NZ house price inflation a slow burn with lagging

Research note: NZ house price inflation a slow burn with lagging supply
(See attached file: NZhousing0804.pdf)

Attached is a research note on NZ housing, covering the following points:

* JPMorgan's housing model shows that New Zealand's market currently is
undersupplied

* Housing supply is likely to be subdued over the medium term as
constraints persist

* Policy changes aimed at stimulating supply are essential to alleviate
the home affordability crisis

The RBNZ has been fighting a losing battle against inflation since 2004, and one of Reserve Bank officials' main opponents, an exuberant housing market, has been formidable. New Zealand's housing market, of course, has significant support and many allies. A flood of net permanent immigration has stimulated a doubling of house prices since 2001, and local banks, which are powerful allies of the housing industry, have rendered monetary policy impotent by slashing margins and enticing homebuyers into longer-dated fixed-term mortgages at lower interest rates.

Furthermore, housing supply, for a variety of reasons, has not kept up with the rapid rise in demand. The RBNZ this week flagged the unresponsiveness of housing supply as a key factor supporting house prices. JPMorgan's housing model supports RBNZ officials' concerns, concluding that the market is undersupplied. Unless government policy addresses the regulatory and administrative constraints inhibiting land supply and development, upward pressure on house prices will remain, and the RBNZ will be forced to keep interest rates higher for longer.

ENDS

(See attached file: NZhousing0804.pdf)

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