Don’t knock rising house prices: REINZ

The economic benefit of rising residential property prices should not be underestimated or dismissed, says national president of the Real Estate Institute Murray Cleland.

Tuesday, February 20th 2007, 9:14AM

by The Landlord

A building boom in provincial areas and its economic flow-on effect has contributed to a “golden period” of prosperity in the provinces, Cleland says in the February issue of Real Estate magazine.

While the Real Estate Institute acknowledges the impact of rising property prices on household debt and getting into a first home, he says constant criticism of rising property prices is starting to make people think they are entirely a bad thing.

Last year, “the constant threat of raised interest rates and intervention from the Reserve Bank also affected confidence – assisted by constant speculation from the gloomier economists that this was inevitable – and almost began to make people feel as if rising property prices were a bad thing,” Cleland says.

“But of course they are not a bad thing and are a significant contributor to our current economic buoyancy.”

Cleland says that provincial New Zealand is experiencing a period of strong economic growth and development.

“Provincial New Zealand is now leading the residential house price growth tables, having been perhaps a bit slower off the blocks than the larger cities in the earlier days of the property price cycle.”

“Businesses in these towns are growing, possibly to a greater extent than those in the larger cities, where a preoccupation with political and economic indicators tends to obscure the real goal of ‘getting on with the job’.”

“Much of this provincial prosperity stems from buoyant house prices in recent years, which have a strong economic flow-on effect.”

“The rise in residential property prices over the last few years has undoubtedly been a factor in increased new home building activity, as the value equation between existing and new homes adjusts itself.”

And Cleland believes that 2007 will be an even better year for house prices than 2006, “with less doom-saying and a growing realisation that a strong property market makes for a strong economy”.

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