The New Zealand housing nightmare

By Leith van Onselen

Above is an interesting video presentation from New Zealander, Andrew Atkin, who runs the blog “Building Utopia”. In the video, Aitken provides a step-by-step analysis of why housing affordability has been destroyed in New Zealand, with particular focus on supply-side barriers that have forced-up the cost of building new homes.

It’s an excellent structural supply-siders view of the housing market, which I agree with (which means that many of you won’t). Many of the same criticisms could equally be applied to Australia.

Well worth a look.

Unconventional Economist


  1. Hong Kong : Pop 7.2 M : Size 1,104 km^2 : 14.9 (DHI)
    Singapore : Pop 5.4 M : Size 716.1 km^2 : 5.1 (DHI)

    Melbourne : Pop 4.1 M : Size 9,990 km^2 : 8.4 (DHI)
    Sydney : Pop 4.6 M : Size 12,145 km^2 : 9.0 (DHI)

    Auckland : Pop 1.4 M : Size 1,086 km² : 8.0
    Houston : Pop 1.6 M : Size 1,625 km² : 3.3

      • Except Demographia use the Aust detached house price as their guide and compare that with dwellings that may be largely 35sqm apartments in other cities such as HK and Sing.

      • Hugh PavletichMEMBER

        Peter Fraser … correct. Read the End Notes of the Annual Demographia Housing Surveys ( ) …

        … and too … an earlier SMH article of mine … REPORT: HOUSING AFFORDABILITY OUT OF SYNC WITH INCOMES …

        In taking the structural approach, Peter may like to inform MB readers the quantum of the bubble value of the Australian housing market, the bubble mortgage volume and line that up against the Capital Base of the Banks … as I did with NEW ZEALANDS BUBBLE ECONOMY IS VULNERABLE …

        Ireland tanked with its major metros from a 4.7 Median Multiple overall to 2.8 MM, wiping a quarter trillion euro out of its housing market and putting its Banks down. NZ and Australia are sitting currently north of 5.5 MM.

      • @ FF – Hugh has done that above.

        @ Hugh – why don’t you use the all dwellings figures that include apartments, townhouses, villas and other multi- title complexes. They are perfectly adequate homes for many people.

        Is that an unfair question?

      • Peter Fraser I would like to thank you for continuing to be a part of the MB community providing a counterpoint to the increasingly shrill house crash lobby group that exists here.

        It is always useful to have contrarians around, regardless of what your ulterior motives may be, if any. Keeps the bastards honest

        NB: I am largely agnostic with regards to house prices

      • @PF

        Is that an unfair question?

        No it’s not. I would be interested in this as well. However the main idea behind my post is still valid. We have very large metropolitan areas that are relatively sparsely populated and yet housing costs are astronomical.

      • @ FF
        Much of the reason that house prices are high is the fact that our metropolitan areas are sparsely populated. If we had the density of HK for instance and all lived in high rise apartments of about 80 sqm do you think that the median price would be where it is?

        But if that isn’t a standard of dwelling that most Australians want, then they have to pay for that higher cost that comes with lighter density and/or the higher cost of transport and infrastructure on the city fringe.

        If you look at the high rise development going on in our major cities at least the developers think that we are now ready for smaller abodes, and they do a lot of research before they commit millions to a project.

        I don’t have the answers to the future housing wants of the people, I think that it’s a case of “watch this space” but IMHO the trend seems to be towards smaller dwelling sizes and smaller lots in the city fringe.

        But regardless, I would like to compare house in Australia with houses in other cities in other countries.

        Right now we have a palace index for Australia and a hovel index for many other cities of the world, and they are simply not comparative.

      • Peter … please read Demographia Survey End Notes Page 52 ( ) … extract …

        “House Characteristics: The indexes and data on which the Survey is based reflect the overwhelming majority
        of existing housing in the markets. At the same time, there are differences in house types, housing
        characteristics and lot size between the geographies covered. The Demographia International Housing Affordability Survey does not adjust the Median Multiples to reflect these differences. For example, the average size of housing, particularly new housing, is abnormally small by New World standards, the United Kingdom and
        Hong Kong.56”

        The Demographia Surveys primary function is to alert the public and policymakers that if the housing the majority live in exceeds 3.0 times incomes … land supply and infrastructure financing arrangements need to be dealt with urgently, to ensure unnecessary bubbles are not triggered.


