Westpac expects Auckland’s housing shortage to be wiped out by the end of next year, although across the rest of the country it will take four to five years.

In its latest economic bulletin, Westpac senior economist Satish Ranchhod says the combination of rapid home building and slower population growth means the housing shortages developed in recent years are now being rapidly eroded.

The shortage of houses in Auckland has been cut from about 35,000 homes at the start of the pandemic to about 15,000, says Ranchhod.

“There is still a way to go, but that is a massive turn-around after a decade when the pressures on housing stock had become increasingly pronounced.”

Ranchhod says over the next five years New Zealand will need to build about 130,000 new houses to address the existing shortfall and keep up with the needs of our growing population. That’s equivalent to building 26,000 new homes a year.

With the number of completed homes set to rise sharply, this raises the risk the city could tip into oversupply within the next few years. “We don’t think that will be the case for long: an abundant supply of housing will help to stem the exodus of Aucklanders, bringing demand and supply back towards balance. Ultimately, the risk of oversupply is more relevant at the national level, rather than regional.”

Ranchhod says the bank expects the level of home building to gradually ease back in the middle of the decade, mainly due to the rise in interest rates and related easing in house prices. “Nevertheless, we expect home building activity will remain elevated because of the strong financial incentives for developers to bring new projects to market.”