House price rises concentrated in Auckland can still have a material impact on the national economy, Westpac economists say.
In its latest monthly analysis of the housing market, Westpac pointed out that while prices fell slightly in September, they were 5% higher than a year ago.
“But the sense continues to be that housing demand has lost some momentum over the past few months.”
It noted that while Auckland and Christchurch prices dipped slightly in September, the cities were outperforming the rest of the country.
“The market in Wellington and the rest of the North Island remains much more subdued.”
That could still push up spending, the economists said.
“The mid-1990s housing boom was largely confined to the Auckland region, as the existing housing stock proved insufficient for a rapidly rising regional population. Still we saw rapidly rising growth in household debt, rising consumer spending, and a sharp increase in non-traded inflation. The RBNZ ended up hiking interest rates by several percentage points over 1994-1995.”