Treasury forecasts housing downturn

The economic forecasts contained in this month’s Budget make pessimistic reading, even though they are hedged with a number of caveats.

Treasury economists estimate that residential investments has already fallen to zero for the year to March, although the way statistics are completed mean it is not yet clear that has happened.

The economic tables accompanying Finance Minister Michael Cullen’s sixth Budget also predict residential housing investment will fall to negative over the next two years.

Investment in the sector was already weaker during the second half of last year than the Treasury had forecast. However the officials say there may have been a catch-up earlier this year.

“The continued buoyancy in house sales (a leading indicator of residential investment) may also portend a short-term resurgence in residential investment, although the increase in house sales may merely reflect the mortgage rate war in late 2004.”

And the Budget’s economic outlook goes on to say that the Treasury may have been too pessimistic.

“The anecdotes of a backlog of work which has built up in the housing construction industry (chiefly because of the shortage of skilled trades people) provides a further risk of higher than forecast residential investment for a period.”

However, the forecasters warn this does not mean the downturn is off – merely that it may be postponed. If there was an up-tick in the sector in the first part of this year, “there would be lower activity later”.

To keep up with Property News visit the NZ PROPERTY MAGAZINE's website. Sign up for its newsletter here.

     

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Related News:

Second St John withdrawal of labour takes effect tomorrow with further strikes likely
Sanford Appoints Independent Director
CRP ADVISES CLOSURE OF SHARE OFFER TO EXISTING INVESTOR
Devon Funds Morning Note - 14 August 2024
OCR 5.25% - Monetary restraint tempered as inflation converges on target
Consumers still need due diligence as new deposit takers emerge.
Woolworths strike: staff asked to dress up in Disney costumes for a week on their own dollar
Turners Invests in Quashed Online Insurance Platform
PGW Reports on Challenging Year
Arvida Announces Executive Team Changes