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3NZ ECONOMY

Moreaggr amuch greater NZ compared that NZ will ideally the Reserve quickly to reduce interest rates and avoid large rises in unemployment. It however may not be possible if inflation remains high. Thereisalot of uncertainty around this but is the main factor that has the potential to keep house price subdued longer

4CONSTRUCTION COSTS ARE HIGH IN BOTH COUNTRIES

Trying to build ahome rightnow in NZ andAustralia is really difficult.Construction costs have hit record highs, driven by both supply chain problems, building material cost increases and labour shortages. While supply chains areimproving and building material costs arecoming down, labour is still achallenge, particularly in NZ.

These construction challenges areleading to a shortage of homes being built. This has become very clear inAustralia where rents aresky rocketing and price growth is on themove. It is yettoshow up in NZ because migration hasbeen comparatively alot lower With population growth set to pick up however,NZis set to have ahome shortage in the next 12 months.

5

NEW LISTINGS IN BOTH COUNTRIESARE FALLING

In bothNZandAustralia, thereis ashortageofnew property listings. While interest rate increases have led to lower buyer activity, it hasalso meant that vendors areless likely to want to go to market. InAustralia, this has been akey to price growth starting up again. Thereissimply a shortageofproperties to buy, particularly given the rate of population growth. With NZ population increasing again, it is likely to be asimilar challengeinNZ.

6

RENTS IN NZ REMAIN STEADY,FOR NOW

Australian rents arenow increasing at their fastest rate ever recorded. This reflects ashortage of housing compared to the level of population growth.This imbalance is now showing up in houseprice increases NZ rents have remained comparatively stable, primarily because populationgrowth has only recently returned to positive.

This year,NZisexpected to see much higher levels of population growth. This will lead to moredemand for housing,higher rents and higher prices.

Based on what has happened inAustralia,and what is set to happen in NZ, house price growth in NZ is imminent. In particular population growth is back, driving up demand for housing. Soon, it is likely this will outweigh the aggressive monetarypolicy that has been implemented in NZ.Akey risk factor however is recession. Hopefully policy implemented by both the NZ Governmentand the RBNZ willavoid this occurring.

•NeridaConisbeeischiefeconomistforRayWhite

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