Thursday, 26 November 2015

Housing market a regulatory disaster

Guest post by Affordable Auckland’s mayoral candidate Stephen Berry

With Auckland’s housing market becoming an international sensation following the sale of a state-house hovel in Devonport for over $1 million [read Bloomberg’s ‘London House Prices Have Nothing on Auckland’], it’s clear young people and low-income families are paying the price for the Council’s regulatory disaster.

Nosey NIMBYs, heritage preservation and zone rigidity are all contributors to the insane hyper-inflation that has afflicted Auckland’s housing market. Resource consent costs averaging fifteen- to thirty-thousand dollars per site don’t help.  However the biggest elephant in the room, which the left-wing council refuses to recognise, is that what is causing the artificial land shortage sending values skyrocketing are their very own policies.”

I refuse to accept the usual scapegoat of ‘foreign speculation’ as the cause of Auckland’s heated house market. Speculation is just a symptom of our problems, not the cause. In order to slow price inflation the city needs to abolish the urban boundary and allow the city to spread out, as well as intensifying.

High school economics textbooks are not the only place you can find the basic economic laws that demonstrate price inflation when supply is artificially prevented from meeting demand. A 2010 report from the Productivity Commission report was also able to illustrate this consequence when it showed land 2km inside council’s self-imposed urban limit is eight times the price of land 2km outside of it.

Centrally planning special zones where consents processes are streamlined, and where land-owners receive special favour, will attract headlines but is not going to make the slightest dent in prices. The fact only 102 houses have been built out of 30,000 projected proves this.

The Council needs to remove the regulatory distortions it has created to allow the market to begin behaving in a healthy manner. Centrally-planned growth must be replaced by organic growth respecting private property rights. The consequences of not doing so will be and are becoming catastrophic.


Stephen Berry is the Affordable Auckland mayoral candidate for 2016.
He was third place-getter in the 2103 Auckland mayoralty election.
Like Affordable Cities on Facebook.

3 comments:

  1. shame to see the shallow nimby/heritage thinking here.
    Auckland has plenty of already zoned apartment (and tce) zoned land - and has for 20years, the kningslands, gt North road etc. Some have started being more developed but still only a fraction of it used so far, without need to expand into suburban areas.
    Auckland is already an intensified city by world stds, and tearing down a 4-5 bedroom villa for 2x 2 bedroom terraces does nothing except increase cost of housing.
    Debate is at superficial number of houses level - real impact is at bedroom level. Auckland grew by 70,000+ last year - and they're all sleeping somewhere. We have huge capacity in existing housing stock, and what people and the market respond to ie elderly selling and freeing up capacity.
    The real affordability isn't around accommodation - you can buy huge numbers of cheap apartments, it's around a style of housing people want ie the existing suburban backyard style - exactly what council wants to stop. So where competition drives up prices. Apartment prices aren't moving by anywhere that level - the market working and saying what it wants more of.
    So issue is Council stopping the market delivering what people want.
    Their insistence on protecting wealthy life style block owners (like Phil Goff) is at the root of the problem.
    the other and bigger element is the credit boom flowing on from overseas and their money printing presses

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  2. There are 20,000-30,000 empty houses in Auckland due to foreign & domestic speculators. The biggest regulatory failure has been the government refusing to find out who is buying the houses. Nobody can advocate policy until we know what exactly is going on.

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  3. "Nobody can advocate policy until we know what exactly is going on."

    Comrade by time the clowns in Wellington get lucky and work out what is going on and reacts the market changes.

    Council restrictions on land cause price increases but don't explain the massive spikes in prices over the last 3 years.

    The credit pouring into the market, for a range of reasons, does explain the spike.

    Anyway if house prices in Auckland becomes affordable ("affordable" a politically correct word) for whatever reason then the banks are all insolvent.


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