And this is the big grey area.
You could get a quick sense of it by inventing a measure like median house price to electronic card spending (the later is on Infoshare on StatsNZ).
I just want to go on record I grow increasingly of the opinion it is primarily a financial bubble not a population pressure issue.
While it is true (I assume) that Auckland needs to build 75000 extra homes to have the same kind of people per household as the rest of the country, it is also true that Auckland needs to build about zero extra homes to have the same kind of people per household as Auckland did in 2001 (approximately zero, there are a few small changes in household composition over the period). For decades the provinces have been getting older and emptying out, so comparing the household sizes of the places people are moving from as the reference point does not give the whole picture.
Looking at it as a financial bubble, the issues become things like who has access to what financial resources and how attractive tulip bulbs are as a store of money.
But it won’t happen while the Reserve Bank Governor is constrained to keeping Inflation within the 1-3% range and the only tool he has is the OCR
It is not actually the Reserve Banks job- it looks after banking stability (trying to ensure the banks won't crash in the event of a downturn) and given house prices are outside the inflationary measures, it does not form part of the 1-3 range calculation.
The only reason people think the Reserve Bank has anything to do with it is that the government has been so very, very inactive that the Reserve Bank has gone "this could be so destabilising that we will do what we can so long as it does not conflict with our formal objectives".
Census 2001 - average household size in the Auckland region - 2.9 people.
Census 2013 - average household size in the Auckland region - 2.9 people.
People can probably make their own estimates of how much population pressure has been the main causal factor in house price increases in this period.
Auckland has an unaffordability edging all the way towards 11 (as a multiple of income)
Ireland sprawled massively and was at 5.5 when it's bubble burst, remember what that was like for Ireland?
Apartments in Tokyo was (I think) at around 18 in 1989 (possibly the most unaffordable in history for the population living there) and the 1990s are referred to "the lost decade" from the fallout.
The housing situation here is exactly the same as Auckland.
Except that by most of the metrics of comparing houses affordability to local peoples ability to pay for them, Auckland works out to be about 1 and 1/2 times less affordable than London. Current London is kinda equivalent to Auckland 2012, before the bubble on top of the bubble.
I am just of the opinion neither building up nor out will make much difference to Auckland house prices while it is so disconnected from the local economy, and I have not yet heard anyone explain how something that does not respond to local economic signals is supposed to start responding to those local signals give its lack to date.
I spent the past couple of days assembling the data for this graph- the ratio of median house prices to GDP per person, so a measure of the degree to which the economic activity of that person underwrites the prices of the houses in that locale. The grey dots are every metropolitan area in the United States that I could easily match the GDP, population, and median house prices for. I've added three lines to put Auckland into context of the initial graph that sparked this article: Auckland, New York as being from the expensive without many builds part of the first infographic, and Las Vegas from the massive builds no price change part of the graph.
In both New York and Las Vegas the ability of peoples economic contributions to afford the price of local houses is pretty similar, even if the raw prices themselves are rather different. Auckland is not responding to the local economy, it was a bit unaffordable when compared to the US at the peak of the US housing bubble, but since the US bubble burst and Auckland's didn't (instead now adding a bubble on bubble) it seems to me it is going to take some demand side levers (things around capital gains and the ability to hide the source of money in housing) to make any difference.
I am glad the growing urban sprawl and decrease in population density in the central core relative to the fringes has kept house prices in London affordable since the 1980s.
Which might prompt comments that London is different to the U.S. cities, my point is so is New Zealand.
"We have John Key’s word on this."
He is a man of many roles. Was he commenting wearing his Panama hat?
"that during a garden-variety recession, or a major fiscal cataclysm like a bubble"
To me that is the distinction of voting conservatively (which can actually either be right or left) for fear of losing what you have, and voting radically (which can either be right or left) because you have nothing to lose.