Supply issues facing builders have made the challenge to address the country's housing shortage that much harder, say Kiwibank economists; new supply now 'at risk'
By David Hargreaves
Major supply issues facing builders have made the task of addressing the country's housing shortage that much harder, Kiwibank economists say.
And they say new housing supply is now "at risk" from these supply issues.
The pressures in the residential building sector were evident in last week's scorching 3.3% annual inflation figure release.
In the June quarter alone, home construction costs leapt by 4.6%, which was the biggest quarterly rise since 1987, while for the 12-month period, the rise was 7.4%.
The Covid disruptions to the global supply chain are playing havoc in the construction sector here, right in the middle of a building boom.
Earlier this year the Kiwibank economists compiled an economic note that suggested the Covid pandemic had provided a rare opportunity for New Zealand to balance its housing market.
They had calculated that the country was short of about 67,000 and reckoned that at the current rate of building this shortage could have been removed in about three years' time.
However, in their First View publication this week, the economists say "unfortunately, current constraints may push this estimate out even further".
The construction sector, they say is "a major pinch point in the economy" at present.
"And it couldn't come at a worse time."
A closed border had given us "a sliver of a silver lining", they say.
Population growth had "dived overnight", curtailing new demand for housing at a time we were faced with a massive housing shortage and rising housing costs.
It seem that "finally" NZ had enough "clear air" to start making up for the shortfall in housing accumulated over the past decade.
"But sadly new challenges have emerged.
"Stimulus to fight covid has boosted internal demand for housing, and shortages of labour and materials are starting to limit the pace of new home building."
They said that house price growth was expected to start easing "in part because of significant new housing supply coming on stream".
"However, new supply is now at risk from major supply issues faced by builders.
"The challenge to address Aotearoa's housing shortage looks to have become much harder."
This story was originally published on Interest.co.nz and has been republished here with permission.