If Labour is right that a flood of Chinese capital is driving up Auckland house prices, this could wind up being the single biggest wasted opportunity New Zealand has had over the past… well, since I’ve been here.
If Auckland zoning were sane, all of that capital could be helping to build new subdivisions, new apartment buildings, new townhouses, new mid-rises – new housing. There would likely be less of that capital, as expected price increases would be lower, but the capital would be giving us new housing.
Instead, it’s bidding up house prices. That’s not a particular problem, but big price fluctuations that could come from it are a bigger problem than having too much housing built. In the worst case, if the capital were directed to new building and then the flood dried up, the cost of housing would fall – there would be more housing available at lower cost. Just imagine: Auckland would have low rents and a low cost of living with plentiful housing. If “oh nos! They built too much housing with their own money and they lost a pile of their money and now we get to live cheaply!” is somehow a worst case.
What would it take to fix it? Open up zoning to allow new building under very rapid consenting – again, both up and out. To get substantial new greenfield development in the suburbs, you’ll have to ease up on the Overseas Investment Act at the same time so foreign investors can buy tracts of land to put up housing.
Bit depressing that the knee-jerk reaction is to put controls on foreign investment here rather than to fix the darned rules that prevent its being used more productively.