Population and politics drive house prices in main centres

House prices in Auckland will shoot up 15 per cent in the next three years, rising faster than in most others areas, according to forecaster Infometrics.

Its findings, just released by PMI Mortgage Insurance, shows Auckland will be matched only by Wellington.

But prices in other areas will rise more sedately, stay the same or fall.

Infometrics senior economist Gareth Kiernan cited strong population growth projections for Auckland and continued job stability in Wellington's public sector after Labour's re-election as the main factors that would drive up prices in those two cities.

The robustness of the economy buoyed people's confidence in their own financial strength, which also helped to fuel the market, said Mr Kiernan.

"Unemployment doesn't look like it's going to go above 4 per cent or 5 per cent in the foreseeable future because there's simply not enough people out there," he said.

Infometrics found that although housing had been predicted to decline this year, there were few signs of the market showing any inclination to slow.

"Despite higher property prices, residential demand in New Zealand continues to grow," the report said.

"Recent rises in fixed and floating mortgage rates have increased speculation that activity in the housing market will start declining.

"Although further decreases in sales volumes are likely over the next year, this fall is not expected to be significant."

Although price rises would not be as spectacular, they would increase 7 per cent nationally by June next year, said Infometrics.

PMI chief executive Ian Graham singled out high employment levels as the driving factor behind the continued confidence.

"People purchasing homes will continue to be confident about their ability to service debt because of low unemployment, which is expected to continue," he said.

Statistics New Zealand released figures this week which showed wage rises accelerated in the September quarter, making another interest rate rise by the Reserve Bank nearly a certainty.


House price forecasts by 2008:


Northland: up 11 per cent.
Auckland: up 15 per cent.
Waikato/Bay of Plenty/Gisborne/Tauranga: up 11 per cent.
Taranaki/Manawatu/Wanganui: unchanged.
Wellington: up 15 per cent.
Christchurch: unchanged.
Otago/Southland: down 4 per cent.