Expectation is a powerful thing. It's the reason 45,000 sections in Auckland are sitting there ready to go, with all the connections to water, power and roads - but no houses.

The prospect of a repeat of the doubling or tripling of land prices around Auckland in the past 15 years has created a dangerous dynamic for the economy and for first-home buyers in particular.

It means land bankers are more likely to hold on to land expecting to get tax-free capital gains without going through the messy business of building and selling new houses.

The 35 to 40 per cent rise in Auckland land value over the past two years was proof positive that they are sitting on the biggest sure thing in the history of New Zealand investment.


Auckland's metropolitan urban limit acted as an artificial land supply constraint, helping turbocharge then gold plate those capital gains.

But is that about to change? Building and Housing Minister Nick Smith would certainly like it to.

He'll have his work cut out making a success of the recently created special housing areas and the Government's housing accord with Auckland Mayor Len Brown.

It's a crucial task and the risk is that thousands of resource consents for sections could end up being drip-fed to the public to ensure supply doesn't crash the market.

Already there are signs of people sitting on land in hopes of getting special housing area status.

The only way to change that expectation is to force land prices down by somehow unleashing a landslide of development.

That would be politically difficult, but Smith talked tough this week in announcing with Brown that 11,060 new sections had been consented in the first year of the accord, 20 per cent above the targeted 9000.

They were also confident about hitting the second and third-year targets for new sections.

The Government is preparing to launch its policy of doubling subsidies for first-home buyers and hopes this will tempt the land bankers out of their shells to build houses for these newly cashed-up buyers.

Smith talked in particularly direct terms about changing the expectations of land bankers this week.

"If they see land prices continue to appreciate at 15 per cent to 25 per cent per year, then they will have the incentive to sit on their land and not to develop it.

"That's why a critical part of the accord is making plain that the metropolitan urban limit is dead," Smith said.

"The Government and the council are determined to release sufficient land supply and we're not going to allow land price inflation of the sort we've seen over the last decade."

There will be a Mexican stand-off for a time to see if the tough talk turns into softer land prices.

First-home buyers all around the country will be hoping the dam breaks and the more nervous landowners decide to jump first to avoid being the last whale beached in a weaker market.

The Government should look at selling and developing its own land to properly shred those nerves and break the land bankers.