Sustained fiscal stimulus and a removed island position at the bottom of the world have aided New Zealand’s economic recovery in the wake of the global health crisis. Now two years on, are regional differences causing the team of five million to break away into regional silos?
Following what is considered the be the longest uninterrupted period of profit-making for residential property owners, government intervention and dampening measures including global uncertainty and tightening credit controls are starting to slow the rate of value growth across the country.
Despite persistent demand drivers, regional economic differences are emerging, with the impact of the pandemic playing a pivotal role in projections for future housing inflation across our regions.
Key trends have emerged from the virus’ impact across Aotearoa, as economies heavily reliant on international tourism and hospitality suffered at the hands of closed borders and fear of domestic travel.
Similarly, positive growth in regional economies with a primary sector focus has been underpinned by rising commodity prices and heightened demand for food across the world.
The gradual reopening of New Zealand’s international border is expected to renew confidence in regions hit hardest by a lack of tourism activity, while upward pressure on commodity prices continues to encourage strength in locations with strong farming economies.
In the two years to February 2022 domestic migration has played a larger than usual role in regional prosperity, with border closures meaning slowing, and in some cases negative population growth.
However, the importance of work and lifestyle opportunities have been emphasised, as evidenced by above-average housing inflation in fringe communities including Northland’s Kaipara, Waikato’s Waipa District, Wellington’s Kapiti Coast and Waimakariri in Canterbury.
The permanent move to working from home has enabled employees to move away from traditionally urban areas in search of more affordable housing and lifestyle opportunities, offering these regions an economic boost.
Despite increasing inventory levels, supply remains tight across some regional centres, with areas across the lower North Island including Taranaki, Whanganui-Manawatu and the Wellington region yet to benefit from the record-breaking building consent issuance recorded at the close of 2021.
This lack of supply continues to put upward pressure on house prices, despite affordability concerns.
Substantial increases in building activity continue to see New Zealand’s building and construction sectors add the largest number of new jobs, with average employment in the sector rising some four percent, adding nearly 10,000 new jobs.
Future growth projections for the prosperity of New Zealand’s regional centres are firmly tied to the global outlook, with Russia’s recent invasion of Ukraine a significant disruptor, for which the impact remains to be seen.
As a key exporter of energy products that supply farm inputs, along with fertiliser, wheat, corn and sunflower oil, sanctions against the Russian economy have the potential to raise farm costs and the cost of living for consumers, against the backdrop of national inflation which has accelerated to a 30 year high of 30 percent in the December 2021 quarter.
Looking ahead, we expect to see a continued divergence of housing activity across the country, as economic factors including wage growth, employment prospects and the variable international impact on regional industries continued to influence demand for housing across the country.