Brendon Harre says housing policy failure impacts heavily on the poor. He calls for a fix to the housing crisis from an inequality perspective targeting the RMA and infrastructure financing

Brendon Harre says housing policy failure impacts heavily on the poor. He calls for a fix to the housing crisis from an inequality perspective targeting the RMA and infrastructure financing

Housing policy failure impacts heavily on the poor as many commentators, including myself have long detailed. A civilised society should be able adequately house all of its people. Failures like families living in motor vehicles in the car parks of Auckland is confronting and distressing. The call to fix the housing crisis from an inequality perspective is strong and valid.

Housing policy failure though also burdens New Zealanders through loss of productivity. This story has less emotional impact but I believe it has wide ranging detrimental effects that are felt throughout New Zealand's society.

The economic argument goes like this;

The Italian-American economist Enrico Moretti has described who benefits from productivity gains -workers or landowners is dependent upon whether the city has inelastic versus elastic housing supply, by using a two city economic model with a positive productivity shock to city b.

3. If housing supply in b is fixed… the entire productivity increase is capitalized in land values in city b… City b becomes more productive but it cannot expand its workforce because housing cannot expand. No one can move to city b, and the only effect of the productivity shock is to raise cost of housing… All the benefit goes to landowners in b. Real wages are not affected, and workers in both cities are indifferent. This is a case where, even in the presence of a shock that makes some firms more productive, labor is prevented from accessing this increased productivity by the constraints on housing supply. Part of the increase in productivity is therefore wasted.
4. If housing supply in b is infinitely elastic… indicating that housing prices in bdo not change. For each additional worker who intends to move to city b, a housing unit is added so that housing prices never increase. Landowners are indifferent, and the entire benefit of the productivity increase accrues to workers… indicating that real wages in city b increase by the full amount of the productivity shock. Real wages in city a also increase, but less than in b

The above paragraphs are from Moretti’s Labour Market Handbook (P. 1264). Note the mathematical proofs have been removed for conciseness reasons.

House price inflation (and rental price inflation is a similar story -though not quite as extreme) is inflating faster than income. Most of last century up until the 1990s median house prices were stable in relation to median household income, at a ratio of between 3 and 4. Most recently in NZ it is over 6, in Auckland it is 9.0 and Tauranga is the most unaffordable at 9.1

The evidence points to New Zealand towns and cities since the 1990s being closer to Moretti’s inelastic scenario 3 rather than the more beneficial (for workers) scenario 4, as house prices have significantly increased yet house building rates have responded very slowly.

2012 was the start of a significant price boom for Auckland houses. This graph only shows the start of the boom it continued to 2018 and prices roughly doubled.

Auckland for instance had a significant increase in house prices from 2012 yet four years later in 2016 its building consent rate was only middling. Since 2014 Wellington’s building rate has been slow in comparison to its population growth, resulting in rents increasing by approximately $100 a week or $5000 a year for 2-bedroom flats since 2014/15. Wellington’s building rate in 2016 was even worse than Auckland’s.

Auckland could only build at a rate of 6.1 houses in mid 2016 despite prices rising rapidly from mid 2012, Wellington’s building rate was even worse at 3.6. Source: NZ Herald article -Despite huge housing shortfall, Auckland consents per capita only middling

I believe the economic reforms of the 1980s and 90s made many markets in New Zealand more responsive to changing conditions (some would argue too responsive). The labour market, farming, manufacturing, imported goods etc all had to respond to market forces but the housing market went the other way, becoming more rigid due to failures with the Resource Management Act (land-use policy) and infrastructure financing.

This housing policy failure means that productivity gains and other increases to housing demand in urban areas (where 85% of kiwis live) accrue to landowners not workers and a proportion of productivity gains are lost. This also means productive city-based firms in New Zealand struggle to recruit and retain skilled staff.

