So you are about to buy a house? You will have a head full of hopes, dreams and ambitions for your new home - and some limitations. House-buying for most is about choices, compromises and trade-offs.

Top of the list is your budget - what you can afford to pay and your overall debt servicing capacity. Within that budget you will be thinking about how many bedrooms and bathrooms you need, how much living space, storage and parking space, which neighbourhoods you would prefer, how close to work, schools, shops, family and friends, parks you want to be.

And what about transport? Will you walk, cycle, drive, or use public transport?

It is a complex mix. The better off you are, the broader the choices available and the less pressing the compromises faced.

For those on lower incomes, the choices become much harder and the compromises are more challenging - less space, less attractive neighbourhoods, longer commutes, poorer quality houses.

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That is why the Productivity Commission has been asking how can New Zealanders get better housing at prices they can afford?

One influence on housing affordability and housing choice is local planning policies.

This is particularly significant in Auckland as our largest and fastest growing city.

The Auckland Council reports a housing shortfall now of 10,000 homes and expects that a further 11,000 new homes will be needed each year over the next 30 years.

The Auckland spatial plan is an outline of how the city intends to provide for that growth. The plan adopts a "compact urban form" concept that aims to limit suburban "sprawl" and encourage greater density of housing within existing city boundaries.

The plan proposes that 75 per cent of the expected population growth will be accommodated through a mix of high and medium-rise housing, and lower-rise terrace and townhouse developments.

But will this offer enough homes that are affordable and attractive relative to expanded greenfield developments on the city outskirts?

The answer depends on a number of important considerations. On the plus side for greenfield development:

* Conventional low-rise homes on greenfield sites are generally less expensive to build than housing in higher density infill, multi-storey or brownfields developments.

* The land is cheaper - a real issue in Auckland where section prices account for almost 60 per cent of the cost of a new house on average (compared with 40 per cent across the rest of New Zealand).

But the cost arguments cut both ways. Transport costs may be higher and access to public transport more limited in suburban greenfields settings. The significance of this will, however, depend on where the buyer is working. Only around 12 per cent of Auckland's workforce works in the CBD. The other 88 per cent is distributed quite widely across the city.

And the cost of connecting to critical infrastructure services - water supply, sewage collection, stormwater drainage - may be expensive on greenfields developments, with that cost typically reflected in the cost of the section through council development levies.

Whether "brownfield" development within existing urban limits provides for cheaper access to existing infrastructure depends critically on the state and capacity of that existing urban infrastructure. If new infrastructure is needed to accommodate increased housing density, that can be very expensive.

An argument for intensifying land use within city boundaries is that it avoids the need for new infrastructure investment although, obviously, this will not be the case where the existing infrastructure is already at or near capacity.

The Productivity Commission's draft findings, now out for public consultation, suggest that meeting the housing needs and aspirations of our people may require more greenfields development around our rapidly growing urban centres.

Section prices have escalated rapidly in these centres, putting serious pressure on the ability to provide starter homes to many New Zealanders looking for their first step on the housing ladder.

Does the commission oppose the compact urban form concept? No. Intensification is an essential part of the solution to housing our growing population.

However, the compact city will flow only when local authorities and property developers can create ways to make living in a denser city more attractive and affordable. It should be one of the available choices for homebuyers, but not the only choice.

Is the commission on the right track? Let us know what you think. Our draft report, released on December 16, can be found at productivity.govt.nz. Submissions are invited by February 11. The final report will be provided to the Government by March 16.

Full story by Murray Sherwin here.

The Productivity Commission 's housing affordability report made some good points about the need to release more land for housing development, as councils continue to favour intensification, Prime Minister John Key says.

Speaking on TV One's Breakfast programme, Key said central and local government needed to work together on the issue, as local councils were able to manage land supply, and the government was able to manage migration patterns into the country, and mostly to its biggest city, Auckland.

Meanwhile, Key indicated the government did not want to target the rental investment sector much more, saying if they went too far in changing the dynamics of the sector, rents would rise.

