How restricted is land supply? – Reserve Bank of New Zealand – Te Pūtea Matua

A paper released today by the Housing Technical Working Group (HTWG) – a joint initiative of Te Tai Ōhanga the Treasury, Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development and Te Pūtea Matua Reserve Bank of New Zealand – provides an assessment of how restricted land supply is in Auckland and how this has changed.

Analysis of Availability of Land Supply in Auckland (The Treasury website) finds direct evidence of restrictions on the supply of urban land. Among the paper’s findings is that these restrictions are estimated to have added $378.4 per square metre to the price of urban land immediately inside of the Rural Urban Boundary line in Auckland in 2021.

“This is important because it backs up the Housing Technical Working Group’s earlier proposition that New Zealand house prices were driven higher by a combination of declining interest rates globally and restricted land supply”, said Treasury Chief Economic Adviser and HTWG spokesperson Dominick Stephens.

“The more land supply is restricted, the more that financial changes such as movements in interest rates and taxation will be captured as changes in the price of scarce urban land, rather than changes in housing supply or rents.

“The paper also found some tentative evidence that the availability of urban land in areas of Auckland improved over the five-year period following the introduction of the Auckland Unitary Plan.

“Interpreting the indicators used in this paper requires care and nuance, as they are highly sensitive to measurement decisions such as the delineation of new builds from second-hand stock, and the definition of rural-urban boundaries. But when used thoughtfully, measured over time across and within regions, and considered alongside other evidence, these indicators have multiple policy uses.

“For instance, the indicators can help with what restrictions policy should seek to target. Grouping regions based on the indicators can help find common underlying causes of the restrictions. This can guide which interventions are likely to have greater or lesser impact in which regions.

“When measured over time, the indicators can also help determine whether restrictions are loosening or tightening, as well as help us observe and evaluate the impact of policy interventions and cyclical factors such as interest rates.”

Analysis of Availability of Land Supply in Auckland is produced by Mariona Roigé Valiente, Andrew Coleman, Nam Ngo and Chris Parker and is the third paper published by the HTWG. The two earlier papers are: