High building and funding costs may put a significant brake on the rate of new house building and the broader economy over the next three years, the latest consensus forecast from NZ Institute of Economic Research (NZIER) shows.
Photo: 123RF
In the report, compiled from a survey of forecasts from financial institutions, NZIER said economists predicted residential construction investment to fall from 10.5 percent this year to 2.5 percent in 2020.
NZIER senior economist Christina Leung said rising costs could hinder future residential developments.
"Strong population growth points to increased demand for dwellings, but the ramp-up in residential construction has been hindered by higher construction and funding costs and tighter access to credit," she said.
Economic forecasters now expected an even more protracted construction cycle, she said.
Overall, economic growth was expected to slow from 3.3 percent this year to 2.7 percent in 2020, while household spending was also predicted to slow from 4.7 percent this year to 2.6 percent in 2020.
On the upside, export growth, which had been weaker over the past year, was forecast to make a "solid recovery" over the next few years.
Annual average growth in exports was expected to lift above 3 percent by March 2019, before moderating to 2.9 percent in the next year.
"Although heightened geo-political tensions offshore present a downside risk to the export outlook, the expected improvement is growth in the major economies is positive for export demand," Ms Leung said.