens says, as well, the stop start recovery since the GFC is s on the wane and as greater economic certainty builds people will feel confident to build.

"Finally, I think the uncertainty over amalgamating those seven cities into one supercity is perhaps holding people back and again, there's a slightly better degree of certainty now than some time ago."

Asked about rising interest rates, Mr Stephens said he felt they would put something of a brake on activity via a slow-down in the rate of house price inflation.

"But I do think the house price signal out there now is quite emphatic and ... the construction industry really is ramping up at a quite a pace at the moment."

Mr Stephens says Wellington and Nelson/Tasman are the other two regions where there is an undersupply of residential building.