TOO MANY HOUSES?
By Richard Harman (author)
More support for Bill English’s Auckland housing bust forecast yesterday with a report from the Auckland Council’s Chief Economist Chris Parker.
His report says that was that one reason that Auckland’s house prices are high (as well as high relative to rents and incomes) is because future capital gains are capitalised into land
“Those gains are not because rents will rapidly escalate, but because existing land can be redeveloped to accommodate high levels of growth in the coming decades<” he says.
“And more density means more potential revenue overall to each section of land — this potential is being priced in now.”
The Council commissioned NZIER to run some numbers to notionally test the idea, and their results support this — at a stretch.
He concludes that it is still possible to make sense of Auckland’s high house prices, and it is not necessarily a bubble just yet.
Therefore it is possible to manage the problem of high prices whilst avoiding a house price bust — but prices need to level off at about where they are now.
In other words any more price rises and Auckland risks having a housing bubble which can only end in a crash.
But there were also some ominous figures out from Statistics New Zealand which show that housing supply in Auckland is ramping up.
The trend for the number of new dwellings consented in Auckland is at its highest level since November 2004. This is partly due to a large number of apartments being consented in July 2015.
The Finance Minister made the point on Tuesday to POLITIK that it was possible Auckland was building too many houses now and that could result in a crash within the next eight years.