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Publications ~ Final Report of the House Prices Unit: House Price Increases and Housing in New Zealand - March 2008

 

Prepared by

The House Prices Unit, Department of the Prime Minister and Cabinet

Background

The House Prices Unit conducted this study from August 2007 to December 2007, with the aim of reaching a better understanding of:

• The housing market as a national system.
• The relative importance and size of the influences of house price inflation.
• What it would take to slow house price inflation and potentially lessen the volatility of New Zealand’s house price cycles or better manage their impacts.
• The consequences – for the macroeconomy, economic growth and social outcomes – of adjusting policy settings.

The Unit identified the impacts of house price increases across a variety of topics. This report summarises the findings of the Unit’s analysis of the drivers of house price increases and their implications for economic and social outcomes.

PDF Version (1,076kB)

CONTENTS

• 1. Executive summary
• 2. Introduction: house price increases and housing in New Zealand
• 3. Why housing and house prices matter
• 4. Background statistics
  • 4.1 The New Zealand housing stock
  • 4.2 A snapshot of housing tenure
  • 4.3 Forms of government intervention in the housing market
  • 4.4 Real house prices have increased 80% and have lifted across all of New Zealand
• 5. Framework for analysing house price increases
• 6. Demand factors
  • 6.1 Household formation trends
  • 6.2 Population and migration
  • 6.3 Interest rates, inflation, financial deregulation and the availability of credit
  • 6.4 Economic growth, income growth and unemployment
  • 6.5 Expectations
  • 6.6 Preference for property as a form of investment
  • 6.7 Preference for home ownership
  • 6.8 The tax system
• 7. Supply factors
  • 7.1 Supply of dwellings
  • 7.2 Costs of building a house
  • 7.3 The cost of land has doubled since 2001
  • 7.4 Costs of materials have increased
  • 7.5 Labour costs have increased
  • 7.6 Regulation
  • 7.7 Design and building techniques
• 8. Future outlook for prices
• 9. Impact on choices – location and dwelling type
• 10. Impact on costs and tenure choice
  • 10.1 A definition of housing stress
  • 10.2 Impact on tenure type – home ownership affordability has declined
  • 10.3 Impact on tenure type – home ownership rates have fallen and are projected to continue falling
  • 10.4 Impact on tenure type – rental affordability
• 11. Housing policy and the intermediate market
• 12. Impact on economic performance and sustainability
• 13. Policy directions
  • 13.1 Further work
• 14. Bibliography