New Zealand housing sector likely to slow in 2017, headwinds seen from upward pressure on global interest rates

Data released by Statistics New Zealand on Monday showed that New Zealand building permits spiked a seasonally adjusted 2.6 percent on month in October, after a 0.2 percent increase in September.

The total number of new building permits issued in New Zealand came in at 2,575. For the year ended October, 30,161 new dwellings were consented - up 14 percent on year. The annual number of homes consented has exceeded 30,000 for the first time in 11 years. However, it still remains 10,000 less than the all-time high of 40,000 reached in early 1974.

Housing demand and construction spending are two crucial sectors of the New Zealand's economy. Statistics New Zealand will report Q3 GDP growth on Thursday and forecasts are for a 0.9 percent rise m/m. In annualized terms, GDP is forecast to expand 3.7 percent.

"New Zealand’s housing sector is forecast to slow in 2017. House price inflation is forecast to slow to 5% next year from a pace of 14% in 2016. Upward pressure on global interest rates could provide the biggest headwind to the housing sector in 2017," according to Westpac’s commentary.