Auckland housing can’t outrun the population ponzi

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By Leith van Onselen

I wrote yesterday how the incumbent National Government of New Zealand is under immense pressure over the issues of housing and immigration, which threatens a voter revolt at the upcoming general election on 23 September 2017.

This revolt is likely to be strongest in New Zealand’s largest and most expensive city – Auckland – where housing costs have risen to extortionate levels partly on the back of unprecedented immigration.

Yesterday afternoon, Interest.co.nz’s David Hargreaves penned an enlightening piece on just how badly Auckland’s housing supply is failing to keep up with immigration:

Let’s forget natural population growth and just look at immigration.

The calendar year 2016 figures are out. These say the net gain of migrants nationwide was in excess of 70,000.

Of those who gave an intended place of residence in New Zealand, about 60% said Auckland.

This suggests a net migration gain in Auckland of about 42,000.

The statistics tell us about three people live in every house in Auckland.

This tells you that simply to accommodate the extra 42,000 migrants Auckland needed 14,000 new homes last year. Not 10,000.

…the ramping up of immigration has allowed this Government to pump up the economy, while also helping to keep the lid on wage pressures with cheap imported labour.

I don’t think you can truly start to alleviate the housing pressures in Auckland without doing something about inbound migration numbers. But of course the high immigration numbers – and the extraordinarily high number, over 40,000, of work visas issued last year – also point to big structural problems here of not training the young to fit career vacancies. And often we are not talking about highly skilled jobs.

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Much like the Coalition Government in Australia, New Zealand’s National Government has pinned the blame for Auckland’s housing crisis on a lack of supply and rigid planning, without addressing the many demand-drivers under its control that are also making housing unaffordable.

And then there is Auckland’s traffic congestion, which is being made worse through mass immigration. The TomTom Traffic Index 2016 ranked Auckland the 40th most congested city from a list of 295 cities around the world, with Auckland having the second highest traffic congestion in Australasia after Sydney (ranked 30th).

Surely New Zealand voters’ patience is being sorely tested, especially those residing around Auckland.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.