More details are needed of the Government's extensive housing promises before Treasury can have confidence in the effect they will have on the economy.
The Government's KiwiBuild programme will boost construction activity, Treasury says, but only if the pressures on the sector are relieved.
In the Half Year Fiscal Update today, Treasury says it's expecting an extra $5.4 billion of residential construction investment over the next four years – largely due to KiwiBuild. That's a 10 per cent increase.
However, it's warned that it can't forecast the number of new dwellings the policy will actually lead to, and says if the current constraints aren't lifted, the impact may not be as strong.
Concerns have been raised with the lack of detail about the KiwiBuild policy and other housing-related promises.
Labour aims to have 100,000 extra affordable homes over the next 10 years for first home buyers at a $2 billion cost.
But there are constraints in the sector, including a labour shortage and pressure on materials pushing construction costs higher and tighter credit limits.
Treasury says residential investment growth is expected to remain weak in the short term.
"While there's been a softening in demand this year, it's expected to increase because of strong population growth and low interest rates continue."
It says policies to help with that pressure could include more competition – including from foreign construction firms.
Housing Minister Phil Twyford says he's spoken to some foreign owned construction businesses who may be willing and able to come to New Zealand and help with the ambitious project.
Other policies could include construction work visas, infrastructure funding, modular housing and buying off the plan.
"There is a high degree of uncertainty about the impact of policies designed to alleviate capacity constraints, given the limited detail on what form they will take or when they will come into effect.
"They could be more effective than assumed and mean that residential investment expands faster to meet the demand created by KiwBuild. Or, the constraints could have a more prolonged impact," Mr Twyford said.
Other promises are expected to see an increase in the takeup of the Homestart grant.
"There's a risk that costs may be different to what has been included in the forecast."
Treasury also warns Labour's promise to reduce homelessness and increase the number of state houses has yet to be developed and it’s likely to have a "significant" fiscal impact.
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