-Jane Turner, economist at ASB
New Zealand house-building approvals numbers skyrocketed 16% last year as 24,680 consents for new dwellings were granted. Thus, it is widely expected that the construction boom in the country will continue into the year, which will boost economic growth. Measured on a monthly basis, non-apartment dwelling consents climbed 1.6% in December, Statistics New Zealand reported, with a total 1,733 houses receiving consent over the reported month. Including volatile apartments, consents, however, dropped 2.1% in December.
The Reserve Bank said earlier in the week that the housing market was showing signs of improvement, especially in Auckland, adding there is the possibility of an interest rate cut, a decision that could lower mortgage costs and further boost the property boom. While the sturdy and continuous increase in construction activity is positive for the New Zealand economy, the Reserve Bank of New Zealand will be worried about the overheating housing market, particularly as record population growth keeps further increasing housing demand. Economists believe the central bank may need to consider its macro-prudential toolkit to find ways around controlling the housing market, with loan-to-value ratio restrictions already being in place since October 2013.
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