When we were on the housing market in 2005, it was really clear really quickly that a pretty big component of Christchurch house prices was regulatory rents. As you can see from the map below, there's no shortage of physical land to the north, west, and southwest where Christchurch could expand. But a 1000 square meter residential section on the outskirts of Christchurch costs $200K - $200 per square meter; a 10.1 hectare (10,100 square meter) agricultural section a half hour from Christchurch has an asking price of $159,000: $15 per square meter. That difference isn't just commuting costs and in-town amenity value. Rather, it's land use restrictions that prevent Christchurch from expanding outwards. And so land prices in town get bid up.
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Demographia ranks Christchurch as 288th most affordable city in the world, with median house price of six times median household income. They note a September Quarter house price of $333,800 and median household income of $55,600. I wonder if they might have Christchurch income a bit on the low side: Stats NZ has Canterbury's median household income in 2010 at $65,000. That will include some higher income dairy farmers but also some poorer households in small towns; our median multiple would only drop to a shade over 5 (on par with Toronto) with that adjustment.
House prices have skyrocketed principally because of more restrictive land use regulations that have virtually prohibited new house construction on or beyond the urban fringe. This is particularly evident where there are "urban containment" measures, such as urban growth boundaries. Land value differentials of ten or more times, have been documented immediately across urban growth boundaries (such as in Portland and Auckland). These adjacent properties have values (referred to as "urban echo values") that are substantially higher than true rural values.There's little chance that this changes. A city council that eases zoning to make housing more affordable will also impose capital losses on the city's homeowners. Homeowners are more likely to vote than renters. And cue Olson on the Logic of Collective Action.
Land use restrictions let richer homeowners feel good about themselves while promoting policies that protect their wealth and kinda screw over poor folks.
I'd be curious to hear from folks involved in Christchurch property development: what are the binding constraints? Are land prices here bid up more by restrictions on outgrowth on the fringes or by prohibitions on building more than two or three stories in most parts of town?
Full disclosure: We own a home in South Brighton and hope that, should Council ever decide to stop screwing over poor folks and ease back on zoning, we'll be somewhat protected from falls in land prices because the beach has actual scarcity value rather than just regulatory scarcity value.