Auckland's urban boundary is adding up to $50,000 to the price of the average home, according to new research.

Despite this, Auckland Council's chief economist is torpedoing claims the city limits are strangling land supply and artificially driving up the cost of scarce land.

Pundits have long argued the city's rural urban boundary (RUB) is curbing housing development on Auckland's outer fringe.

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They say this inflates the cost of land inside the city limits, adding hundreds of thousands of dollars to the price of Auckland homes.

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However, a 10-month investigation by the council's chief economist David Norman, released today, has debunked the claims as not based on facts.

"Our findings today show that the actual impact of the RUB on property prices is at most a small fraction of what was previously estimated," Norman said.

"It's about looking at the facts and they lie where they lie."

Previous research estimated that urban-zoned land inside the boundary was worth several times more than rural land thanks to a "price premium".

A 2017 study found over-regulation was responsible for 56 per cent of the price of an average Auckland home - the equivalent of $530,000.

But Norman's report says the studies often ignored crucial variables like a property's proximity to the city, its amenity value in terms of beach access or sea views, and whether the land was flat, sloping or near shops and decent schools.

Pundits have long claimed that urban limits were restricting development and driving up the price of scarce land. Photo / Michael Craig
Pundits have long claimed that urban limits were restricting development and driving up the price of scarce land. Photo / Michael Craig

Also crucially, some studies had not accounted for significant infrastructure costs necessary to connect rural areas in terms of roads, water and electricity, drastically miscalculating the actual price differential of land inside and outside the urban boundary.

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Norman's research found that at most, the price premium for developed land inside the boundary was 5.2 per cent compared to undeveloped rural land once those variables were factored in.

That equates to $50,380 on the average Auckland home.

However, this was based on conservative estimates and the figure was likely to be lower or even non-existent, Norman said.

He expected new Real Estate Institute data for February to show Auckland median house prices had hit a new record level, breaking the $900,000 mark for the first time.

And while housing affordability remained problematic, removing the urban boundary was unlikely to deliver significantly cheaper land to the market, he said.

His research was based on 37,000 property sales across Auckland since the Unitary Plan came into effect. Norman said it had undergone "sensitivity" testing to ensure it was robust and hoped the findings would inform policy debate.

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Auckland Mayor Phil Goff says the research shows claimed advantages of removing the urban boundaries are
Auckland Mayor Phil Goff says the research shows claimed advantages of removing the urban boundaries are "not sustained". Photo / Jason Oxenham

Mayor Phil Goff said the Unitary Plan ensured there was sufficient land supply.

Development capacity existed for up to two million new dwellings in existing urban areas over the next 30 years, plus an additional 137,000 homes across 13,000ha of greenfield development sites.

"[The Unitary Plan] allowed for greater intensification of housing to ensure a more compact rather than a sprawling city, which is critical to tackle problems such as traffic congestion and carbon emissions.

"The council research shows that the changes are working and that the claimed advantages of removing the RUB are not sustained."

Not everyone agrees, however.

Hugh Pavletich, co-author of Demographia Housing Affordability Survey, says New Zealand's property market is the most over-priced in the developed world. Photo / John McCombe
Hugh Pavletich, co-author of Demographia Housing Affordability Survey, says New Zealand's property market is the most over-priced in the developed world. Photo / John McCombe

Hugh Pavletich is co-author of the annual Demographia Housing Affordability Survey which found New Zealand housing market is the most over-priced in the developed world relative to household incomes.

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He dismissed the Auckland Council research as "complete drivel" and questioned Norman's independence.

"They'd have to use arithmetical gymnastics to come up with that conclusion."

Pavletich said the numbers were simple. Raw undeveloped land in rural areas several kilometres outside the RUB was worth $30,000 to $50,000 per hectare. Inside the RUB such land was $2m to $3m or more.

"It is really that simple. Most laymen could understand it but it appears some economists are baffled by it all."

After coming to power in 2017, the Labour government vowed to axe "highly restrictive planning rules like the urban growth boundary" to address house prices.

In a statement yesterday, Urban Development Minister Phil Twyford said: "I look forward to going over the research, but it's common sense that if you restrict land, house prices will go up."

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