As promised by the Finance Minister there were no big surprises in today’s Budget, the numbers look good with small though growing fiscal surpluses projected, growth averaging near 3%, unemployment falling to 4.6%, and interest rates not rising until 2018/19. The Budget Speech referenced an upcoming National Policy Statement on Urban Development which will direct councils to allow more housing and measure the impact on house prices of their decisions.
Were existing efforts to boost housing supply working such a statement would not be necessary, and the factors which have met our expectations of insufficient supply growth are so strong that no statement is likely to change where things go from here. In fact just this week Wellington Council said they have failed to reach any of their housing supply targets for two years and see no chance of meeting their full five year target.
The upshot is continuing upward pressure on prices and a steadily rising resolve behind doors at the Reserve Bank to bring a new hammer down on the pace of growth in lending – not just in Auckland perhaps but also elsewhere. Investors should pay heed to the general lack of housing shortages in most parts of the country outside Auckland and Queenstown as they contemplate their regional investment and building plans these next three years.