Many kiwis with labour market skills have moved to areas where they can receive a higher proportion of benefits from their labour. In the common Australaisian labour market the least worst place wrt housing is Queensland which is where the greatest proportion of New Zealand’s large 750,000 diaspora reside. About a third of New Zealanders residing in Australia live in Queensland with half of them living in Brisbane. Brisbane is the city with the most New Zealanders despite it being much smaller than Melbourne and Sydney. The New Zealanders working in Australia earn above average incomes, work longer hours and have a higher labour market participation rate i.e. they are economic refugees taking advantage of better labour and housing market conditions.

The policy response to New Zealand’s skills shortage from successive governments has not been to fix the housing market but to open up immigration. This hasn’t been a successful economic strategy. New Zealand’s relative economic decline has continued. Proponents of a high immigration rate may argue that New Zealand’s immigration policy has limited the countries economic decline. I am not informed enough to judge the overall merits of a high or low immigration rate. I do though want to acknowledge New Zealand has an internationally high and volatile immigration rate. New Zealand’s current migration rate at 13 people per 1000 population is almost four times as high as the United Kingdom and the United States. And that fast population growth via high and volatile net immigration levels has caused housing market difficulties whilst the arriving immigrants are arguably less skillful than the departing emigrants.

Source: Consistently dismal relative productivity growth

New Zealand’s economy has remained dependent on rural based industries -farming, forestry and tourism, despite the economic reforms of the 1980’s and 90s intending to diversify the economy. New Zealand firms have not been able to move up the value chain. Productivity growth has been dismally poor. A low wage, low skill economy has become entrenched. New Zealand is gradually falling behind comparable OECD economies -most of whom have adapted to urbanisation better than New Zealand.

Matthew Rognlie analysis of Piketty’s inequality thesis on the fall and rise of net capital share, has found that capital income is not growing at the expense of labour. This refutes one of the main theories of economist Thomas Piketty’s popular book Capital in the 21st Century. Rognlie’s closer examination of the quantitative data shows that the long-term rise in capital income is mostly driven by housing. This should concern New Zealand because since the 1990s we are one of the countries whose house prices have risen the most.

A capital gains tax would have addressed some of these concerning symptoms by taxing and redistributing a percentage of future accruals in landowner wealth, but it would not have fixed the underlying cause. Thus from a housing perspective there would have been an argument for capital gains tax on fairness but not on efficiency grounds. Given the political difficulties of imposing a capital gains tax on the family home there was huge implementation problems as well. It is not surprising that capital gains tax has been taken off the political agenda.

Barring some dramatic change in the political environment it seems Jacinda Ardern’s government will get at least a second term if not more. Her government should use this time to embed structural changes in the housing market to make it more elastic so that workers not landowners get a greater proportion of future productivity gains. This would be a transformational change that addresses one of two crises that the next generation are most concerned about -the housing crisis (Generation Rent).

The other concern is the existential ecological crisis of climate change (Extinction Rebellion). To address both of these crises New Zealand will need to look at modelling off cities with flexible housing markets and small ecological footprints, like Tokyo rather than cities which achieve flexible housing markets at the expense of large ecological footprints, like Houston.

Structural reform to the housing market is politically achievable (the first rule in politics is being able to count) because these reforms are in the coalition agreement and the Speech from the Throne. The capital gains tax unfortunately wasn’t achievable because there was no agreement between coalition partners.

Jacinda Ardern calls herself a pragmatic idealist. I hope her idealism includes addressing the housing crisis and climate change. I hope her pragmatism gives her insight into the viable routes for successfully achieving these goals.


Additional Reading:

Housing Constraints and Spatial Misallocation By Chang-Tai Hsieh and Enrico Moretti

The Causes and Economic Consequences of Rising Regional Housing Prices in New Zealand by Peter Nunns

New Zealand has nearly as many New Zealanders living abroad (750,000) as it does migrants living in New Zealand (1,000,000) according to the Wikipedia entry on New Zealanders.

