What Wellington house prices have come to

A real estate agent yesterday sent me a PDF showing all the recent house sales in southern and eastern Wellington.

This one caught my eye

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It is tiny, by almost any New Zealand standards.

It caught my eye because it is almost over the road from the school one of my daughters goes to, and because a fellow parishoner had spent her adult life in the almost identically small next door house.

Not only is the house tiny, but the section is pretty small by any standards.  No great redevelopment opportunities, unless (I suppose) someone managed to buy up the whole row of tiny houses.

Berhampore isn’t such a bad location I suppose.  It is an easy walk to the hospital or to Massey’s Wellington campus.  And I guess one could walk to work in town. The distance from this house to, say, Unity Books in Willis St is about the same as the distance from the Mt Eden shops to the Auckland Unity Books in High St.   But…….Berhampore is not Mt Eden.  It is slowly rejuvenating, and is apparently very popular among Green Party voters, but it will always have small houses, tiny sections, and rather a lot of council/state housing (oh, and the Satan’s Slaves are almost over the back fence).

And yet this tiny property went for $633,500.

Out of curiosity I checked out the real price I paid for my first house in 1989.  It was another couple of kilometres out of town, but the house was bigger, it was a couple of blocks from the beach, and the section was about three times the size of the Berhampore one.  In 2016 dollars, that house cost me $282000.

People in central and local government –  ministers, mayors, councillors, relevant officials – should really be hanging their heads in shame, at having so badly messed up housing and land supply markets to have produced such an atrocious situation.  Sadly, shame now seems like a foreign concept to those who do so much (always well-intentioned, but good intentions are never enough) damage to the prospects, and reasonable expectations, of our younger generations.

40 thoughts on “What Wellington house prices have come to

  1. The NZ housing market – especially Auck. but now also Wgton and others – has become a classic property bubble and will end in the way all bubbles end. There has never been a debt-driven boom in history that has gone on for ever and this one won’t be the first. The tears will be flowing.

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    • But if the supply side is not able to respond then the eventual boom recovery and boom that follows every classic property bubble. In 2007 it took just 2 years for prices to stabilise and then a couple of years of flat recovery and then the big boom follows. The fundamentals boil down again to demand and supply. The demand issue is not going to go away so you might as well focus on the supply.

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  2. No wonder National is not keen on Debt to Income limits.

    A return to sane lending levels would crash the Economy as well as the Housing Ponzi.

    Hanging their heads in shame? – more likely laughing all the way to the land bank.

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  3. That is a quality house likely built of Kauri hardwood. It would likely stand up for another 100 years. You can’t rebuild these houses cheaply.

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  4. I think ‘hanging your head in shame’ should be owned by the all of the voters, at a local and national level, who endorse the policies that allow this to happen. People in local and central government are there at our whim, we vote them in. We do not easily give elected representatives a mandate to change things, and seldom do they campaign on a ‘change’ platform. The NIMBY group is loud and strong, the sum total of the mess of policy is our own individual responsibility.

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    • To say everyone is responsible, is to say that no one is responsible. Politicians and officials make actual decisions, with real consequences. Sure they face some loose electoral discipline, but no mass group of voters asked back at the time the RMA was being designed for increasingly binding land use restrictions. In fairness, probably few of the decisionmakers appreciated the eventual consequences either. But when you make a mistake, even if you never intended harm, the first decent thing is to step forward and say sorry.

      I don’;t buy the NIMBY story. The biggest issue is about ready access to new developable land on the periphery of towns/cities. That isn’t a NIMBY issue, but one of policymaker (elected and not) preferences about “urban form”.

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      • Michael I know that peripheral land supply is the biggest supply vent. The large expanse of rural price land is the closest a city housing market has to perfect competition -freedom of entry.

        But from a resource allocation point of view -where housing supply is a type of labour market mobility i.e. the Alain Bertaud -Cities as Labour Markets thesis. http://marroninstitute.nyu.edu/content/blog/alain-bertaud-cities-as-labor-markets.

        In this case the ability to build up is as important to build out -as it allows housing supply to respond to the cities labour demand from a location perspective.

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      • Brendon is correct.The earthworks was required on my infill site due to height to boundary limits. To fit the house onto the site requires 2 metre of dirt to be dug out and as a result extensive retaining walls was required to be constructed. I was initially keen to put in 2 levels of dwelling but would have to dig out another 3 metres of dirt. The site was zoned Res 6a which would have allowed 8metres height anyway but due to height to boundary limits I was restricted from easily adding 260sqm of living space and only getting 130sqm.