        And too .. the HOUSTON ASSOCIATION OF REALTORS Monthly Report …

        … where the median price of condos / townhouses is $US150,000 while stand-alone housing median is $196,000 . Condos / townhousese are about 76% of the stand-alone stuff … the latter being the major interest in a normal market.

        Take particular note of the importance of the structural definition of an affordable housing market Peter. It is the fringes we are most interested in … land supply and infrastructure financing … as they are the only adequately responsive inflation vent.

        There are no perfect measures. The Median Multiple is adequate … one recommended by the World Bank and United Nations Urban Indicators Programs … and others.

        We need to ensure healthy markets so that households are not paying anymore than 3.0 times their annual household income to house themselves, with sensible mortgage loads not exceeding about 2.5 times. You will be aware the Irish Monetary Authorities (they are bringing in macroprudential disciplines) are really focused more on Loan to Income Ratios than Loan to Value Ratios. The Irish Bankers have been taught some good lessons. We should be learning from them.

      • Coming … just dispassionately follow the numbers.

        Ask why new starter housing is NOT going in on the fringes of the Aussie metros for below $A1,000 per square metre ALL UP (serviced lot and construction).

        I walked through the issue many years ago with respect to NZ with … HOUSTON: WE HAVE A HOUSING AFFORDABILITY PROBLEM …

        This is NOT a complex issue … although it will of course be conveniently complex for politicians and bureaucrats !

    • FlyingFox:

      What is the point you are trying to make?

      There is a slight problem with your size and population of Houston. Houston, the urban area, has more than 5 million people in it.

      There is a municipality called Houston, which presumably has the 1.2 million that you are referring to.

      Singapore is an example of the absolute best that can be achieved by not having freehold title and private property rights. I have no objection to advocacy of that as a solution to the status quo. At least such advocacy would not be useful idiocy for big rentiers in property and finance.

      I believe Demographia uses “separate family housing” as their basis for comparisons as long as this housing is the major part of the property market. Where they accept “all forms of housing”, this is in cases where separate family homes are a small proportion of the market and exorbitantly over-priced due to their sheer scarcity.

      I would observe that there is NO housing market where including “all housing types” in the survey would render an unaffordable city, “affordable”. Why would including Sydney’s typically $1,000,000 CBD apartments, make the median multiple there any lower?

      Ironically, the only cities whose median multiples might be dragged LOWER, are the already-affordable cities where apartments actually ARE generally a lot CHEAPER than the already-cheap median family house. In fact I have long argued that a “bottom quintile multiple” that does include whatever housing types are in the bottom quintile of the market, would be even more damning of the utopian planned cities than the median multiple is.

      Cities with a median multiple of 3 seem to have a good spread of housing prices below the median, so that there literally are $90,000 houses for the $30,000 income earner. But when the median multiple is 8, the housing that might be expected to be “only” $240,000 (i.e. 8 times the low-end income rather than 3) is certainly NOT “ONLY 240,000”. What might be available for $240,000, might be a single room “apartment” while anything remotely resembling “housing” albeit high-density – i.e. actually with a kitchen, say, will be at least $400,000.

      Social justice is a major reason to call for reform, and it is big mistake of economic libertarians to ignore this aspect just because they want to avoid sounding like lefties. It is also a major hypocrisy of lefty social justice types, to NOT support reform of housing markets along the lines that the libertarians suggest.

      • @PB

        The point I was trying to make was somewhat what you made. Considering that we have such a mix of housing and a large urban area, our house prices are very high.

        Will post correct info re Houston later.

      • Actually, I think there is a case to be made for a correlation in the direction of “the smaller the average home size, the HIGHER the median multiple”.

        Completely the opposite of the common shallow assumptions these days.

        All the evidence points to “revealed preferences”, as opposed to what the planners allege to be “stated preferences” (via surveys etc), being that human beings want more space than what planners think they want.

    • OK lets look at the “nuts and Bolts” that make up the production cost of housing.

