Housing market set to take off - Key

New Zealand's housing market is set to take off again, particularly in Auckland, as slow planning processes, lack of development finance and internal migration forces up rents and prices, Prime Minister John Key said this morning.

Speaking on TV One's Breakfast programme, Key was asked whether he thought New Zealand's housing market looked like it would take off again.

Key said his personal view for some time had been that for a variety of reasons, such as slow planning processes, and the collapse of a large number of finance companies which provided development finance, the housing market was "going to take off''.

"All the indications are that in certain parts of the country, particularly Auckland - I think the rent increases you see, and the housing price increases you see - are a function of the fact that there's a lot of internal and external migration taking place, and not enough supply coming through,'' Key said.

"And we are starting to see that supply bubbling to the surface, but it's quite slow, and it normally lags demand,'' he said.

His comments are at odds with the views of his own Finance Minister.

Bill English told TVNZ's Q+A show that he was confident New Zealand was not about to see another housing boom.

He said nobody wanted to see a repeat of the runaway market a few years ago. There was "just not the cash around anyway,'' to fuel any boom.

English said neither our own banks nor the overseas ones which fund them were going to fund a bubble.

Although some prices had been rising, overall credit growth was zero.

Westpac Bank chief economist Dominick Stevens said the term "housing boom'' was a fairly emotive one.

"I don't think anybody would necessarily characterise it [the market] as a boom,'' he said.

"The reserve bank is forecasting inflation at 5 per cent for 2012, Westpac is forecasting it at 4 per cent which means the economy is quite different from 2011. Although, we are in the middle of a period of stronger house price gains, it is may not necessarily translate into a housing boom.''

Stevens said that, generally, it was too soon to tell whether NZ was on the verge of a housing boom despite increasing house prices.

 

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