        The new Unitary Plan once it becomes operative would rezone to Urban Dwelling which is boundary to boundary up to 8 metres I think basically discarding the height to boundary limits up to 8 metres. But of course there are the Nimby legal challenges to get past that is creating massive delays for developers and builders.

        The beauty of democracy. 1.5 million people held hostage by 2 small minority groups, Auckland 2040 and Heritage NZ.

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  5. And with “compact city” zealots controlling the WCC and Regional Council you are not going to see any land supply problems recognised let alone solved. It’s game over for young people owning a house in Wellington.

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  6. If housing is mainly a supply issue, roughly, how many homes is the country short? No doubt some people/families are living in tough conditions but it seems most people in the country have accommodation. Think demand and financing thereof requires creative thought: I’m sure the mortgage application process in 1989 was a little different to what it is today and perhaps this focused most people on buying one home rather than a ‘portfolio’ of investments….

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    • Houses cost about three times what they should – most of that is due to council restrictions on land supply but Government over-regulation of building is a factor as well. Nothing else really matters – investors buy because the restrictions create scarcity values – but they also buy new houses which increases accommodation supply.

      Oddly enough houses should be cheaper now that ever before – mass produced materials from China are very cheap and there are high tech wastewater plants and viable solar/wind power systems so you could in theory build a house anywhere with little existing infrastructure. But the councilors and planners now control where houses can be and they prefer the compact city model with trains and cycleways – so we are stuck with the high land costs.

      The Govt prefers highly priced NZ made materials for houses – so we are stuck with that too. Apparently we have ‘special conditions’ here so things like our windows need to be locally made and cost around 5 times what imported ones do.

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      • My experience with development is that the cost of infrastruture creates expensive houses. The house itself is cheap but the regulation and certification required at every single step creates expensive houses. You can buy second hand 4 bedroom 130sqm houses for $25k and less. But infrastructure for an average development site in an existing in fill housing will put a hole of $350k plus into your pocket per site. Add interest to that for the numerous delays and the hole gets bigger. This is just earthworks, public drainage, private drainage, manholes, cesspits, right of way, concrete, retaining wall if any and certification and checks by engineers, surveyors, council, water meter $14k, development levy $25k etc etc. No land cost in that total as yet.

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      • It isn’t so much numbers of houses, as ready availability of new peripheral land, combined (presumably) with structural barriers such as those GGS highlights that artificially inflate the cost of construction, even if land were readily available, and owners were competing to bring it into development. No doubt, all those things flow into some housing shortages (we’ve seen the rise in real rents, even as real interest rates have fallen), but if the cost of bringing a new house to market (land + construction) is “rigged” by policy, there is a (quite high) price level that houses won’t fall below for long,

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  7. Hmm. Seems to me there should be a rough estimate of the supply shortage. Just think those that took the risk and leveraged equity gains as interest rates fell have ownership of an asset class that is perhaps better rationed. I’m not sure how many propertirs GGS owns but I doubt he requires more than one or two on the asset ledger….

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  8. For those that are asking how big the ‘shortage’ housing supply is and therefore how many additional houses need to be built. That is not how land/real estate economics work.

    The problem with placing excessive restrictions on how and where to build additional housing is it causes urban land supply to become inelastic. This raises prices and restricts quantity supplied. The increased cost of new builds -which like when we had restrictions on importing new cars -means the 2nd hand/ existing housing also rises in price. Worse still it makes houses and property in general susceptible to a speculative boom/bust cycle -which worsens prices/costs further.

    The extra cost of housing means people delay leaving home, live in a shared rental for longer and that overcrowded conditions worsens. New Zealand’s home ownership rate peaked in 1990 and has now declined back to levels last seen in the 1950s. At the sharp end of the property market -41,000 are technically homeless according the definition that the Census uses -meaning they are dependent on others allowing them to couch surf, or they live in places not considered ‘homes’ such as campgrounds, garages and cars. This works out as 1 in 100 kiwis in the 2013 census and has worsened from 1 in 120 kiwis in 2006.

    Unaffordable housing I think is causing a mis-allocation of resources in New Zealand. Unaffordable urban areas means labour cannot mobilise to where they are needed -thus productivity and urban based diversification is inhibited. Two of New Zealand’s biggest economic problems.

    It is frustrating that so many kiwis naively do not understand the economics of our dysfunctional housing market.

    Thanks Michael for plugging away and trying to educate people on this important issue.

