The decline of housing supply in New Zealand
Why have house prices in New Zealand increased so much over the last few decades? What did the country do to construct this crisis? How can we fix this?
Over the last 20 years, New Zealand has experienced faster growth in real house prices than any other Organisation for Economic Co-operation and Development (OECD) country. In the space of a generation, housing has gone from being abundant and reasonably affordable, to being scarce and prohibitively expensive.
While a difficult situation to change, unaffordable housing is not inevitable or inescapable. It is possible to overcome these challenges, with some significant changes to our approach to planning and infrastructure provision.
In this research we look at how housing markets have been shaped by infrastructure and urban planning policies, and presents some options for making housing more available and affordable.
Key findings
- Increased housing demand now has a larger impact on prices than it did in the past. Between the late 1930s and late 1970s, a 1% rise in population caused house prices to increase by roughly 0.5%. Between the late 1970s and late 2010s, a 1% rise in population caused house prices to increase by roughly 2.0%. Income growth also had a larger impact on prices in recent decades.
- When urban planning policies limit development, either ‘up’ in the centre of the city or ‘out’ at the fringes, it leads to higher house prices and reduced supply over time.
- Between the 1930s and 1970s, planning rules made it easy to build new houses or apartments in existing suburbs and to build new suburbs. However, planning rules have since become more restrictive and more complex over time.
- Urban expansion dictates the pace of urban expansion.
- Going forward, we can boost housing supply and improve affordability by reforming our approach to urban infrastructure and urban planning.
The decline of housing supply in New Zealand
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