      What is the difference in tax inputs between the international cities Hugh?

      Do you have that data?

      What are the differences in stamp duty costs, developer contributions, value added tax, planning consent costs, environmental impact studies, infrastructure costs, etc etc.

      • Peter … exactly what I have been saying like a scratched record for a decade !

        Please read FOCUS ON RESTORING HOUSING AFFORDABILITY … hyperlink provided elsewhere on this thread.

        Could you give the AHURI people and other Aussie housing researchers a wind up … please … !!!

  2. This video presentation is a great credit to Andrew Atkin … and thank you Leith for posting it !

    Where are the Australian ones ?

    Andrew created THE REAL DEAL poster early 2013 …

    The new build numbers have badly inflated since then (now considerably higher than those mentioned in Andrews video).

    For example outer Christchurch (Halswell) is now about $3,500 per square metre ALL UP (serviced lot and construction) … Riccarton / Mona Vale ChCh $5,500 psm all up approx.

    It is a complete circus.

    I shudder to think what the current Auckland fringe pricing is per square metre all up.

    There is extensive further information on the Kiwiblog article of yesterday thread … THE PRESS ON THE CHRISTCHURCH DISTRICT PLAN … including information on the NZ Productivity Commission issues paper … USING LAND FOR HOUSING …

    The New Zealand Productivity Commission is doing outstanding work. Check out its earlier reports on housing affordability, regulatory performance and other issues. Really well grounded … and recognised as such internationally.

  3. Excellent presentation of housing disaster and its political roots. The government stopped serving people a long time ago.

    • Lori … what needs to be noted as well, is that Andrew Atkins is not employed in the property industry and has done all this work in his own time and at his own expense.

      A remarkable guy.

      What Andrew has in abundance is common sense, compassion and a strong sense of social / civic responsibility.

      We are incredibly fortunate with the growing numbers of people … across the political spectrum … who really care in New Zealand. These good people detest the social injustice of this housing fiasco.

  4. I too highly appreciate Andrew Atkin’s efforts. Very insightful guy on a wide range of subjects. It is always interesting what type of “thinker” gets it right on housing markets.

  5. I believe that underlying all of this is generational demographics. We are where we are because of baby boomer ‘values’.

    Unlike their parents who understood the value of development and building for a growing population, the baby boomers are driven by selfish greeny/NIMBY ‘values’ and have sweated the societal assets left by the war generation (one of these societal assets was affordable housing).

    In order for the situation to correct there will need to be a shift in values back towards building and development in the community interest. This however will take generational change.

    i.e. the baby boomers will have to die off first… (but not before their send us the bill for their retirement…)

    • i.e. the baby boomers will have to die off first… (but not before their send us the bill for their retirement…)

      Minus 100% – Pure BS comments

      To blame a whole generation is pure fantasy -it is always the so called “ruling class” that F$%#@ up – and the plebs in the main are unengaged. MOST Australian are complacent & not very interested especially if they have to think for themselves.

      • You are a baby boomer aren’t you.

        What have the baby boomers left? What will be their legacy for coming generations?

      • But he is correct, the aging baby boomers will create a huge amount of employment opportunity in many areas of the economy, so it will represent a huge transfer of funds from that generation to following generations, and on top of that assets will be left to the following generations on their death.

        There will be winners and losers of course, but the boomers can’t take it to the grave with them, it will all be moved to the following generations.

      • With increased life expectancy most boomers will go to their graves penniless – don’t expect a generational transfer of wealth.

      • @ Stomper – LOL – if they go to their grave penniless then there must have been a wealth transfer – think about what you say.

        Do you think that assets and money just disappear?

    • Yes I suppose I am – 70 soon. However I don’t go blaming the previous generation.

      The Generation before me were responsible for World Wars & lots of other nasty crap – I & others of my generation have probably worked a lot harder than you ever have or are ever likely to. How’s that ?

      • “others of my generation have probably worked a lot harder than you ever have or are ever likely to” – I DON’T THINK SO!

        Demographically we are headed to 2 workers per 1970 it was more like 7 workers per retiree. Those two workers will need to bear the costs of one baby boomer retiree.