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    • A while back Wellington opted for a compact city with little zoned land at the fringes – but had a fairly liberal infill housing policy. Then via Plan Change 56 restricted infill housing supposedly because of NIMBY (“no houses for people who aren’t me”) discontent. But in the justification for PC56 the WCC said the ‘lightning rod” was a 6 townhouse development in Agra Cres in Khandallah. But in that example it was the neighbour complaining that the WCC had allowed the developer to build a couple of metres beyond the consented plan – not about the rules at all.

      They had to falsely portray this public discontent as it simply didn’t exist – but it forced almost every development to get a Resource Consent which gave the planners the power they wanted. This became even more obvious when they introduced PC 72/73 which would select the areas the planners preferred for higher density – taking even more control.

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      • Do NZ local government planners planners have the same mindset as the Soviet planner who reportedly when first coming to the West asked -who had planned the bread production for such and such city.

        Is there a schism in planner circles where some believe in spontaneous order in the housing market ie Alain Bertaud types. Versus the Soviet types who believe they must direct housing production?

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      • Oh agreed. Mafia protection rackets are not really similar to the NZ gang landscape (other than a general blase attitude to ‘illegality’, not unknown in more genteel contexts). My grandparents (Chch) house was purchased by a small gang who recently patched over to a larger gang. Neighbours report the biggest issue is police pressure (they tend to come early in the a.m., with guns and dogs). At a guess I’d say the corporate approach to meth has resulted in a general dampening down of gang contests. This, of course, has nothing to do with Wellington or other locales house prices.

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  9. Is there any research that splits out the extent to which different factors have contributed to housing price inflation ? It is popular to blame land use restrictions, but I’m not convinced that releasing more land on the periphery will actually reduce prices that much, simply because the related infrastructure doesn’t exist. It could easily take 2hrs to make the journey from the periphery of Auckland to the CBD regardless of transport mode.

    In my opinion distortions created by negative gearing and a lack of a comprehensive capital gains tax are also a big factor that have caused people to invest in housing rather than other asset classes. Secondly there is quite simply the mania caused by an inflating bubble and the associated cheerleading from celebrity investors, proper climber tv shows, regular front page news stories about people making a killing in the property market etc. And lastly there is the tsunami of cash coming out of China from new migrants as well as China based investors. This has contributed to the disconnect between incomes and housing prices as these purchasers no longer need to earn the money in NZ to pay off the purchase price. The same factor is at play in other housing markets strongly associated with Chinese immigration and investment such as Hong Kong, Vancouver, Toronto, Sydney, Melbourne etc. In fact it is surprising how similar the debate about housing prices in Vancouver has been to that in Auckland.

    Taken together these factors have created a perfect storm. I’m not convinced that liberalising planning rules and increasing the housing supply will necessarily reduce prices when faced with the other forces. Although the countries are not really comparable, modelling undertaken by Oxford Economics for the recent Redfern review into rates of home ownership in the UK, found that even with a massive increase the number of homes being constructed over the rate of household formation, house prices might only drop by 5%.

    http://www.redfernreview.org/wp-content/uploads/2016/11/20161114-Redfern-Review-modelling-paper.pdf

    In order to make housing more affordable a multifaceted approach would be needed (that will never happen). This would include comprehensive capital gains taxes, elimination of negative gearing, bans on non-resident investors, restrictions on immigration, investment in public transport infrastructure, and a loosening of land use restrictions.

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    • Tony a difficulty the academics have is a lack examples of countries/cities with restrictive planning rules and high house prices, that have successfully undertaken reforms, which returned the market to affordability.

      Certainly the UK have never been able to manage the politics of housing reforms -despite having unaffordable housing and a boom/bust property market since the 1950s -so I am doubtful on how valueable there research is on the topic.

      Perhaps Japan/Tokyo is the only example of successfully implementing urban planning reforms -Michael has written about that before -a proper acadamic study of Tokyo from the 1980s property boom to its current state of affordability would be very valuable.

      I think for NZ to return to affordable housing will take a series of structural reforms along the lines which you mention -but relaxing planning restrictions is critically important and unfortunately the most controversial. Doing partial reforms to some areas, but not tackling planning issues like land banking will be ineffective in getting a return to affordable housing.

      I have written quite a few articles on the topic -you can access my library here https://medium.com/@brendon_harre

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    • Negative gearing and capital gains tax is a red herring. Just a waste of time and a waste of IRD administration dollars. Every other country has capital gains tax plus U.K. has loss limitation or loss contained. It has made a difference in prices going up. Get down to basics. It is a demand and supply issue.

