Auckland housing scene slow to recover

By BERNARD ORSMAN

Aucklanders should not hold their breath about a pickup in the housing market, says an independent report card on the local economy.

Too many houses are still overpriced, nearly 30 per cent fewer permits are being issued for new houses than a year ago, and it will be the end of the year before any upturn, says part of an annual stocktake of the Auckland economy prepared by the Auckland Regional Council in conjunction with Infometrics, a Wellington firm of economic forecasters.

Furthermore, says their report, Auckland has a glut of apartments for sale and it may take longer than the end of the year for that market to recover. The problem is not helped by the "low quality of some developments."

A Massey University survey of property experts found almost unanimous agreement that Auckland apartment prices would fall, says the report.

"Inflation is eroding real house prices, and some economic growth will boost the ability of households to pay for housing, but it may take some time for the market to return to equilibrium."

The president of the Real Estate Institute, Rex Hadley, said it was fair to say the Auckland housing market was slow in the second half of last year, but sales had picked up in February and March. "All the indications are that the corners have been turned."

Economists said this time last year that the future looked rosy for Auckland, but business dropped more quickly than expected from the highs of the America's Cup and millennium celebrations.

The downturn in the domestic economy and slow employment growth added to a drop in household spending, which hurt the retail, housing and manufacturing industries.

By the end of last year, Auckland was lagging behind the national average for economic growth.

Releasing the report, ARC strategic policy committee chairwoman Gwen Bull said the Auckland economy was expected to catch up with the rest of the country at a rate of 2.2 per cent growth, rising above that in 2003.

Tourism, information technology and communications, and manufactured exports were forecast to drive the growth.

For the second consecutive year, business and financial services nudged ahead of manufacturing as the biggest driver of the region's economy.