Solution to housing in NZ: Supply or Demand?

There is very little debate that there is a serious housing issue in certain parts of New Zealand. Parts of Christchurch, Tauranga and most of Auckland are seeing dramatic rises in house prices and this pressure is also leading to risky purchasing practices being adopted by those in the market (for example purchasing without properly viewing a property or before obtaining a pre-purchase inspection report).

The real discussion appears to be around the solution. This was at the forefront in the build-up to the election with all major parties promising to address housing in some shape or form. The issue is not whether there is a problem but how to deal with it. In an already overheated market potentially increasing housing demand (by for example, increasing housing subsidies or availability of finance) could compound the problem leading to continued inflation of prices. On the other hand if supply is increased in a manner that is not in line with market conditions it will mean that one party (most likely local or national government) will miss out on some of the benefit (through reduced prices). In the background there is also the risk that if developments are pushed through without the appropriate safeguards then we may see another round of a leaky-home type saga.

Treasury has recently come out with a statement that suggests supporting the demand side is not necessarily the answer. While not expressly saying this the solution is likely to lie on the supply side it would be possible to read this in. Focusing on the supply option has already been raised by the New Zealand Initiative and covered in a previous post.

Although there is no silver bullet to the current housing issue, it is interesting to examine this debate in terms of demand as well as supply.

One thought on “Solution to housing in NZ: Supply or Demand?

  1. Pingback: HomeStart grants come into effect | CONSTRUCTION LAW BLOG

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