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    • Finding good research that compellingly answers the questions is difficult – and it is worth bearing in mind that probably few people’s minds are really changed much by even the best econometric evidence. As Brendon notes, one of the difficulties is that there are few/no known examples yet of countries unwinding the web of land use controls once they’ve been put in place. Another is that even capturing which dimensions of the controls, and how they are applied in practice, is difficult.

      On tax issues, my view has long been shaped by the perspective that there are significant differences in how housing is taxed from one country to another (CGT or not, ringfencing or not, tax-protected investment entities or not etc) and those differences don’t seem to show up in systematic differences in housing/land prices across countries. It would be surprising if tax made no difference, but I’m not persuaded the effects are typically large. On the other hand, one can look at somewhere like the US where there is a more or less common tax system across the country, common immigration policy, common monetary policy etc, and still find huge differences in house and land price outcomes. I’ve taken that as quite strongly supportive that differences in planning restrictions etc – which are mostly at a county/city level there – really do play a material role in explaining why house prices in quite ordinary cities have often got so appallingly high,

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      • The best analytical papers re house prices in the USA, manage to devise a formula that fits all the disparate housing market outcomes quite well. In all these papers it puts the inelasticity of housing supply as a “trigger factor” outside a set of brackets in which everything else is contained. The elastic-housing-supply markets have the same “price boosting” factors inside the brackets, but the trigger factor outside the brackets is low enough that the figures inside the brackets have little effect on the final outcomes. In the inelastic-supply housing markets, the reverse is true – the price-boosting figures inside the brackets have full impact because they are activated by the inelastic housing supply.

        The most up-to-date example of papers like this, I think is Heeboll and Anundsen (2014) “Supply Restrictions, Subprime Lending and Regional US House Prices”.

        Attempts to make the elasticity of housing supply just one factor applying directly to the outcomes, along with all the other factors, never achieves a formula with explanatory power.

        It is also obvious that although the “Index” for “supply elasticity” is based on a number of types of supply restriction, there is one single one that is sufficient for the exercise: is there freedom to convert rural land to urban use with no regulatory choke? Nothing else matters for affordability. It is perfectly possible to have massive restrictions on density and yet still have a systemically affordable housing market – Atlanta, for example, is around 1/3 the density of Los Angeles and Auckland, and around 1/12 the density of London, yet it is a median-multiple-3 housing market. Its average section size is something like 2/3 of an acre.

        Land is simply so cheap in reality – i.e. in non-urban uses – that very low bid rents from the urban economy are all that is necessary to ensure conversion between uses. Rural land can be as cheap as $20,000 per hectare and in the absence of regulatory chokes on the conversion of it, even the land immediately outside the existing fringe of median-multiple-3 cities can be as cheap as $50,000 per hectare. This is the stuff of the classic Van Thunen land rent curve.

        Even when you have anti-density mandates that are creating new suburbs with lots ranging from 1/2 an acre to 4 acres in size, land this cheap is such a small input to overall costs, that the median multiple can still remain down at around 3.

        Systemically unaffordable housing markets are ALL about the raw land costs under regulatory chokes on conversion from rural use, inflating to $500,000 per hectare (at least), and there is absolutely nothing that brings this back down in the absence of liberalisation of the ability to convert rural land to urban use. Ironically, increasing the allowed density of development feeds straight into higher site values. It is entirely likely that in Auckland, greenfields land inside the growth boundary is selling for $4,000,000 per hectare BECAUSE developers are allowed to put 30 units per hectare on it.

        Imposing a growth boundary means that upzoning NEVER actually brings “house prices” down – it shrinks the allowable average size per unit even as the price continues to inflate. Ironically, every existing property in zones where allowed density has been increased, also inflates in value, representing the “development potential” of the “site”. These ridiculous railway cottages in relatively central suburbs priced at $1,000,000 would not be anywhere near that expensive if there was not zoning allowing townhouses to be crammed on the property. Also ironically, most of these properties merely inflate in price without being redeveloped; the redevelopment that does take place, is only ever a pathetic contribution to “housing supply” and the shortages continue.

        The British have been running this dismal experiment for decades and they never learn – such is the immunity of the mind attracted to central planning, to evidence and real-life outcomes. Mind you, the economics profession has been pissing around not getting anything right about the underlying land economics, either. It is a classic example of ivory-tower disconnect from the real world. The policy advice world is still awash with fraudulent papers that claim that intensification and redevelopment will create affordable housing markets absent evil “sprawl”.

