New Zealand's ‘love affair’ with houses and cars∗∗

The authors wish to thank Ian Ewing and his colleagues at Statistics New Zealand for assistance with the data and the Reserve Bank of New Zealand for the grant that assisted this research. The authors have also benefitted from comments on earlier drafts by Grant Spencer, Arthur Grimes, Ian King and two anonymous referees to the Journal.

Abstract

Rapidly rising house prices over the last few years has drawn the attention of researchers to the drivers lying behind both supply and demand side influences in the housing market. This study complements much of that work by attempting to uncover the price and income parameters for rental and owner‐occupied housing in New Zealand in relation to all other goods and services purchased by households. The research quantifies a point long understood informally about demand behaviour in this country, that the demand for housing (and cars) is particularly income elastic. This has important implications for policy makers who attempt to constrain speculative housing demand. Another notable feature of the period has been an apparent trend away from owner occupied housing towards rental accommodation. The research is carried out using Household Economic Survey data through 2004.

Keywords::

• Housing
• Income Elasticity
• Household Economic Survey

Notes

The authors wish to thank Ian Ewing and his colleagues at Statistics New Zealand for assistance with the data and the Reserve Bank of New Zealand for the grant that assisted this research. The authors have also benefitted from comments on earlier drafts by Grant Spencer, Arthur Grimes, Ian King and two anonymous referees to the Journal.

School of Economics and Finance, Victoria University of Wellington, PO Box 600 Wellington, New Zealand; email: [email protected] (Corresponding author).

Trade division, OECD, Paris, email: [email protected]