New Zealand is missing 500,000 houses because of its inability to build at the same rate over the last 30 years as it did between the mid 1940s and the late 1970s. That's the view of independent economist Shamubeel Eaqub, who has analysed New Zealand's house building record since the 1920s.
Eaqub presented his findings at the New Zealand Planning Institute's annual conference in Wellington on Wednesday. He found that New Zealand would now have 500,000 houses more than it currently has if it had built at a rate of more than eight houses per 1,000 people, as it did between the end of World War Two and 1980.
Instead, the house building rate dropped to around five per 1,000 people between the early 1980s and now. That was now being reflected in increased over-crowding in Auckland in particular and a plummeting home vacancy rate.
The biggest fall in the building rate was immediately after the Global Financial Crisis in 2008, when it dropped to almost three per 1,000 head of population.
Eaqub said New Zealand was now also building the wrong sort of homes, with most homes being larger three, four and five bedroom homes with multiple bathrooms. The high price of land made these larger homes the only viable alternative for house builders and buyers, while smaller and more affordable homes were not being built.
He pointed to a slide in the number of state houses from nearly 20 per 1,000 people in the late 1980s to less than 15 per 1,000 now as another sign of the failure of the housing market and the Government's response.
"Right now we're not building houses for everybody in our communities, and we're failing by building wrong sort of houses," he said.
Eaqub said there was also now a risk that an increase in house-building activity in recent years was about to reverse because of a reduction in bank lending to property developers and investors as the credit cycle turned and regulators forced banks to tighten up.
He said he was fearful about the effects of the coming turning of the credit cycle on house building efforts.
"I fully expect a construction bust next year. We are going to have a construction bust before we have a housing bust," he said.
"We haven't built enough houses for a very long period of time. If we're going to keep not building enough houses, I'm not confident that whatever correction we have in the housing market is going to last."
He pointed to a turning of the credit cycle.
"It means that we're not going to be building a lot of the projects that have been consented and the construction cycle is going to come down," he said.
"All the problems we have today will be still be with us in 12 months time or 24 months time."