New Zealand has an estimated resident population of around 4,885,300 (as of June 2018). Over one million New Zealanders recorded in the 2013 New Zealand census were born overseas. While most New Zealanders are resident in New Zealand, there is also a significant diaspora, estimated at around 750,000. Of these, around 640,800 lived in Australia (a June 2013 estimate), which was equivalent to 13% of the domestic population of New Zealand. Other communities of New Zealanders abroad are predominantly concentrated in other English-speaking countries, specifically the United Kingdom, the United States and Canada, with smaller numbers located elsewhere.

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I concur and this is a very good article. But I think it should be noted that it is not all about the poor and probably NZ housing policy failure impacts most heavily on the Auckland rich. If the demand drop that is now happening in Australia starts to occur here, in our inelastic market, the wealth reduction of Auckland's rich will be spectacular.

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Oh, poor Auckland riches...

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Brendon, that is one brilliant article.

Thank you Roger

The price of the median Auckland house actually is about $200K more than your Nov 2013 price - so the problem is even worse than you show. Also the metric of consents per 1000 people isn't a good one for a rapidly growing population like Auckland. You need a demand factor as well which would show the 6.1/1000 pop number to be woefully inadequate. I think the Auckland population was increasing at about 35000 a year - and the consents were about 10,000. There is lots of infill so you probably need to discount the demolition consents too - maybe 2000? So at say 2.5 people per household Auckland is short about 6000 houses a year at that rate.

It's a massive problem which the councils "compact urban form" is completely responsible for. Auckland's failure has infected the entire NZ house market too - all totally avoidable. Yet the councillors and bureaucrats seem to show no empathy or humility at all - and continue force the failed densification policies on the city.

Good piece Brendon.
Rather than further bastardising the RMA, I would really like to see it burnt and for us to look at new legislation.
Of course, there is the argument that the RMA is not the problem, rather it is the way it is implemented. I think there is some truth to this, however implementation of it is so consistently bad that I think it demands the RMA is changed or preferably burnt (and we start again). It's clearly not directing councils sufficiently to ensure we get the right implementation.

The idea of an Auckland with compact Japanese-like footprint is very appealing, but that horse has bolted. Phil Goff has carried out significant reform of the Auckland market with massive land supply increases from 2017 onward. The elasticity of the Auckland housing market has increased and housing in Auckland is now being built at rates similar to Christchurch's peak. Auckland has been reformed and is now like a proportionally more spread out version of Houston.

Sorry. How is Phil Goff responsible for "significant reform of the Auckland market with massive land supply increases from 2017 onward."?
Phil Goff assumed office post AUP implementation. He had literally no say in the process...

The term is "carried out" which means to execute, follow though with, perform, do.

Had I meant "responsible for" I may have written that.

I understand your point Unaha but Auckland even now could move towards a Tokyo style of urbanism. Auckland could (and I think will have to sooner or later) stop spatially subsidising the car by introducing congestion road pricing. Auckland could learn the lesson of how to integrate property development with new rapid transit -especially in brownfield or greenfield areas where large master planned developments could quickly change Auckland by developing with pace and scale. Auckland could remove unneeded urban growth boundaries that prevent the city from building upwards -giving the city fine-grained bottom up walkable communities..... Wellington, Christchurch and our smaller cities could make similar changes.

I don't think that removing urban growth boundaries will make any difference to getting more intensification. I of course understand the theory but I am not convinced the reality would follow the theory in Auckland. In my opinion it won't make any difference at all, which is why I think we might as well keep the boundaries. There is plenty of future urban zoned that could be brought forward if infrastructure funding and financing was sorted out.

Fritz l appreciate your comment and I know you have industry experience so there is some expertise backing your opinion. I think long term (over decades) giving a right to intensify (and removing objection rights) could have a significant impact. But in the medium term (less than a decade) a more top down masterplanned approach implemented at pace and scale is what will have the greatest impact.

Have a look at Heidelberg to see how the Germans do it. And all buildings (houses, offices, schools, fire stations, hospitals) built to the Passive House standard.
https://m.youtube.com/watch?v=VLJQdxuxEGo

Fascinating. The difference between the ways German local govt and Auckland council work is immense.

Brilliant Kiwimm that is the sort of innovative and sustainable housing and urban development that NZ needs.

