Despite the current global pandemic and resulting economic strife, the New Zealand housing market just keeps going bonkers. The national median property price increased by 22.8 per cent to $780,000 during the year ending February, while Auckland’s median increased by 24.3% to $1.1 million.

So what’s to blame? The answer is of course lack of supply. Unfortunately, while the answer to that question is simple, the solution is anything but.

The big equation

Back in 2019, Infometrics estimated that New Zealand had a housing shortage to the tune of 40,000 properties. We’ve been building more houses than ever but it’s likely the supply shortage is still in the tens of thousands.

In the meantime, interest rates are at record lows and Kiwis aren’t spending overseas so their money’s being poured into housing. Interest rates may increase and New Zealanders will eventually start travelling again, which should help fix the demand side of the equation. Less money into housing = less demand = lower price increases.

But supply is another question – it won’t just sort itself out. The only way out of this is to build more homes.

There’s plenty of evidence to prove that lack of supply pushes up prices but the most compelling comes from data compiled by Homes.co.nz and Infometrics. They found that the more houses that were built in a region, the slower the house price rises were.

For example, in Auckland only 9.5 per cent of the city’s housing stock has been built in the last decade and the prices have skyrocketed. In Christchurch, where prices have been much more subdued, around 14 per cent of their housing stock has been built during the same period.

How can we build more houses?

We know we need to build more houses but how can we actually make it happen? Here are a few ideas:

• Local councils need to release more land inside cities and on their fringes for residential development.
• Developers need to be incentivised to build smaller, more affordable homes, rather than the large properties that are most common.
• The Resource Management Act (RMA) needs to be reformed to be fairer to developers instead of favouring owners of properties surrounding developments, and council bureaucrats. The Labour Government has already committed to this, though details at the time of writing are scarce.
• Administration costs and time required by the RMA and council consents need to be slashed to help developers efficiently and effectively build the new homes our communities need.

Solving the housing crisis is a massive job and it’s going to take years to get it right. But if laws and regulations are changed to enable it, New Zealand’s private residential developers are definitely up to the task.