House prices in cities expected to drive economic recovery – Westpac

A report by one of the biggest banks in New Zealand says the big metropolitan areas are likely to drive economic recovery this year, and that further-increasing house prices will play a big role.

Westpac‘s Regional Roundup predicts spending activity on the back of skyrocketing house prices in places like Wellington, Auckland and Christchurch will effectively close the performance gap with already high-flying rural regions.

The report showed many rural areas, supported by strong commodity prices and demand for goods, had not been badly affected by the economic downturn caused by COVID-19.

But regions exposed to foreign tourism, such as Auckland and Central Otago, recorded a greater impact on their economies.

Westpac’s industry economist, Paul Clark, told Morning Report regions with traditionally rural economies were essentially operating at pre-COVID levels, including Bay of Plenty, Hawke’s Bay, Gisborne and Northland.

China’s economic strength during the pandemic had propped up New Zealand’s regional exporters, with commodity prices remaining relatively firm.

“The economy in general has shown quite a strong recovery and we think a lot of the regions are showing a similar trend and its really those regions that have a strong regional background… we’re talking about agriculture, horticulture and forestry,” he said.

The big metropolitan regions of Wellington, Auckland and Christchurch, where service industries were significantly affected by lockdowns, and tourism-dependent Otago, had more catching up to do.