19 July 2024

Hamilton’s GDP to grow despite expected 12% fall in house prices

Hamilton’s average annual GDP growth rate is predicted to be about 2% through to 2024, while house prices are expected to drop 12% from their peak in 2022.

This forecast is made in Hamilton City Council’s first Growth Outlook Report, providing an in-depth look at how the city’s economy may fare over the short-term.

The report –released today, predicts Hamilton’s economy will be resilient even if the national economy slows or enters a recession.

The report draws on a series of Council models used to forecast house prices, GDP, and numbers of dwellings consented and new homes completed.

(Source: HCC)

Growth Funding and Analytics Manager, Greg Carstens said the report forecasts Hamilton’s average annual GDP growth rate to be about 2% through to 2024 – below the 3.6% growth rate seen pre-pandemic.

“Two percent is okay or slightly below what you’d like for healthy GDP growth. But in today’s environment, when you’re flirting with a recession, you’d consider 2% strong,” Carstens said.

“Rising interest rates, supply chain issues, banks tightening credit and other uncertainties have impacted consumer and business confidence. But Hamilton looks to be in a good position to weather the storm given our diverse economy and how resilient our different productive sectors are.”

Hamilton house prices are expected to drop 12% from their peak in 2022, before levelling out.

Carstens believes the fall in prices can be viewed as a correction following a period of unprecedented growth. He doesn’t expect house prices to take off again any time soon.

A drop in house prices, however, does not necessarily translate to homes becoming more affordable, Carstens said, with rising interest rates making it more expensive to service home loans.

Following the Global Financial Crisis (GFC), there was a fall in Hamilton house prices followed by a five-year period of little to no price change.

The city’s record level of residential consenting in 2021 is expected to drop off in 2023, representing a decline of about 20%. However, the number of new homes being completed is predicted to increase from the end of 2022 and into 2023 as construction backlogs are cleared.

“A pipeline of consented homes will come on line next year and that will push those numbers up. One of the real takeaway points is the economic environment doesn’t seem to be hurting infill housing developments like it is in the greenfield at this stage,” Carstens said.

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