Report forecasts unprecedented growth in New Zealand construction industry

The total value of a "massive building boom" in New Zealand is forecast to top 200 billion NZ dollars (134.24 billion U.S. dollars) over the next six years as the country comes to grips with its housing crisis, according to a government report out Wednesday.

The value was expected to hit a record 37 billion NZ dollars ( 24.83 billion U.S. dollars) next year, according to the National Construction Pipeline Report released by Building and Housing Minister Nick Smith.

"This report forecasts the strongest sustained level of growth in the building and construction industry in 40 years. It confirms we are building more than we have ever before, and forecasts further growth of 12 percent per year for each of the next two years," Smith said in a statement.

"The projected peak in 2016 and 2017 is 30 percent higher in real terms than the last peak in 2007, and 85 percent higher than the peak in 1997."

The report projected that 80,000 new homes would be built in the biggest city of Auckland by the end of 2020, which compared with only 30,000 built over the past six years and signaled "a massive building boom," said Smith.

The report also forecast the building consents in Auckland, home to a quarter of the country's population, would rise from 10, 500 this year to about 14,000 between 2016 and 2020.

"Today's report points to a golden era for New Zealand's building and construction industry. The challenge for government is to ensure we have the skills and capacity to meet the demands of this growth, and that the regulatory measures are in place so that quality is not compromised for quantity during this period of unprecedented growth," said Smith.

The Reserve Bank of New Zealand (RBNZ) has repeatedly warned that soaring house prices in Auckland pose a risk to the country's

financial stability.

RBNZ governor Graeme Wheeler repeated concerns that lowering the official cash rate could fuel house price inflation in Auckland.

"The Bank continues to be concerned about the financial stability risks and risks to the broader economy that would be associated with a major correction in Auckland house prices," Wheeler said in a published speech Wednesday to business people in the North Island city of Tauranga.

While the government has attributed the crisis to a lack of supply, the RBNZ has targeted investors with a series of loan-to- value mortgage curbs.

"While a strong supply response over several years is needed to address Auckland's housing imbalance, macro-prudential policy can help to lower the financial and economic risks while important regulatory and infrastructure issues are addressed and additional investment in new housing takes place," said Wheeler. Endi