4 Jun 2017

House prices far outstripping CPI - report

7:15 am on 4 June 2017

Houses would cost half as much if prices stayed somewhere near Consumer Price Index inflation - as they did for 40 years before 2001 - a report has found.

auckland housing

Photo: 123RF

The AUT Policy Observatory report, authored by the economist Brian Easton, showed the average house price now rises about 12.4 percent more than the CPI each year.

The index measures the changing price of a fixed basket of goods and services, but the differential with house prices has increased almost tenfold in the past 15 years, the report said.

Dr Easton said house prices would be half what they are now if the differential had remained low, and that could be seen as a measure of just how overpriced houses are.

A partner at the economic consultancy Sense Partners, Kirdan Lees, agreed with the findings.

He said high land prices were driving up the cost of buying a house.

"The reason why land has gone up is you jknow there's pretty high demand for prime locations, it's about couples that both want to work together in a dynamic city," he said.

"So that's one reason why house prices might have gone up a bit more than consumer prices."

Mr Lees said more houses needed to be built to meet demand to get prices down.

The Policy Observatory is a national centre for public policy research and advice based at Auckland University of Technology.

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