Kiwimm I have written an article about this video.
https://medium.com/land-buildings-identity-and-values/future-proofing-th...

Did you actually watch the video - that is the most depressing looking development imaginable - did you see the playground? I guess if you want your kids to spend all their time in front of a screen then it's fine. Let's hope NZ never gets to think this is a good idea.

All things being equal, I would agree with you, that boundaries are a better idea than lack of boundaries. Unfortunately this is Auckland where things are not equal. The council has already removed (or greatly widened) outer urban boundaries. Auckland Council retains (and has effectively narrowed) the inner urban boundary. I do not think we should be restricting development closer to Auckland, whilst subsidising development further away and instead think we should widen the inner urban boundary to remedy the disparity.

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Good article but I think we really have to highlight the "How did NZ's (Particularly Auckland) property prices get so ridiculously high"? Considering that wages are low in NZ and even in Auckland. By the way Brendon, high immigration actually suppresses wages it doesn't increase them. That's why some Western countries have had to bring a minimum salary level for immigrants to stop local employers exploiting them and and avoiding employing residents (Since they can get cheap workers from overseas).
Currently the UK is looking to increase their Visa salary requirement for Employers of Non EU countries to £55,000 per immigrant ($107,000 NZD).
https://www.peoplemanagement.co.uk/news/articles/new-threshold-non-eu-visas

Strangely enough I was recently watching a documentary on NZ's housing crisis "Who Owns New Zealand Now?" which is certainly worth a watching. https://www.youtube.com/watch?v=HzSAmOQuyjU
It also show how wages have been suppressed in NZ over the past 30years.

Going back to my first question: "How did NZ's (Particularly Auckland) property prices get so ridiculously high"? I'll think you'll find the answer is; lots and lots of overseas money mostly through money laundering. Basically a false economy fostered by the previous National Government.

The argument can be made that when rural land is zoned as residential, the value increase largely reflects the cost of all the infrastructure and services that the government and municipalities must provide to support the new properties. I.e. everything from motorways, schools, hospitals etc to libraries and sports grounds. As such that increase in land value should not fall into the pocket of the lucky owner or land banker. The most appropriate place where it should go is to the party who is paying for all this. I.E. the immediate subdivision developer, Government and Municipalities.
I would be happy if the government took possession under the public works act of all land about to be re zoned, at rural land values, then tendered out it’s development through a body such as Transit. This will produce cheaper section prices and fully compensate the community for all the costs associated for their development.

I propose something similar but not quite as extreme Chris for how Wellington could solve its housing crisis. My proposal is that the government through its new Housing and Urban Development Authority negotiates with landowners that it will provide infrastructure (including rapid transit), consenting, property titles (1000s), public services -educational, health, parks etc and in exchange the landowners get 1/4 of the property titles and the Housing and Urban Development Authority gets 3/4. Infrastructure is paid off by a targeted rate on the property titles.
This model could be repeated elsewhere and would be consistent with the Tokyo urbanism style discussed above.
https://medium.com/land-buildings-identity-and-values/can-a-eco-city-sol...

Interesting alternative idea, Brendon. Might be useful for land that is already inside the urban boundary. It's weakness are that it is not as clean cut and has some vulnerabilities. As we have seen this government is extraordinarily naive and very vulnerable to have the wool pulled over their eyes. I can just see a slick land developer screwing them comprehensively. It is also vulnerable to dishonest influences , pockets being lined on both sides of any arrangement.
One of the other things that I like about this idea is that if the government wants to modulate the section price trajectory; they can set the prices at anything that they like (As opposed to some measure that will suddenly crash the market). At least any extraordinarily large profits will end up in the right pocket. Long term however the land price trajectory should be downwards to sensible and affordable levels; and the government should make it clear that that is what is going to happen, least the players, manipulators and speculators think that at some time in the future they will get there hands on the control of the land market again.

The aspect I like about this model is that the Urban Development Authority could introduce a completely new business model into NZs housing development market.

Not just reducing section prices down to there true infrastructure cost value. It could do density done well.

