Housing has been a key driver of the economy over recent years, both in creating strong growth and the recent recession. Recent house price, house sales and building consents data suggest the cycle is turning up, although there is considerable uncertainty around the sustainability of the recovery.
A key point of contention is whether there is a shortage of housing. There is a considerable divergence of views among commentators. Our analysis suggests the rate of home building has kept pace with underlying demand and there is no shortage at present.
But comparing the current exceptionally low rate of homebuilding with the growth in underlying demand suggests pressures could emerge.