Peter Lyons: Bet the house on city's weatherboard economics

Other parts of the country have been less successful in applying the lessons learned in Auckland. Photo / Richard Robinson

Opinion

Now that the annual growth in the price of houses in Auckland exceeds most of our annual incomes, it's time we kicked back.

There is little point in continuing to work when the weatherboard three-bedroom bungalow is generating such massive returns on an annual basis. Why rise at 6 in the morning to endure the commute to the factory or office when your house makes more dollars on a daily basis? It's time we garnered the return for our wisdom in owning the roof over our heads. Life is short. It's time to consider a lengthy OE while letting our houses do the work for us.

It is amazing that we are the first civilisation to unravel the alchemists' secret right here in Auckland. Some of the greatest economic thinkers throughout the ages failed to recognise a simple reality that is playing out in suburbs such as Avondale and Glen Eden. I knew that Adam Smith, John Maynard Keynes and Milton Friedman lacked real insight into economic affairs. The economic success of a nation is derived from the ownership of weatherboard villas, bungalows and granny flats.

Our political leaders have recognised this new economic paradigm. They are wise and generous in the extreme. They are even willing to allow other people from around the world to drink at our fountain of riches.

Our leaders have shown how resolute they can be by ignoring calls from the narrow-minded and selfish to deny outsiders access to our El Dorado. They likely believe that their generosity will ensure that our blessings will continue and our contentment under their wise government will grow.

Economic academics are busy rewriting their textbooks. They foolishly taught that national prosperity depended on how well a country used its resources to produce goods and services to meet the wants and needs of its citizens. They used to use gross domestic product to measure the annual output of a country. They are struggling to incorporate this new paradigm of national prosperity into their textbooks as it unfolds on a daily basis in the suburbs of Auckland.

New Zealand has been blessed with a tax system that has encouraged the emergence of this successful form of wealth creation. Other nations have tended down the path of less profitable industries such as software development and pharmaceuticals. New Zealand has had a strong dairying sector but there is little point in getting up early to milk cows when there is such wealth to be had from owning a bungalow in Kelston.

New Zealand has benefited from a deregulated banking system. Without the financial support of this sector it is doubtful the country would have unlocked the secret to economic prosperity. The banks have been the conduit to peoples' dreams of material nirvana through housing inflation.

Other parts of the country have been less successful in applying the lessons learned in Auckland. This is largely attitudinal. People in these regions often regard their houses as dwellings to be lived in, rather than wealth-creating money machines. They regard houses as homes rather than ATMs. Many gaze with bemused envy as millionaires proliferate in this great city.

Apart from attitude, there are several other key ingredients that economists have identified that have allowed this massive paradigm shift in economic thinking that is unfolding in Auckland. Fundamental ingredients include support from politicians and bankers and the real estate industry and media to allow the new reality to emerge. The market conditions that helped create the new reality include severe supply constraints and liberty of demand.

It cannot be overemphasised just how seismic the shift in economic thinking has been. Human history has been plagued by the necessity of work. There have been untold writings on the curse of human labour as a necessity of our existence.

What has occurred in the suburbs of Auckland has the potential to render this blight on humanity obsolete. Wages and salaries will be redundant concepts buried by the beauty of capital gains. It is so simple it is amazing it has taken millennia to discover.

Peter Lyons teaches economics at St Peter's College in Epsom and has written several economics texts.

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