Conservative private developers would not control the section covenants which limit sales to the top end of the market by forbiding options like duplexes, multiplexes, small or no garaging, small house size...

An Urban Development Authority could target a variety of modest housing types focusing on the middle of the market. This could create an appealing walkable community which is sold at a faster pace thereby quickly achieving a density that makes rapid transit sustainable.

Excellent article. I greatly appreciate the tone which feels like it avoids blame and emotion. I guess you support here general feelings I had; ones I wasn't literate enough to express most of the time.

From here it feels easy to start suggesting ideas that would start to reduce the inelasticity of our housing market, perhaps radical or experimental ones that we should be exploring, again without emotion. Perhaps building new but simple dense housing/apartment complexes that suit the needs of those new to the region, support the needs of the poor or the many slightly-struggling, and stop using that class of people to prop up the wealth of existing landowners.

New, radical, experimental and innovative ways to reduce the inelasticity of our housing markets would be very much appreciated.

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How was this ever described by New Zealand politicians as "a good problem to have"?

You have to shake your head in wonder.

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It was so disgenious and dishonest.
One of the things Key canpaigned on before getting first elected was 'sorting out the housing mess' (his exact words to me circa 2007).
And then the mess conveniently became 'a good problem to have'.
Hopeless

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"New Zealand’s current migration rate at 13 people per 1000 population is almost four times as high as the United Kingdom and the United States. And that fast population growth via high and volatile net immigration levels has caused housing market difficulties whilst the arriving immigrants are arguably less skillful than the departing emigrants."

Skills and social cohesion aren't longer necessary when you have the strength of diversity.

The kiwis fleeing to Queensland must be so sorry when they look back and see what they are missing out on.

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I was interested to read that Australia is to reduce it's immigration quota from 190,000 to 130,000 per year. Note

1 they have a quota
2 Their population is 25,000,000 compared to our 4,500,000 to 5,000,000. This makes our immigration of 60,000 to 80,000 per year (that we know about) look extremely high and out of control. Don't we know it, no housing and runaway infrastructure costs.
There may be some relief in the future as house prices crash in Australia as people will chase the higher income and lower house prices over there. I don't know that the Australian government will be that thrilled and will there be some backlash in the free travel between the two nations?

https://www.y-axis.com.au/blog/australia-reduce-overseas-immigration-quo...

There are problems with high numbers of 'temporary' work visas but NZ Permanent residency approvals are between 35,000 and 40,000 which is down from 50,000 for the previous government. It still leaves the per capita rate higher than Australia and UK and USA but a significant improvement which our governing parties are unwilling to boast about.

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I sent an email 2 weeks ago to the Minister of Immigration and Winston Peters asking why our levels of immigration are so high despite the election promises. Yet to get a response. If I do I imagine it will be full of spin.

I'm sure we'd all like to hear the response when you get it Fritz.

Brendon, that is a brilliant article. A point noticed by other commentators.

We are now in such a mess that putting it right will cause some anguish (even myself with a house and rental property will grumble as my wealth evaporates) but that anguish is trivial compared to families with young kids living in cars and motels.

Please forward your article to our politicians. They need to mull over your remark: ""A low wage, low skill economy has become entrenched "".

+1 Brendon.

Demand
1) Lower immigration to something sustainable, and set policy based on maximising gdp/capita, rather than growth gdp only via high immigration
2) The immigration rate has to come down if we are to meet climate change targets which are absolute not per capita

Supply
1) Sunset all covenants restricting density & zoning
2) Remove all urban growth boundaries
3) Issue RMA national standards removing density & zoning limits & requiring limits base only on effects
4) Let ComCom dismantle the building supplies duopoly
5) Move to targeted rates/bonds to fund infrastructure
6) Government is already moving on certifying prefabs by type rather than site by site

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I marvel at the indifference of NZrs over immigration and the low level of debate. The economic benefit justification is wearing thin as the touted GDP per capita increase benefit of more people fails to materialise. The ageing workforce/sub replacement fertility rate justifications are still sometimes advanced, almost always absent commentary on why immigration will not fix this 'problem' nor on what other solutions might be possible. With most of the once earnestly promoted justifications for mass migration losing their credibility, including the demands of a lazy business community which prefers to import more people rather than invest capital to improve productivity, it seems that it is now mainly the ideological concept of more 'ethnic diversity' and a bigger population being 'good for us' that is driving the tide of arrivals swamping our infrastructure. Housing is a critical example of these stresses but at a higher level there seems to be limited discussion about wider concepts such as why a radical change to our national identity is being driven, effectively by Wellington bureaucrats.

