By Eric Crampton 09/07/2015

I like Bernard Hickey’s concluding paragraph in this weekend’s column. After explaining how changes in Chinese controls on outbound overseas investment could spark greater interest in Auckland property, he writes:

A look across the Tasman suggests the flood of money coming from China could be put to good use if it is funnelled into new housing developments, in particular apartments off the plan. Australian developer Lend Lease sold 581 apartments off the plan for its latest Darling Harbour project in five hours on one weekend last month, including more than a third to overseas buyers. It sold A$600 million of property at a rate of A$2 million a minute.

If Auckland and the Government could only convince Aucklanders to allow the building of more overseas-funded apartments near the CBD then it might have a smidgen of a hope of filling that shortage of 60,000 homes. They would cost NZ$30 billion to build so that NZ$16 billion of overseas investment could come in very handy indeed, if it was directed into new homes rather than existing homes.

The problem isn’t a lack of capital – there’s plenty around. Or a lack of capacity to put up buildings – that’s determined by longer term expectations about whether you can make a go of starting up a construction company, expanding an existing one, or getting into trades. There can be current constraints, but those are an equilibrium that could shift if we again allowed new construction.

The barrier is instead where and whether Council allows new construction to take place. And that’s a function of whether Council has strong enough incentive to overrule the NIMBYs under the current RMA processes and local government financing regimes.

Every time a NIMBY cries, an angel gets stuck in an overcrowded house.