An economist is picking the Auckland housing market to flip from shortage to surplus in 2022.
As they have across most of the country, house prices in the super city have skyrocketed in the past year. The average (mean) is at $1.3 million according to QV, while the median is around $1.1 million.
Experts have credited the rise to record-low interest rates, making it cheap to borrow, and a lack of supply.
But both are set to turn, says economist Cameron Bagrie.
"The interest rate cycle has turned," he told The AM Show on Tuesday, citing rises in interest rates offered on long-term fixed mortgages and building consent data.
"Look at the numbers, particularly for Auckland. Auckland consented about 16,000 units in the last 12 months and I think the run rate is going to be the same over this calendar year and into 2022."
In the year to April there were 42,848 consents nationwide, nearly half of them - 18,224 - in Auckland, where the rate of consents has doubled in the last five years.
With the borders shut thanks to COVID-19, population growth thanks to migration has plummeted. In the year to March 2020 - when the borders shut - we had a net gain of 91,900, which dropped to just 6600 in the 12 months to March 2021.
"Auckland's population growth is not 16,000 in the last 12 months - so we're actually going to end up building more than one house per individual. We're playing catch-up at the moment - it's going to be interesting in 2022 because Auckland's market, the thing's gonna flip."
Supply constraints and a tight labour market are expected to drive inflation up, which could prompt the Reserve Bank to raise interest rates - further dampening demand, and perhaps prices.
"That's a real recipe for inflation, so inflation and interest rates, that'll be the 2022 story."
But it's not just interest rates that'll help, says Bagrie.
"You've got the removal of the interest rate deduction, which is a big, clobbering hit. There's more responsibility on landlords to act on long-term players, ie. look after your tenants, Healthy Homes [legislation], these sorts of things. That's a good thing, that sort of stuff is long overdue.
"But the playing field has fundamentally sort of shifted. That's a good story because New Zealand does tend to have too many eggs in that housing basket."