Auckland Economic Commentary
David Norman, Chief Economist
Apples and oranges: Simplicity and complexity in world house prices
Housing affordability remains a challenge for many Aucklanders, despite affordability being the best in almost six years, and 26% better than in June 2015. At a headline level, what causes house prices to rise is simple: Has the supply of housing been sufficient tomeet demand from residents and non-residents? But in the detail, the question is more complex and there is a risk of oversimplifying: If we haven’t built enough houses, why not? The reasons not enough houses are built are a function of demand factors such as incomes and unemployment rates, tax and ownership regimes; and supply factors such as industry structure, labour laws and construction wages, materials costs, regulation,and geography. House prices rose sharply in Auckland between 2002 and 2006, and again from 2011 to 2016, making home ownership unaffordable for many in a city with strong stated and revealed preferences for home ownership.
