The Hawke's Bay economy is exposed to an Auckland property market collapse.
The Hawke's Bay economy is exposed to an Auckland property market collapse.
The Hawke's Bay economy would suffer from an Auckland property market collapse, says Infometrics chief forecaster Gareth Kiernan.
House prices have almost doubled since 2011 while incomes are up by less than a quarter.
In Hawke's Bay the increase is 30 per cent for the same period, with the majorityof the increase in the past two years.
He said the Hawke's Bay economy was benefiting from strong horticulture and wine sectors while traditional mainstay sheep and beef has held its ground.
"Auckland is 35 per cent to 40 per cent of the nation-wide economy and property market, so I think where Auckland goes there will be some flow-on effect to other parts of the country," he said.
"Generally the region's economic performance is pretty good so it may help to insulate it to some extent, but I guess Auckland is such a large proportion of the nationwide economy that I don't think you can ever entirely avoid some of those effects coming through."
He said the prospect of economic damage to regions closer to Auckland should its house market collapse, such as the Bay of Plenty and Waikato, was greater because their values echoed Auckland's while they were not starting from a position of undersupply as Auckland had.
"Obviously house prices in Hastings and Napier have been going up pretty well so there are some risks there. You look at Hawke's Bay and there was quite a significant period of time - a bit like Wellington - where prices didn't really do much since the Global Financial Crisis, so a bit of a lift is a bit of a catch-up."
Good population growth and low interest rates was a justification for Hawke's Bay house prices growing strongly but if supply increased along with interest rates over the next two years "then you could move into a period of oversupply".
