The International Monetary Fund said Wednesday that New Zealand has to maintain building houses to address housing affordability, adding that land should be freed up for investment.
The cyclical downturn in house prices has not addressed the structural housing shortfall. After its “Article IV” review of New Zealand policies, the IMF noted, “There is a strong need to expand housing supply, including social housing, to improve affordability.”
Since November 2021, New Zealand house prices have declined 16% as the central bank aggressively boosted the cash rate to reduce inflation. New Zealand has one of the world’s highest house-price-to-income ratios.
The IMF report says financial stability risks are controlled despite falling prices.
It said ensuring long-term affordability requires freeing up land availability, improving planning and zoning, and encouraging infrastructure investment to fast-track housing developments and reduce construction costs and delays.
The IMF expects New Zealand’s economic growth to decelerate to 1% this year and next and inflation to fall to 1% to 3% by 2025.
It warned that the external environment and a likely need for further monetary and financial tightening pose risks to the outlook.
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