Demand for Housing Lifting?

Since the last post I have been to NY, London and Singapore presenting on the state of the NZ property market – in Feb 11. One of the key messages was that we have a growing demand for housing in Auckland, yet supply has not been keeping pace. Building consents last year were at their lowest since 1965.

I highlighted that we were beginning to see the evidence of the supply demand disconnect in the form of high rental demand. People were prepared in some cases to prepay 6 months rent. That scenario has not really abated. I suggested that at some point that rental demand might start converting to buying demand once people perceived it was a good time to buy and if they could afford it.

At the point of a significant lift in demand I asked would supply be able to meet demand. In Auckland we will need 200,000 new household by 2031, Auckland only has the potential for 170,000. And if you are after a 3 bed home on 400s/, of land plus, then that supply could run out as early as 2023. So the answer is supply will struggle to meet demand. It’s pretty simple economics, when demand exceeds supply, prices will rise.

So the $60m question is when will demand for housing starting moving from rental demand to buying demand? Could that shift be starting to happen now? In the Herald today we see a report that we experienced significantly higher sales volumes in March. Additionally we are now seeing most negotiations we enter into for our clients become multi offer, something we haven’t experienced for a long time.

Is this the start of sustained lift in demand?

 

Published on Thursday, April 7th, 2011, under Directors Market Commentary

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