Door closes on Gen Rent: The proof is in the figures

Removing restrictions on building heights in suburbs around Auckland's centre would free up housing. Photo / Doug Sherring

If you are reading this and you don't own Auckland property, this will probably ruin your Sunday.

Figures released this week by Barfoot & Thompson confirmed Auckland's housing market has officially floated off into its own orbit.

The average price of a three-bedroom house in what used to be the old Auckland City rose above $1 million for the first time last month. In West Auckland, it rose 20.5 per cent over the past year to $632,032.

Barfoot sold 420 homes worth more than $1m each last month and just 300 homes for less than $500,000. Barfoot's agents would have collected almost $1m in commissions each day.

Auckland house prices are now rising at double-digit rates annually. The rest of the country is growing at less than 5 per cent or not at all.

Even in Christchurch, house price inflation is subdued, as a wall of new houses hits the market to soak up demand.

No relief is in sight. Net migration is rollicking along at record highs and at least half of new migrants end up in Auckland. Longer-term fixed mortgage rates are low and falling.

Housing supply in Auckland is nowhere near catching up with the shortages built up over recent years.

In the 12 months to February, 7,745 building consents were issued in Auckland, well below the 10,000-plus needed to keep up with population growth, let alone catch up on the shortage of 20,000 dwellings from over the past five years, according to MBIE estimates.

If the current trends continue into next year, economists are forecasting another double-digit increase in tax-free capital gains for Auckland homeowners. Renters are in all sorts of strife because rents are rising 5-10 per cent a year, double or quadruple income growth.

Auckland's housing market is now an issue for the Reserve Bank in financial stability terms, it's a fiscal problem for the Government and it's an affordability problem for first-home buyers and renters.

What can be done short term?

The Government is expected to announce within a few weeks it will ramp up its Tamaki Redevelopment project of Housing NZ land in Glen Innes into a $1 billion scheme with hundreds of new affordable homes.

It is also, with the Auckland Council, looking at how to free up Government land for housing.

But the Government and Auckland Council will have to consider more aggressive measures.

Prime Minister John Key has left open the option of tweaking immigration settings if the pressure becomes too much. Auckland's housing pressure cooker is getting close to that point.

The Reserve Bank is likely to force banks to hold more capital to back rental property mortgages within a few months, which could push up interest rates for landlords. It is also expected to keep agitating behind the scenes for Government action to reduce the tax advantages for property investors. A brave Reserve Bank would be much louder.

The bigger fixes on the supply side will take much longer. They could include introducing new leasehold agreements and long-term tenancies that make long-term rentals more attractive for tenants and institutional investors.

They could include removing some restrictions around building heights, parking and view shafts that reduce the housing density in suburbs around central Auckland.

All these require political will and bureaucratic heft from the Government and the Auckland Council.

Auckland's Generation Rent and taxpayers north of Warkworth and south of the Bombay Hills can only hope the politicians find these qualities.

That's if they haven't read this far and given up in disgust first.

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