House prices drop, costs increase: Expert paints grim picture of economy, warns it’s unlikely to improve any time soon

The index also showed the national average price of a home is now $ 989,790, dropping by 4.9 percent in the quarter.

But despite prices tumbling, Kiernan said developers are still struggling to cope with the rising building costs.

“We’ve been seeing a slowdown in the residential industry in particular. Consents there have started to weaken on the housing side especially,” he said.

“Townhouses are still increasing strongly, but there are signs that very, very strong demand that we had over the last couple of years has started to ease and that’s not surprising given where house prices are going – they’re down 10 percent from a year needle.

“Building costs are still rising rapidly and that’s making the equation much more difficult for developers to go ahead with their projects.”

The latest data on the construction sector is due to be released later on Wednesday by Statistics NZ, and Kiernan is expecting them to show business confidence continuing to lag.

“Business confidence right across the economy has been very weak through the course of this year and don’t expect to see any change in that today in the numbers. You mentioned the cost pressures, and that is one area we’d be hoping to see a little bit of relief, “he told AM Early.

“The Reserve Bank obviously has been doing a lot of work in terms of raising interest rates during the course of this year to try and get inflation under control but the difficulty is that we don’t have any clear signs that it has turned yet and certainly previous confidence surveys haven’t really shown any improvement there.

“So we’ll be hoping for some of those pricing expectations and cost expectations to ease but it may be a little bit early in the pace for that and we may have to wait a few more months yet.”

Watch the full interview with Gareth Kiernan above.