Thanks, I've been trying to say much the same but without your fluency. I'm one of those immigrants who says "now I'm in lift the drawbridge" a sentence borrowed from a Chinese immigrant.
The indifference may be because of the quality of the debate with a "I don't like foreigners" at one end and self-hatred at the other. The lack of debate is exploited by businessmen who prefer docile cheap workers rather than investment and politicians/bureaucrats who find a growing economy however unproductive gives them job opportunities. No immigrants into Auckland for the last 30 years and we wouldn't need the City Rail Link, most new roads, schools, hospitals, etc. The other unadmitted reason is to ensure Maori remain a minority.

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A favoured technique of the pro-immigration brigade is to label anyone who thinks immigration levels should be significantly reduced an 'xenophobe'.
While undoubtedly most if not all xenophobes want to see big cuts to immigration, it does not follow that all those who want big cuts to immigration are xenophobes.

Fritz. Attaching the label of 'phobe' to any view that doesn't align with prevailing ideology is increasingly becoming the default position of those who are either not equipped or unwilling to debate issues at an evidence based level. As Hitchens declared on 'Islamaphobia' - "a word created by fascists, used by cowards to manipulate morons". An extreme depiction but I agree with the sentiment - where the term is employed solely to stifle debate. My mischievous side enjoys observing the reaction when challenging the prevailing 'hear no evil' culture of many kiwis on sensitive 'cultural' issues such as immigration; the immediate discomfort, the 'uh, oh, nutter alarm' look and an unsettled glance towards the exit. The kiwi physce is now infiltrated with the social progressive agenda, to the extent that robust debate on 'touchy' issues is becoming a rare treat.

Totally agree.
I admired the response of the Islamic community to the Christchurch tragedy. And I know some lovely Muslim people. However, my baseline views on Islam have not changed.
Those views are not entirely positive.

I fear the day we can’t be critical of religion, provided it is not ‘hateful’. After all, religion is a belief system. In my opinion, any belief system should be open to critique.

Also, it’s often a false reaction. I would describe myself as a very open minded person, much more open minded than many of the so called progressives who tut tut at any criticism of immigration.

Brendon's article is about elastic and inelastic housing markets and the former being good for productivity and the latter for accelerating inequality of wealth. So NZ's excessive and ill-planned immigration has made a bad situation worse but is not the cause of the problem. Until reading this I had blamed most of our problem on the low-paid low-skill immigrant replacing skilled Kiwis emigrating. Following Brendon's argument it would make little difference who is added to an inelastic housing market. The traditional method of population growth does give a couple of decades warning so even a severely inelastic housing market can respond.

The two issues are are housing market and climate change. The former has been a clear disaster for at least 15 years and tackling it will help the poor but punish wealthy house owners. Meanwhile most proposed policies for climate change will disproportionately hit the poor.

Yes I think we agree on the substance of the argument Lapun.

Lapun. I agree Brendons very good article makes a credible case that our housing market's inelasticity is the key driver of increasing inequality, and also with your observation that immigration is not the cause. But given this is our reality and that policy makers in Wellington are aware of this, that they continue to exacerbate demand side pressures by supporting levels of inwards migration that are seriously overloading our infrastructure, is irresponsible.

Close but no cigar. It's actually low or falling productivity rates that drive property prices up.

Low productivity, or large government surpluses, increase private sector reliance on credit. Rising property prices are the best indicator of rising credit, and show the highest correlation.

