Government predicts house price boom

In a foreword to the last Demographia study on housing affordability, Mr English writes that the Government agrees with the Productivity Commission that supply issues are making houses more expensive.

“It costs too much and takes too long to build a house in New Zealand,” he said.

That meant that demand shocks caused higher prices rather than an increase in construction, he said

English said it was possible the country was seeing the beginning of a repeat of the mid-2000s demand shock, partly driven by low interest rates.

The Demographia report said that New Zealand median house prices are now 5.3 times median household incomes, almost twice the historic norm of three times, which the country last experienced in the 1990s.

Britain, Australia, New Zealand and Hong Kong were all experiencing pervasive unaffordability, it said.

From 2004 to 2012 Australia and New Zealand had the most unaffordable major markets, with every major market being severely unaffordable every year, the report said.

It said land supply was the biggest issue affecting affordability. “Where house prices have increased substantially relative to incomes, they have been preceded by urban containment regulation.”