        That means I will have to work harder, pay more tax, and get lower services because the money is going to be sucked up by baby boomer health and retirement costs. PLUS pay much higher house prices (another gift of the baby boomer generation).

        It is the baby boomer generation which has cashed in. It is the baby boomer generation which has had it easy by cashing in on both sides… from the legacy of their parents… and from their kids via house prices and retirement costs.

        On an inter generational basis, there has never been a more privileged generation than the baby boomers.

    • “That means I will have to work harder, pay more tax, and get lower services because the money is going to be sucked up by baby boomer health and retirement costs. PLUS pay much higher house prices (another gift of the baby boomer generation).”

      Stop whinging & get on with it & try to resist one size fits all – it doesn’t fit ! Every generation has its winners & losers. When I look around I see some very poor so called baby Boomers & some will be still be working well into normal retirement.

      You’ll be the biggest loser if you keep on playing blame games -even in your own head. BTY I rent & I have full top shelf medical -pay top shelf price .
      So what – pointless effort -over & out.

  6. Very good video presentation. This guy is clearly a truth-sider. First understand the restrictions and the shortage caused. Then understand the bidding war. Someone must miss-out. Then understand how extra dollars equate to extra land price. Andrew Atkin understands supply and demand, shortage and price, cause and effect.

    • Yup. It’s like watching a bunch of numbnuts at an Intelligent Design convention in furious agreement.

      All the luminaries are here…..Hugh Pav, PhilBest, The Claw…..

      • I think he was being sarcastic….

        But still, yes moderate mouse, it’s a bit like that sometimes on MB.

        I think the supply side issues are clearly important, but here’s a thought.

        What is the key driver?

        Supply or demand?

        Well, if prices are set at capacity to pay, then that CAPACITY is clearly the key driver. Don’t get me wrong, fixing supply issues would be beneficial but it doesn’t stop people from bidding up prices to the same level for the incremental stock.

        Macropru? That will ration credit. Fine, exclude some buyers.

        What about the remaining marginal buyers? What determines their capacity to pay. Well, interest rates of course. That’s the key culprit.

      • Melbourneguy,

        As I say elsewhere on this thread: social justice is a great reason to address this issue, because as you say, people are excluded from enjoyment of at least some attributes of a major necessity, for no useful reason. And there is a zero sum wealth transfer in society in the wrong direction.

        I always like to pose the question: how come Liverpool has had shrinking population for decades, and yet its house price median multiple is still around 5?

        So what if there is “demand” that “causes house prices to rise” – dependent entirely on supply being quota-schemed. We do not accept this in food and clothing, and we should not accept it in housing either. The way the free world works, is that peoples incomes rise, they demand more, and they actually get even more than that for less share of their income. This is how free market competition works. There is consumer surplus in everything, not monopoly rent (which Karl Marx was obsessed about).

        There are plenty of cities today, and examples in modern history, to prove that housing can be the same way as cars and TV’s and IPods. So what if there are “interest free” offers and so on, and super low interest rates and loose credit? The price is still based on “what suppliers competing with each other can bring the product to market for”.

      • Moderatemouse … this is a basic human rights issue … in that people should have the right to the opportunity of affordable housing.

        There are people out there who couldn’t care less about others basic rights. History is littered with these types.

        Sadly, you appear to be one of them.

        Read my comments within the Introductory Section of this years Demographia Survey

  7. affordability is not low because there are no enough homes for everyone to live in, affordability is low because there are no enough homes for all the people who want to speculate on house prices.

    There are two ways to fix the affordability problem:

    1. build excess number of homes just to satisfy greedy speculative needs (most of these would not be used for living)
    2. impose strict legal rules that prevent people to speculate on homes

    The issue with first solution is that it would require additional billions of dollar to be wasted on homes that nobody really needs for anything but speculation.

    the problem with the second one is that it’s impossible to be implemented in our current political system (undemocratic two party system)

    so what will happen is the third thing: bubble will grow, more and more credit money will be poured into properties until system collapses and wrecks the whole society for decades. Even than affordability will not improve because people will be struggling for food.

    • doctorX, you are all over the place. One day you say we will mimic Ireland and have cheap houses very soon. Then you say our whole society will be wrecked for decades and affordability will not improve.