        Even in Melbourne, and in Spain in the 2000’s, you could have apartments being thrown skywards en mass even to the point of obvious oversupply, but the prices are NOT anything but exorbitant until after the inevitable crash. The ability of “site values” to capture “allowed density of development” has seen to that.

        I continually point out that in contrast to the median multiple 3 housing markets with overall densities as low as 700 people per square kilometer, Hong Kong has 26,000 people per square km and a median multiple of around 16, and chronic volatility. That is an excellent demonstration of the power of “site value capture”. The fact that there is around 40 times as many people crammed onto each unit of land space does NOT mean that the land value is divided up between households 40 more times, creating affordability by having 1/40 of the land value incorporated into the cost of each housing unit. But this is the absurd assumption on which a global planning fad is based..! In fact the site values have ended up not just 40 times higher, but around 200 times higher. The elasticity of site values to allowed density is obviously exponential under conditions of a choked supply of low-cost rural land to the urban economy.

        The best parallel example in basic economics, would be a deliberately rationed supply of food. If the overall supply was 1/5 of what people are currently consuming, what economic idiot would assume that the result would be everyone spending 1/5 of what they currently do, on food? The economics of rationing and quota simply do not work that way. The tighter the ration, the more that people desperately “bid” for a share that they regard as adequate.

        The central planners of housing everywhere claim to “know” that people “actually don’t want much space any more” but the price signals are “revealed preferences”.

        http://makingnewzealand.wixsite.com/home-site/single-post/2016/09/01/The-Myth-of-Affordable-Intensification

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      • Phil

        Thanks for that comment, which I mostly agree with. I think the challenge in the empirical work is the cross-country context. The US stuff is very valuable, precisely because of the diversity of regimes in the US, but would be more likely to persuade more of the sceptics if it were generalised into cross-country studies.

        Pehraps my only point of departure is around the inevitability of a crash. A market rigged by regulation can stay with outrageous prices for a very long time (many decades).

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      • Rural land is cheap because it has no infrastructure. It is the infrastructure spend that escalates the price of land. It is a complete waste of time comparing rural land with land that has millions of dollars of infrastructure, drinking water, blue pipes for underground, grey pipes for house, private drainage sewerage, public drainage, stormwater, cesspits, manholes, water meters, electrical wiring Vector, Chorus telephone line or Fibre, TSG easements, Right of Way, Private Easements, Soil compacting, Driveway boxing, Driveway concreting, carpark soil compacting, carpark concrete pads, landscaping, earthworks, retaining walls, Council development levies etc etc

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  10. Bernard Hickey’s excellent story about the breaking down of the globalisation social contract has many links to NZ’s housing story.
    http://www.interest.co.nz/opinion/84752/any-building-concrete-cancer-trust-big-society-wide-idea-can-seem-very-solid-right

    I commented as follows;

    I would argue for NZ the most similar period to now is the early 19 century Britain. The end of the Napoleonic wars had bought in a period of international peace, trade and prosperity, but there were huge internal divisions between the ‘have and have-not’s’, as prosperity was not fairly divided. Britain dealt with this problem by gradual reform giving more political power and economic gains to the ‘have-not’s’. Europe did not and had the 1848 revolutions and the US had the 1860’s Civil War.

    In NZ today, the biggest group of ‘have-not’s’ is generation-rent and the biggest group of ‘haves’ is generation-own. This is probably true for many Anglo-world cities, but general in the US the ‘haves’ are more about the ‘establishment’ permanently favouring the managers and owners that make up the corporate class of Wall Street, while the ‘have-nots’ are the workers and small businesses which make up Main Street. The likes of Robert Reich in the US have demonstrated that low to middle income workers, especially males have had no real income gains for 20-30 years, despite making productivity gains. It was this group which didn’t vote Democrat in the numbers which they previously had -meaning Hillary got less votes than Obama -especially in swing States, while Trump got about the same number of votes as Mitt Romney.

    In NZ, John Key is desperate to put out the fire of Generation Rent versus Generation Own narrative. As recently as yesterday on TV3’s The Nation, he was telling a nice story about housing construction picking up -that there is a wall of housing coming on stream and the lag effect will eventually sort out the housing market…..that the growing economy will easily cope with the Kaikoura earthquake and a combination of tax cuts and grants for low income families are coming soon to fairly divvy up the gains from a growing economy….

