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Three months ago, financial media company Bloomberg looked at housing markets in 30 countries and concluded that the New Zealand housing market was the one at greatest risk of a sharp decline based on the relationship of house prices to rent, house prices to household income and the growth of house prices over the preceding decades.

And that should not have been a surprise to anybody who has been following the housing market in New Zealand in recent years. As long ago as 2008, when John Key was Leader of the Opposition, he pointed out that the median price of Auckland houses was already six times the median household income in Auckland, compared with the three times median income traditionally characteristic of affordable housing markets. By 2017 when the National Party lost office, the median house price in Auckland was nine times the median household income. And by last November, with a Labour Government in office, it was over 11 times, and that despite promises to create a more affordable housing market and, among other things, build an additional 100,000 houses over a decade.

The Reserve Bank has noted that New Zealand experienced the sharpest increase in inflation-adjusted house prices across the developed world between 2008 and 2021, something they attributed to a relatively high rate of population growth over that period (largely as a result of immigration) and the fact that, over that period, mortgage rates fell more sharply (by some 5%) than in other developed countries.

Of course, population growth should not of itself push up house prices. Population growth increases the demand for houses, but the price only goes up if supply is constrained in some way. And yes, there have been odd instances of particular building materials being temporarily in short supply, but the main constraint has been the supply of land. The supply of land? In a country larger than the United Kingdom, with a population of just five million people? Tragically yes: local councils in many parts of the country, including Auckland, have constrained the supply of land on which houses are allowed to be built.

David Feist, one of numerous candidates for the Auckland mayoralty that most people have never heard of, recently pointed out that when the Metropolitan Urban Limit (MUL) designed to confine the growth of suburbia around Auckland was created in 1988 the average section price was about 20% of the “house price”. Now it is some 60%, with tiny 400 square metre bare sections in Papakura advertised a few months ago for $970,000.

In a rather extraordinary bi-partisan move some months ago, the Labour Government and the National Opposition joined forces to pass legislation which allows property owners in major centres to increase the number of dwellings which can be built on urban sections without requiring council approval. This was an attempt to increase the effective supply of land within the existing Urban Limit.

But not only is this measure being vigorously opposed by councils all over the country – and especially the Auckland and Christchurch Councils – there is plenty of evidence that what is crucial to reducing the price of land on which houses can be built is reducing the price of land on the perimeter of the city, and the move to allow intensification does nothing to achieve that.

Auckland Council at least has been extremely reluctant to loosen the noose around its boundary, with the result that section prices remain extremely expensive. The reasons for that policy are no doubt several – perhaps concern to reduce the need for greenhouse-gas-spewing cars, perhaps the desire to avoid spreading concrete and bitumen over high quality soils, perhaps reluctance to incur the cost of the necessary infrastructure of a spreading city.

But funding the cost of the infrastructure needed for an expanding city should surely not be beyond the wit of man. The creation of Crown Infrastructure Partners some years ago with bipartisan support should have made a major contribution to funding the infrastructure needed by an expanding city, while the ACT Party has suggested that councils would be more willing to allow urban expansion if central government returned to local government 50% of the GST levied on new houses built in their jurisdiction.

I have some sympathy with those who are reluctant to see very high quality soils built over or taken out of production. I myself have an interest in a kiwifruit orchard not far from Pukekohe, and I would be very reluctant to see it converted to housing. But when Agriculture and Trade Minister Damien O’Connor announced the Government’s intention to prevent highly productive land from being converted to housing, even he admitted that the land converted to lifestyle blocks over the last 20 years has been five times the area converted to residential or rural residential development.

When the Labour Government came to power in 2017, they made a solemn promise in the Speech from the Throne – the formal statement of the Government’s programme for the following three years – to oblige Auckland to scrap the Metropolitan Urban Limit. They have not only abandoned that commitment, they have explicitly promised not to implement it. But if they wish to make an ongoing contribution to making houses more affordable, while simultaneously protecting so-called “elite soils”, they should at very least compel Auckland to abolish the MUL so that urban development can expand into areas where soil is of lower quality, such as the North Shore.

Sadly for those who have bought homes in the last year or two by stretching their family incomes to the utmost, but happily for the very large number of New Zealanders who have not the slightest chance of owning their own home with prices at present levels, house prices have been falling now for some months.

In some areas, house prices have fallen significantly, and the Real Estate Institute of New Zealand reported in mid-September that on average house prices in New Zealand declined by more over the six months to August than in any previous six month period. They noted that in Auckland the median house price has fallen by some $200,000 from its November 2021 peak; while the median price in Wellington, which briefly touched $1 million last October, had fallen to $780,000 by August.

And if rapid population growth and sharply lower interest rates were factors in the sharp rise in house prices over the last 10 or 15 years, then it is logical to expect a significant fall in house prices as population growth falls to very low levels – possibly to a net outflow – and interest rates rise significantly.

Added to the downward pressure are the Government’s late 2021 amendments to the Credit Contracts and Consumer Finance Act (CCCFA) – these amendments have put in place severe financial penalties for bank directors and managers if banks lend to customers where there is even the slightest doubt about their ability to repay, and seem to assume that banks would lend to customers with a high risk of default unless the law prevented them from doing so. The Government has put many crazy laws in place over the last four or five years, but this is one of the nuttiest.

Ironically, with rising interest rates and a net outflow of people, this may just be the straw which tips the housing market into a very significant decline. While this would be enormously painful for some, it could actually do more to improve housing affordability than any of the other things the Government has done to date.

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48 commentaires

“The creation of Crown Infrastructure Partners some years ago with bipartisan support should have made a major contribution to funding the infrastructure needed by an expanding city,”

Thanks for posting.

Hopefully something like this will be implemented by ACT and National, should they be in Government this time next year, along with examining the metropolitan urban limit. When Three Waters is repealed, a robust funding mechanism for significant new water infrastructure will also be sorely needed. Attracting a sensible proportion of overseas investment will help keep the burden on ratepayers and taxpayers to manageable levels.


People have been building homes to provide shelter for themselves and their families forever without regulations and controls over where they could erect a dwelling or what it had to be. Many of the buildings of the past are still standing and being lived in. If someone can access a plot of land and construct a place to live in, why should this be prohibited? Who decided for the rest of us that we had to comply with their orders to have a roof over our heads? The more regulations we have about where a house can be, what it must be made of and who is allowed to build it, the more expensive it becomes and the less people can own a home. Th…

En réponse à

"They" (Bura-rats) make rules and then decide whatever... this self creates a job for themselves, sates the ego and generates a gravy train of Bura-rat-crazy... that leads to more self reward... fees... guess who is paying for it all, but nothing really of any use or benefit to anyone from it, except them.


It seems to me that everyone has something to complain about but few people offer any solutions. The most ridiculous suggestion of all is to ask the people in government to fix something. They probably broke it in the 1st place with their insatiable desire to impose more and more restrictive regulations and spend/waste more and more of our hard earned money. Anyone with half a clue understands that politics is only about who gets the authority and power over the common people so that they can force us to do what they think might be "for our own good". Only an arrogant, omnipotent busybody believes that she or he knows what other people have to do "for their own good". For the past 4…


Paul Dunning
Paul Dunning
20 sept. 2022

The cost of building keeps going up. To subdivide a big chunk is fees for council, surveyors, and services so the replacement cost of a house is quite high, the section is probably all that is going


Imagine saving for years to cobble together $250,000 for a deposit and buying a house for $1,5 million.

And then the market tumbles so that your home is now worth $400,000. Optimistically.

And you still owe the bank over $1 million, plus interest.

Get out of debt people!

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