That's why NZ has some of the most aggressive rates of capital gain, and also some of the highest long run inflation rates (i.e low long run real property returns). It's a combination of Keynesian economics during an upcycle, and low productivity rates over long periods of time.

The property market IS literally inflation, it stores future inflation, and you see it in the tradable sector in downturns.

Strange how it is the cities with the most demand and least supply that have the worst house prices. If it was a general Keynesian effect then all towns and cities would be affected equally.

It's actually the areas with the highest debt saturation, that show the "worst" house prices. The prices in those areas also show the highest sensitivity to credit activity.

There is more evidence for a Keynesian effect than there is evidence of a supply/demand imbalance driving prices. It's part of sector balances that drive the dependency on debt.

To say prices rise because of a supply / demand imbalance is honestly a joke, unless you're talking about the supply/demand conditions of credit.

Credit in the form of interest rates, macroprudential rules etc do have an impact on the demand for houses, as do many other factors -productivity growth, immigration, attractive amenities etc.

Demand then interacts with supply.

All these variables are unique to each city housing market (and sub market), that is why house price vary so much.

Some of those market variables can be changed. In particular housing supply elasticity.

Yes, but credit activity has a near 1:1 correlation with rates of capital gain / prices. I've got a chart that is identical to your chart above of Auckland prices. Nearly every physical sided argument I've seen around land price constraints can be easily dismantled, i.e immigration, the tightness of land supply coupled with physical inflows of migrants is minimal, but it effects existing investor beliefs and thus demand. You see more purchases by local investors as immigration increases, than purchases by migrants, and the purchases are persistent.

Some physical sided arguments do have very large impacts on real property prices, such as certain demographic metrics, they correlate very strongly with real property price peaks globally. But again, that relates to shifts in demographic demand for credit influencing property prices.

Land supply is routinely overestimated in land price booms, it is well documented, and excessive availability of credit reinforces the belief of a shortfall in physical stock, hence why you see tens of thousands of homes not on the market, as a hoarding effect takes place, and this actually constricts supply, thus becoming reinforcing. It's only until a deleveraging process occurs that demand eases and a relative oversupply of homes becomes apparent.

When you look at real property price movements, rather than nominal, you begin to see the real drivers. Most, if not all analysts aren't even aware that real property prices have been stagnant since 2014, i.e 0% real growth, despite large increases in immigration. The rise in property from 2014-2016 nationwide was almost entirely due to currency depreciation.

I'm not being hostile, I'm just trying to highlight the credit side argument as it goes overlooked, but accounts for the majority of movement.

Great article, Brendon. You may be Interested to know that your sentiments re the housing fustercluck impacting mostly on the poor among us, are shared by Michael Reddell. He raises the intriguing possibility that some compensation is called for, because the inequalities created by the fiendish mix of Clueless Councils and Deaf Gubmints will leave permanent generational disadvantage, even if the wand is waved and it's All Made Gooder....

The young and the poor (especially the young poor, and probably especially the Maori and Pacific young poor) are increasingly squeezed out of the possibility of home ownership, for decades or at all. There is no good economic or social case for tolerating this systematic penalisation of the more marginal groups in our society. But there are obstacles to reform, including the economic interests of those who could suffer quite seriously – through no real fault of their own – if the situation was fixed.

And his Modest Suggestion - which assumes that prices fall once the Fix is put in:

It isn’t credible – and arguably isn’t fair – that existing owner-occupiers (especially those who just happened to buy in the last five years) should bear all the losses. Compensation isn’t ideal but even the libertarians at the New Zealand Initiative recognise that sometimes it can be the path to enabling vital reforms to occur. So promise a scheme in which, say, owner-occupiers selling within 10 years of purchase at less than, say, 75 per cent of what they paid for a house, could claim half of any additional losses back from the government (up to a maximum of say $100000). It would be expensive but (a) the costs would spread over multiple years, and (b) who wants to pretend that the current disastrous housing market isn’t costly in all sorts of fiscal (accommodation supplements) and non-fiscal ways.