    Of course, John Key’s story is half true and half spin. For instance -Canterbury has had a residential building boom far exceeding any previous boom and that combined with section prices being under $200k in places like Rolleston and Rangiora put a lid on all house price rises in Greater Christchurch. The Auckland residential boom has yet to ramp up to the size of the early 2000’s building boom under Clark and Cullen and that building boom was inadequate to contain house price rises back then, so why would a smaller building boom now contain prices? On the price side of the equation, land banking is far greater in Auckland and section prices are 50 to 100% greater than Canterbury and they are still rising. So I doubt John Key’s lag effect story.

    As to whether the property ‘haves’ can compensate the ‘have-not’s’ with tax cuts and grants -again Clark and Cullen tried that with Working for Families and it didn’t work……

    What is need is a structural reforms to even up the playing field between Generation Rent and Generation Own. In my opinion if reforms are not provided then the risk of some sort of revolution down the track could rise to dangerous levels.

    I have written more about this on my website -the link is in one of the above comments.

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    • Melbourne has around 3000skm of high rise opportunities. As a result there is now a glut of apartments. An oversupply. All we need to do is drop the viewshaft height limits and allow unlimited height restriction on central Auckland. You cannot limit high rise in central Auckland to only 550skm and expect house prices to fall. Our central CBD is even smaller than Singapore or Hong Kong which has around 1800skm.

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    • Chinese-made $100 billion city near Singapore ‘scares everybody’

      “The landscaped lawns and flowering shrubs of Country Garden Holdings Co.’s huge property showroom in southern Malaysia end abruptly at a small wire fence. Beyond, a desert of dirt stretches into the distance, filled with cranes and piling towers that the Chinese developer is using to build a $100 billion city in the sea.

      While Chinese home buyers have sent prices soaring from Vancouver to Sydney, in this corner of Southeast Asia it’s China’s developers that are swamping the market, pushing prices lower with a glut of hundreds of thousands of new homes.”

      http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11756087

      This is how you lower prices. massive oversupply whilst at the same time boosting GDP and creating jobs.

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  11. Rather than rant with straw-man arguments about it all being John Key’s fault and blaming councils and officials and the RMA maybe its time to look at some data… remember data everyone?

    I know we are all now ‘post truth’ and all, but I’m old fashioned in this respect…

    So in respect of the Wellington market lets talk about the secondary market… people selling existing properties… between Jan 2007 and April 2015 (18 months ago) the average number of properties for sale in Wellington every month was 2,750…

    Between May 2015 and October 2016 the number of properties for sale has fallen from 2,160 to 984… a decline of 55% and an even bigger decline from the average of the previous period..

    So if you look at it from a supply and demand perspective as prices have started to increase… the number of properties being offered for sale has declined… the number of weeks of inventory in the market is currently under six weeks.. Six weeks!!! This is an incredibly tight property market and far tighter than Auckland…

    Since April 2015 the median price for Wellington has increased by 16%…

    So economists… the question to be answered is not about zoning rules, the evilness of John Key, the greed of the banks or any global conspiracy aka Bernard Hickey… it is simply this.

    Why is the supply of Wellington properties falling as the median price increases?

    Answer that and there will be a positive contribution to the debate as opposed to all this drum banging in an echo chamber.

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    • Perhaps there is something to that if you are talking about the annual ebbs and flows in annual house price inflation rates in particular cities. But if one is talking about house and land price levels, and changes over decades, it seems entirely reasonable to sheet responsibility home to politicians, left and right, central and local, who have made the decisions that have produced the sort of housing market (and unaffordable house prices) we now have.

      But even on the annual ebbs and flows, the regulatory backdrop is likely to matter. In markets with responsive house and land supply, if prices do rise there is a strong incentive on any thinking of selling to do so promptly before prices fall back again. That isn’t the case in markets where people fear that a year of sharp price increases may foreshadow more years and years of ever higher prices.

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      • Yes… noted. Although I only mentioned the effect in Wellington it is in fact a national effect, apart from Auckland… the more house prices have increased across the country over the past 18 months the few number of houses have been for sale.

        I know there is a lag effect between prices changing and people reacting to the price change (goes in both directions) but it seems that this effect has been going on for quite a lot longer than one would expect for a supply side response.

        In the absence of a supply side response from the secondary market even steady demand will show up in rising prices all other things being equal… of course that is never the case, but it is an interesting effect.

        I do note that the data I was quoting was seasonally adjusted data, so hopefully the annual cycle is out of the data…

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