Impacts of Land Availability, Housing Supply and Planning Infrastructure on New Zealand House Prices

We summarise and synthesise results from several studies dealing with the impacts of land availability, housing supply and associated planning infrastructure on New Zealand house prices. New house supply is responsive to the ratio of house prices to development costs as predicted by Tobin’s q-theory. Development costs, in turn, are influenced by construction costs and land costs. Qualitative evidence indicates that restrictions on land supply around Auckland – partially a result of that city’s planning infrastructure – are instrumental in raising land costs for that city, and this is substantiated by econometric analysis of the determinants of Auckland land values. Consenting processes also limit house supply responsiveness in Auckland. Our analysis shows that house supply responsiveness varies across New Zealand. In line with theory and with results of international studies, we show that regions with high supply responsiveness have relatively small price spikes following demand shocks