Residential construction and population growth in New Zealand: 1996-2016
Between 1996 and 2016 Auckland’s population increased by 499,000, or by slightly more than the increase in the rest of New Zealand. Yet only half the number of building permits were issued in Auckland as in the rest of the country. To understand this difference, this paper uses regional data to investigate how population growth affects residential construction. It estimates that if Auckland had built houses at the same rate as the rest of the country (adjusted for population growth) it would have needed to have built an additional 40 – 55,000 dwellings during the period – and needed nearly 9000 more construction sector workers. The shortfall was modest until 2005, but sharply accelerated due to the cessation of apartment building in central Auckland. The results show the large increase in the average size of dwellings was not a major factor in Auckland’s shortfall relative to the rest of the country as new dwellings were smaller in Auckland than elsewhere.
The estimates further suggest population change may be ‘hyper-expansionary’ as the residential construction demand associated with an additional person is higher than the output they produce. In these circumstances, population increases raise the demand for labour and create pressure for additional inward migration, potentially explaining why migration-fueled boom-bust cycles may occur.