ASB economist continues to forecast a healthy economic growth outlook for New Zealand, but housing market has slowed down and business is predicted to be in a goldilocks condition.

According to the latest ASB uarterly economic forecast, the housing market, particularly in Auckland, is “losing steam.” Volume of house sales fell by 30% over the last year. Affordability challenges, additional loan restrictions, lifts in mortgage rates and reduction in the “fear of missing out” will be key drivers of the slower market conditions, ASB chief economist Nick Tuffley said.

“In the short-term, would-be sellers will adjust to the softer market by being more realistic about the price their home will sell for, and others who don’t need to sell will pull out of the market or simply not list.”

“Longer-term however, Auckland’s shortage of homes to live in will keep a floor under the market.”

Typically, the report said, a certain level of inflation and higher interest rates could be expected hand-in-hand with a healthy economic growth outlook and strengthening economic activity.

“But our forecasts actually have inflation dropping and the official cash rate on hold at a record-low of 1.75% until early 2019,” Tuffley said.

“That’s a goldilocks mix of conditions for businesses: steady growth, steady inflation and low interest rates.”

Tuffley also said the New Zealand dollar will remain well supported by increased global investor demand for assets and high terms of trade – which is expected to set a new record high this year.

Source: NZAdvisor Online