We are all in this together with Australia, says Motu in a trans-Tasman study, driven by the same long-term factors. And monetary policy is ineffective in modifying these factors

We are all in this together with Australia, says Motu in a trans-Tasman study, driven by the same long-term factors. And monetary policy is ineffective in modifying these factors

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Kiwis often talk about the Auckland housing market as if it were a lone wolf, unconnected to anything else in the country.

Now, however, economic research shows that not only is Auckland part of New Zealand but, when it comes to housing, we’re all in it together with Australia.

A study from Motu Economic and Public Policy Research Trust looked at real house prices (official house prices adjusted by a consumer price index) in sixteen cities in Australia and New Zealand.

“We found that all sixteen cities share a price trend and are influenced by the same long-term factors,” said Arthur Grimes, Senior Fellow at Motu. “Of course, temporary ‘shocks’ such as an influx of migrants have an effect, but these wear off. This means the major cities in Australasia share a weak form of a single housing market.”

With a weak form single housing market, house prices will be affected by a single price trend but different cities may react to differing degrees to this trend. These differing reactions to the overall trend may reflect either geographical or planning constraints.

“Such constraints can affect how much land is available and therefore how land prices respond to migration, said Dr Grimes.

Real House Prices, 16 Cities
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The paper also looked at price dynamics and found that temporary shocks to Australasian house prices are experienced first in five Australian cities (Melbourne, Sydney, Adelaide, Canberra, and Brisbane). The effects then flow through to the more peripheral Australian cities (Perth, Hobart, Darwin), plus Auckland and Wellington. Finally the effects reach the price ‘laggards’ in New Zealand (Dunedin, Christchurch, Palmerston North, Hastings, Tauranga, Hamilton).

“We found little evidence that monetary policy is effective in determining long-run real house prices,” said Dr Grimes. “This means governments need to look at areas other than macroeconomic policy if they are interested in controlling house prices.”

The study Two countries, sixteen cities, five thousand kilometres: How many housing markets? by Ryan Greenaway-McGrevy (University of Auckland), Arthur Grimes (Motu), and Mark Holmes (University of Waikato) received funding from the Resilient Urban Futures Programme Grant from the Ministry of Business, Innovation and Employment.

PDF iconSingle Housing Market.pdf


Motu Economic and Public Policy Research is an independent economic research institute which never advocates an expressed ideology or political position. A charitable trust, Motu is founded on the belief that sound public policy depends on sound research accompanied by rigorous public debate.

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“This means governments need to look at areas other than macroeconomic policy if they are interested in controlling house prices.”

The best friends Turnbull (Goldman Sachs) and Key (Merrill Lynch) have no interest whatsoever in such things.

There are a few recent interviews floating around where the squid is vigourously defending negative gearing and aussie house prices (apparently they would collapse without investor tax rorts).

Quite insightful.

Oh for goodness sake, please tell us something we do not already know ........... we all know the RBNZ and its Aussie counterpart are almost 100% ineffectual at stemming house price inflation, given the open nature of our economies

New Zealand has too many other factors in the equation that need attention , including , ridiculous tax breaks for investing in houses where some people end up paying zero income tax , foreign money flows arriving here chasing yields , massive unprecedented immigration ramping up demand , ineffective town planning and an artificial ring around Auckland constraining land supply , building trade wages which are currently more than those earned by Doctors, and an oligopoly in the building materials supply chain leading us to pay up to 20 to 50% more for basic materials to build a house ............to name a few .

No one needed to undertake a research project to discover something that is well known to everyone .

Instead they should be researching how to deal with these elements, issues and problems , in an environment where there is no political will to do so

Nobody submitted this to Maps of the World Without New Zealand yet?

Anyway, here's an interesting read for the history buffs:

http://blogs.reuters.com/breakingviews/2016/03/23/chancellor-lessons-fro...

http://www.zerohedge.com/news/2016-03-29/made-out-sand-dramatic-look-ins...

Where do we get our Cement from for our latest quality builds.?.

http://www.marketwatch.com/story/spanish-energy-firm-abengoa-files-for-b...

Spanish flu...symptoms. Feeling lethargic, not toeing the line. No energy?

Abengoa's financial woes trace back to Spain's boom years, when the company began to build such projects for itself, fueled by cheaper bank loans and a desire to expand. The company took on billions of dollars of debt in anticipation of a growth rate that didn't materialize.

Should they have come to NZ and built houses in Awkland instead, cannot lose with houses.
Wrong line of business.?