A strong pipeline of building activity and a diverse economy are expected to help Hamilton successfully navigate the next three years.
Hamilton City Council has released its first Growth Outlook Report, providing an in-depth look at how the city’s economy may fare over the short-term.
The report draws on a series of Council models used to forecast house prices, GDP, and numbers of dwellings consented and new homes completed.
Using information collated from Council’s data sources, as well as other organisations such as Treasury and the Reserve Bank, the report predicts Hamilton’s economy will be resilient even if the national economy slows or enters a recession.
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.”
Six sectors each make up between 9% to 16% of jobs in Hamilton.
Hamilton house prices are expected to drop 12% from their peak in 2022, before levelling out.
Carstens said 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.
“We’re seeing a house price crunch kick in, the likes of which hasn’t happened in the past 20 years. There was a steep price climb in 2021 and now we’re coming back to where prices should be. I don’t think we’ll see house prices power back up to those levels in the next couple of years because there’s too much disruption out there.”
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.
“The house price drop is symptomatic of a market disruption, it’s not really showing the market is fundamentally becoming more affordable. If you have the cash, then it’s easier and more affordable to get a house. But if you don’t have the deposit, and you don’t have a particularly high income, it’s not really any easier than before. Also, if you are staying in the same market, you are buying low but selling low too.”
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.