Auckland estate agents were jubilant this week at figures showing house prices and sales volumes in the city had taken off again.
"Recent fears of the Auckland market cooling have been overstated," the Real Estate Institute's chief executive, Colleen Milne, told the Herald on Tuesday.
Sales volumes had risen by 67 per cent in March and the region's median sale price rose from $750,000 in February to $820,000 in March.
If this is the end of the slowdown since late last year, when the Government introduced a "bright line" test for capital gains tax and the Reserve Bank increased the deposit required for residential investment loans in Auckland, not everyone will be jubilant.
Those steps were taken to slow the rate of rising prices, not stop the rise or send it into reverse, and for six months it succeeded.
The Reserve Bank was confident enough of that to reduce its official cash rate unexpectedly last month, which now looks unwise.
Money has seldom been cheaper. Very low interest rates and high immigration are fuelling a housing market that becomes more unaffordable by the month for those on average incomes without a home of their own.
Even those who can take on a mortgage are borrowing sums that make their parents' eyes water.
But as soon as some of those young people take on a million dollars of debt they see their house value rising and interest rates falling and look to buy an investment property if a bank will let them, which it probably will. The old rules of affordability have gone out the window.
But not everyone is earning enough to get a mortgage even on today's rules.
Too many young working couples nowadays cannot hope for a home of their own.
The modest "Kiwi dream" of yesteryear - a three-bedroom bungalow in the suburbs - bears a price beyond their contemplation. They will have to rent that bungalow, paying somebody else's mortgage on it.
If the state can find the means to build more low-priced houses, they will soon become yet more investment property. There is no single solution, but a combination of many might work.
The first report today in our Home Truths series shows that almost 90 per cent of Auckland houses are probably out of a first home-buyer's reach, and the remorseless rise of prices is no longer confined to Auckland.
Demand is now being felt in other regions, possibly a result of the Reserve Bank's selective regulation of the Auckland region.
New Zealand is now the most expensive country in the world to buy a home when prices are related to local incomes.
The Government appears to have no more answers. When Finance Minister Bill English was asked on Newstalk ZB this week, he resorted to blaming Auckland's land use restrictions and hoped the new Unitary Plan will permit more houses to be built.
But no matter how permissive the plan may be when it is finalised, it will not magically build more houses.
The building industry's capacity remains a severe constraint on Auckland's ability to match housing to population growth.
Nor does the Labour Party have the answer. If the state can find the means to build more low-priced houses, they will soon become yet more investment property.
There is no single solution, but a combination of many might work.
We need higher density housing, more large-scale builders, cheaper materials, more rigorous taxation of property investment, to mention a few.
Otherwise we will be a society permanently divided into home-owners and life-long tenants. Nobody wants to live there.
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