Land supply constraints and housing prices in New Zealand

Author:
Mario Andres Fernandez
Source:
Auckland Council Research and Evaluation Unit RIMU
Publication date:
2016

The housing sector in New Zealand is not meeting the needs of an increasing population.

The National Policy Statement on Urban Development Capacity (NPSUDC) mandates that plans of high and medium growth regions and cities should provide development capacity to meet long-term housing demand and improve housing affordability. The success of the NPSUDC relies on the responsiveness of housing prices to changes in land supply.

Results from a calibrated model show that a 10 per cent decrease in Auckland’s housing prices requires land supply to increase by 17 per cent, equivalent to 78,000 additional dwellings. A 50 per cent decrease in prices requires a 184 per cent increase in land supply, equivalent to 385,000 additional dwellings. However, price responsiveness is decreasing as preferences to stay or settle in Auckland become stronger. That is, increasingly large changes on land supply are needed to achieve price decreases. Hence, land supply per se is insufficient to improve housing affordability.

Auckland Council technical report, TR2016/038

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Last updated: 2016-11-08