"But by the same logic, we continue to warn that when interest rates do eventually rise, house prices will fall."
Unfortunately that last statement doesn't point to a fall any time soon.
Westpac expects the Official Cash Rate will remain on hold at a record low of 0.25 per cent until early 2024.
Stephens is more optimistic about the supply side of the housing equation.
"This building boom is coming at a time when population growth has plunged to its lowest rate in a decade," he says.
"The housing shortages that have long dogged New Zealand are now rapidly receding thanks to booming construction activity and low population growth," he says.
"This means that the severe housing shortages that have been dogging New Zealand for years are now rapidly eroding."
It will still take some years of catch up until we can say "there's enough houses on the ground", he warns.
But as the shortage declines we could see rent inflation easing sooner, perhaps within a year, he says.
Stephens says the latest lockdown won't alter the forecasts, "so long as it is relatively brief and doesn't progress to level 4".
Falling rents would be very good news as new data from StatsNZ shows they rose by almost 5 per cent in the year to June 2020 - prior to the pandemic property boom.
There were two components to the StatsNZ data released today.
One was around a rise in incomes.
Stats NZ found the median annual household income rose 6.9 per cent to $75,024 in the year to June 2020 compared with a year earlier.
The survey used to generate these statistics finished in late March 2020 because of the pandemic.
That's clearly good news, which the Government was understandably quick to highlight in a press release.
But data around housing costs wasn't so good.
In the year ended June 2020, average weekly housing costs were $354 a week, up 3.1 per cent from 2019. For households making these payments, increases were seen in property rates (up 5 per cent), mortgage principal repayments (up 5.7 per cent), and rent payments (up 4.8 per cent).
To be fair, the ratio of income spent on housing costs stayed around the same when the income rise was factored in.
In the year ended June 2020, households spent an average of $21 of every $100 of their household income on housing costs, which is relatively unchanged from 2019.
But that is an average.
Spending on mortgage interest payments decreased (down 6.7 per cent) over this same period.
That means those in the housing market for a longer period of time will have made gains on lower interest rates while those who have just bought copped a price rise.
"Rising house prices have rapidly become a social and political flashpoint, with the Government pledging to take 'bold action' on both housing demand and supply. We regard the options as limited," says Westpac's Stephens.
He sees interest rates as the primary driver of the boom.
But KiwiBank's Kerr argues more supply policy is needed and can work.
"A revamp to the Resource Management Act already planned will help, but the overhaul of such significant legislation will take years," he says.
"We wait with bated breath on the Cabinet's planned upcoming announcements. Some policy changes aimed at reducing demand from 'speculators' are expected to be revealed at the end of the month."