      Which one is it?



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  9. I dont think anyone disagrees that inelastic supply is a necessary condition for overpriced housing. This sets the price at the fringe. However the steepness of the rent curve within the city is set by a number of other things – such as transport costs, family structure, ease of acquiring housing finance by investors vs owner-occupiers etc.

    We all agree too that in the end political will and regulation determines house prices. Post war a number of policies were put in place that caused the home ownership rate to rise from 30% to 70% by 1960 without a rise in house prices.. These policies have been progressively removed since 1984.- will ownership go back to 30%? Probably not but we are headed that way.

    • Very concise summary of the situation joeflood. One problem is that all kinds of people disagree with your correct summation.
      The shortage-deniers will blame everything from easy credit to wives working to grannies empty rooms.

      • It’s Urban Economics 101, Claw.

        Now – we can also comment on what causes high prices at the periphery. Drip feeding of land supply hoarding, development charges, the demise of spec housing – and easy finance which is the wind that pumps up the balloon right across the urban area.

        Of course there’s a land-driven shortage. It’s sufficient just to look at the dramatic change in the ratio of land to construction costs since the 1960s.

        Having said this – the supply effect is very slow and has been eating away at affordability since the 1970s. You will get a much bigger and quicker bang by attacking demand – but you will not repair the underlying structural damage caused by alleged “smart growth”.

    • Joe, do you have sources of urban land rent curve analyses that show fringe growth constraints forcing them up at the fringe and not the centre?

      The NZ Productivity Commission, for its Report on Housing Affordability, had an analysis done for Auckland, of the land rent curve as growth containment policies took effect. Its shape was pretty much maintained from fringe to centre as it was forced up. This is exactly what I had been arguing already, based on years of observing property prices in different parts of cities over time.

      I would very much like to know of sources of similar analyses. Certainly the “planning gain” factor at the fringe of UK cities is surprisingly close to the factor also found for CBD floor rents difference to non-growth-constrained US cities of similar population. That is a factor of at least 100, ranging up to several hundred.

      I argue that fringe growth containment creates an effect in the urban land market, where upzoning increases site rent faster than floor space is actually added. Hence the data tending to suggest that the correlation between median multiples and average “housing unit space”, runs in the direction of smaller space = higher median multiple.

      There is absolutely no non-fringe-constrained city that does not have a combination of median-multiple-3 affordability and a housing unit size that is at the top end of the data distribution.

      • That’s correct Phil, the curve will normally be shown, ceteris paribus, as increasing evenly across the urban area. This is why we say that applying developer charges is a windfall to existing property owners which should be taxed away,

        There are two other properties of the curve that affect average urban prices. One is the actual diameter of the city – increasing the boundary of the city increases the average trip length and reduces accessibility. Those with better relative accessibility get a bonus which is then capitalised into house prices. Once again, this is even across the city. And so – every time there is a new house at the fringe, the whole city gets a boost to its land prices which in theory ought to be taxed away,

        Finally there are the things that steepen the curve itself – and these are the least understood and the nastiest. Even reputable economists say very silly things here. It’s long and tricky so all I will do is name some of the factors. 1. Urban growth boundaries, these are deadly. 2. Two income professional families, so are these. 3. Changes in transport costs or infrastructure. 4. Decentralisation.5 Taxes and imposts. 6. Dropping regulations restricting access to finance or to property ownership (this has been a very major effect which is hopefully now played out.

  10. Andrew did an excellent job creating this video and succinctly describing the bidding war that causes unaffordable housing.

    What was less clear is that affordability is unrelated to density. There is high density cities that are much more affordable than our Australasian ones.

    Also he only describes only one option of achieving affordability being the extremely liberal planning regimes around a ‘free’ framework of motorway provision i.e. Houston.

    Andrew did not discuss the more ‘socialist’ systems used in Japan or Germany.

    These are discussed in the thread following here.

    P.S Re driverless cars no one knows if this technology will quickly come like digital cameras did, or slowly like electric cars or always be 20 to 30 years away like nuclear fusion energy production. Personally I think it would be reckless to pin all my affordable housing hopes on one untried new technology.