Is There Really a Housing Shortage in NZ? | Ep. 87

In this episode, we discuss whether there really is a housing shortage within New Zealand, and particularly within the Auckland property market. In pure economic terms, there can never be a shortage of any good in a free market, so long as demand and supply don't significantly change. Under these conditions, if there are more buyers than sellers in a market then those buyers will bid the price up. As they do, some buyers will drop out of the market and more suppliers will be drawn into the market by the higher prices that are now available. This will continue until there is an equilibrium. However, we also discuss that the assumption that demand and supply are constant while these market dynamics play out, may not be accurate. For instance, even as prices are bid up and some buyers drop out of the market, there are even more buyers entering the market wanting property. This occurs through organic population growth (more people being born than those that are dying) and through historically high net migration in NZ. The effect of this is that the additional demand coming into the market creates a perpetual shortage. And even though suppliers (both developers and owner occupiers) will be drawn into the market, the lag in the time it takes for that supply to come onto the market means that suppliers can never fully respond to close the shortage.