Evidence from the latest data reveals that the greater Auckland metropolitan area is currently experiencing a new property bubble that began in 2013," they said. Policy makers should be concerned, given the inter-generational effects of rising house prices, the risks to financial stability and the risks that high housing prices could stunt Auckland's growth as employers struggle to find workers able to afford to live in Auckland, Phillips and Greenaway-McGrevy said.
What they studied and found
"Our findings suggest that the Auckland metropolitan area is currently experiencing a property bubble in terms of the house price-to-rent ratio that began in 2013. We also document evidence of an earlier and much broader-based bubble in New Zealand property markets that emerged in the mid-2000s and subsequently collapsed upon the onset of the Great Recession," they wrote.
"The evidence indicates that this bubble likely originated in the Auckland region before spreading to the other main centres. If that recent history were to repeat itself, the ongoing property market bubble in Auckland would be expected to affect property prices in other regions. But, as yet, there is no empirical evidence of this contagion to the other centres from the current Auckland real estate bubble," they wrote in mid 2015 with data up to the end of June 2015.
Since then house price inflation has accelerated in Hamilton, Tauranga, Whangarei, Wellington, Dunedin and other larger cities where Auckland investors have been active.
