The impact of the Resource Management Act on the “housing and construction” components of the Consumer Price Index

Owen McShane (historic), Uncategorized

EXECUTIVE SUMMARY

Auckland has recently experienced a property boom, especially in the residential market. This
boom has been driven by an increase in demand which has led to a rapid and significant
increase in housing prices. Changes in housing group prices are a significant component of
the Consumer Price Index (the CPI) at 19.5 percent, just ahead of the whole food group at
17.8 percent. For the two quarters preceding July 1996, the housing group made the largest
contribution to the underlying rate of inflation (0.60 percentage points). New housing costs,
which are a subset of the housing group, contributed 0.38 percentage points to underlying
inflation over the same period.

This report examines the supply side of the residential property market in the Auckland
region and attempts to establish whether this recent increase in prices represents a single ‘one-off’
aberration, or whether any and every future increase in demand will lead to similar price
increases and hence another round of inflation followed by an anti-inflationary response from
the Reserve Bank. In particular the report examines the impact of the Resource Management
Act and its implementation on the residential property market in the Auckland Region.

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