Dismantling the Auckland Metropolitan Urban Limit: Good idea?

Auckland is a sprawling city. It's huge not just within New Zealand, but on a global scale. While we certainly have a few high-density apartment buildings dotted here and there, it is certainly not on the same levels as places like Singapore or London. And, if you don't build up, you have to build out.

That is, unless, there are artificial boundaries such as the Auckland Metropolitan Urban Limit in place.

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Freeing up land

The urban boundary acts as a way to reduce the sprawl of the Auckland Supercity, trying to conserve the environmentally-valuable landscape around the North Island as well as reducing some of the pressure on infrastructure – a more spread-out population requires more roads, after all.

However, many groups have been calling for the Urban Limit to be removed – and it looks like the government has finally been won around, as announced in the proposed National Policy Statement on Urban Development Capacity. Following the protest against increasing residential property densities in some suburbs in the Auckland Unitary Plan (now since revised), the only remaining solution is to continue the age-old Auckland tradition and build out, not up.

But will this new move actually have the intended effect of improving housing affordability?

Considering all factors

Alexander lists no less than 18 features of the Auckland market that is driving housing prices up.

Tony Alexander, Chief Economist at the Bank of New Zealand, explains that the removal of this urban boundary will do little to curb the rising Auckland housing values. The new land that would be freed up would certainly do something to improve housing supply, but this is hardly the end of the story when it comes to housing factors.

Alexander lists no less than 18 features of the Auckland market that is driving housing prices, ranging from low interest rates to poor building standards to simple group psychology. Removing an arbitrary building limit might give developers more options for land, but it will hardly improve the current lack of experienced builders. Nor will the additional supply help curb the fear of missing out that so many residential property investors are succumbing to. And, it certainly won't eliminate the fact that people are getting older and thus need to secure their retirement through property!

Housing supply is just one of many factors that is affecting housing affordability in Auckland. The elimination of the Urban Limit will certainly help there, but that still leaves a huge number of other features unchecked. Until these can be addressed, Auckland values have nowhere to go but up.

Here's to your financial independence!

Daniel Carney
Authorised Financial Adviser / Investment Property Expert

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