WELLINGTON, Jun 14 (Reuters) – New Zealand must continue to increase housing supply to address housing affordability, which remains a concern, the International Monetary Fund said on Wednesday, adding that land needs to be freed up to promote investment.
“The cyclical fall in (house) prices does not mean that the structural housing shortage has been tackled. There is a strong need to expand housing supply, including for social housing to improve affordability,” the IMF said in a statement released following the “Article IV” review of New Zealand’s policy.
House prices in New Zealand are down about 16% since their peak in November 2021, as the central bank has aggressively raised cash rates with the intention of dampening inflation. However, New Zealand still has one of the highest house price-to-income ratios in the world.
The IMF report said that while prices have fallen, risks to financial stability appear to be under control.
It added that achieving long-term affordability critically depends on freeing up land supply and improving planning and zoning, as well as boosting infrastructure investment to enable rapid housing developments and reduce construction costs and delays.
More broadly, the IMF said New Zealand’s economic growth is expected to slow to 1% per annum both this year and next, while inflation is likely to decline gradually to between 1% and 3% by 2025.
“Risks to the outlook stem from the external environment and a possible need for greater monetary and financial tightening,” the report said.
Reporting by Lucy Craymer Edited by Shri Navaratnam