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Housing demand and supply, no solution in sight



The correlation between homelessness and house prices seems obvious; however, does the government confront the causes or merely attempt to address the symptoms? The blog post “New Zealanders feel better about housing market” attempts to raise awareness of news media’s hidden agendas within their reports. Stuff NZ Business Day headlined their report “New Zealanders feel better about housing market” (from where the blog title originates) makes claims regarding the nation’s positive feelings pertaining to the current housing market. Business news is notorious for hyping up markets, and of course business markets stand to profit from such hype. Not only mainstream news are doing this, local online news sites are in on the real estate hype too. The Southern Lakes District news site Crux, published an article by local real estate agent Nicky Ramsden and claimed “properties under $1 million are being snapped up with multiple competing parties inflating their prices in some instances”(2018). Miss Ramsden also states, “There has been a recent flurry of expat and foreign couples about. Some, no doubt, keen to buy before the new foreign buyer’s legislation comes into effect this December. This has driven demand, particularly for properties around the $1 million mark. And the 2018 median house price in our region is now $1,152, 500, compared to five years ago when it was $600,000”.

The increase in house prices may profit current home owners, local councils, real estate agents and banks, however, what about future generations needing homes?
How will they afford housing if prices keep rising? This issue faces Kiwi’s in many parts of Aotearoa, and Auckland seems the axis for homelessness and increased house prices. In a 2015 report titled Investors adding to Auckland Housing Market risk from the Reserve Bank of New Zealand clearly states, “the main underlying cause of the housing shortage in Auckland is the continuing record net inflow of migrants, against a background of very low residential construction activity over many years”.
Below in Figure 1, the graph depicts house prices and the corollary of people arriving and leaving our country.


Figure 1, Auckland migration and house price correlation. Source: Reserve Bank NZ, (2015).

Put plainly, demand is outstripping supply and there appears to be no solution to this equation. Or is there? Would it not make sense to slow demand by decreasing immigration until housing can be provided for those who need it? Maybe this is too simple a solution. Could it be that instead of politicians we need mathematicians designing policies and strategies to confront causal factors?  


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