Rising house prices not the result of a ‘strong market’ but of a totally malfunctioning market [updated]

Bad as the Reserve Bank’s focus on bogus “price stability” is, which as Phil Goff bewailed last week it targets with the blunt instrument of interest rates, it turns out there is little it can do about housing prince inflation – but as we’ve explained many times before, and as Owen McShane explains in his latest newsletter, there’s something Phil and crew could do that could, and would:

    “The Reserve Bank is well aware that local government policies that restrain the supply of land raises house prices because supply cannot respond to changes in the scale and nature of demand.
    “The only way the Reserve Bank can respond to these real estate bubbles is to increase interest rates which in turn increases the value of the dollar.
    “New Zealand’s housing supply is even more constrained than ever because massive compliance costs and development contributions mean the cost of creating new lots now exceed their sale value.
    “These rising prices are not the result of a ‘strong market’ but of a totally malfunctioning market.
    “New Zealand cannot blame low interest rates for our housing bubble.
    “We have had one of the least affordable housing markets in the world and yet during the bubble years the RB maintained a high interest rate regime.
    “Indeed, international urban economists cite NZ as the counter-factual case study to challenge those who blame the bubble on cheap money rather than constraints on supply.
    “The so-called “Smart Growth” planners refuse to learn. They insist we have unaffordable housing because we have not had sufficient Smart Growth (dense thinking.)
    “Their response is to have even more restrictive plans, and in Tauranga they are now proposing enforced minimum densities.
    “Most true communists believe the Soviet Empire collapsed because its communism was not pursued with sufficient rigour.
    “Most central planners blame their failures on other people’s failure to do as they are told.
    “So beware. Smart Growth is coming to a town near you.”

‘GREAT DAY OUT’ UPDATE:

 

Why not join Owen and supporters at Alan Gibbs’s Kaipara farm for the Great Day Out?  Great food, great beer, and some alleged art – all in aid of a good cause.

Come and support Owen’s Centre of Resource Management Studies and Muriel Newman’s Centre for Political Research – and have a great day out.

Standard Donation supporters will enjoy a day at the farm and the Champagne lunch, and have a chance to share ideas with the Trustees and Directors and their friends and colleagues.

Premium Donation supporters will also be able to chose from:

• A guided tour of the alleged works of art by jeep.

• A ride in the Aquada on the lake.

• A helicopter flight over the farm

Head here for details, and to register.