'It's not about tax'

Key noted comments in the report that perceived tax advantages for housing was not a driving factor in driving up house prices over the last decade. He pointed to other nations with capital gains taxes which all experienced house price bubbles - the UK, US and Australia.

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"I think they're right - it's balancing the release of land, making sure that you're intensifying the use of land in certain places, looking at the overall cost of building. One of the things they said was, in Australia they've got very large scale housing taking place that's cheaper," Key said on Breakfast.

"Their main point is if you choke off that supply of land then by definition land prices have to rise," Key said.

For home-owners, the biggest issue still was interest rates, he said.

'Don't want to hit rental investors too much'

Key indicated the government was wary about making further changes to the tax system that would hit rental property investors in the pocket, following the changes made to depreciation rules in Budget 2010, which he said took about a billion dollars a year out of the sector.

"There'll always be a rental market. There's no question we changed the dynamics around (the rental market) - it's not as attractive as it was. The balance there is making sure we don't do so much that people stop investing and then rental prices go up a lot," he said.

Net migration set to stay positive

Meanwhile Key said he expected net migration to New Zealand - a factor in house price pressures - would stay positive.

"One of the issues in Auckland is we're the home of most internal and external migration. We're on a pathway to a couple of million people. That puts pressure on the system," he said.

"The balancing act here is that the councils generally don't want to release land, because they say that forces them to build infrastructure further and further out - roading, sewerage, all those things - whereas intensification, they like that."

The government would look to continue the trend of net positive migration to New Zealand, Key said.

"Yes we lose people to Australia, but we still have a lot of migrants come and I think overall they add a lot of value," he said.

- INTEREST.CO.NZ

In its monthly property report released today, the company says the average asking price for property available nationally hit $434,161 during the month, passing the previous high of $429,250 reached earlier this year in April.

But while price hopes are high, the number of new properties coming onto the market for sale are low - with new listings dropping a seasonally adjusted 11 per cent in October.

The Auckland region led the trend for prices, recording its highest average asking price - $568,778 - since Realestate.co.nz began tracking the market data in 2007.

Read more about the report here.

Chief executive of Realestate.co.nz, Alistair Helm, said the rise in asking prices clearly reflected buyers anticipating a buoyant market.

Many had been encouraged by a high demand for property alongside a "steep drop in inventory" over recent months.

Helm said a "steadying of the number of new property listings becoming available last month indicated that the market is balancing out a little."

New listings tended to increase in October, but slower than expected September sales this year had lead to uncertainty among sellers thinking of entering the market.

The number of new listings in October - 11,312, was slightly up on September, but on a seasonally adjusted basis, this was 11 per cent down on volumes recorded at the same time last year - a considerable drop, said Helm.

- New Zealand building consents stalled in September with its first monthly decline in five eroding gains over the past two months.

The number of new dwellings excluding apartments authorised dropped a seasonally adjusted 14 per cent to 1,039 in September, and was down 17 per cent including the volatile apartments issuance, Statistics New Zealand said.

This decline undoes the strong growth of the past two months as consents were approved for reconstruction in Christchurch.

- NZ HERALD ONLINE

The New Zealand property market picked up again during July, but new listings are in short supply, prompting a warning that disillusioned buyers could end up leaving the market due to a lack of choice.

A monthly report prepared by industry website Realestate.co.nz shows new listings fell 15 per cent on a year ago, and fell by 2 per cent to 8966 from June 2011.

Meanwhile the projected number of weeks it takes to clear existing inventory fell to 38.5 weeks nationally, but was much lower in the main centres, including Auckland where it's at 24 weeks.

"In the space of four months, Auckland has moved from being a buyers to a sellers' market, as the projected number of weeks it takes to clear existing inventory has continued to decline," Realestate.co.nz's chief executive Alistair Helm said.

The low level of supply could see disillusioned buyers exiting the market or prices moving up, if not met by a rise in supply, the report said.

Nationally, there are now just four out of 19 regions where buyers continue to have the upper hand.

However it appears the situation has not yet affected sellers' expectations.

The mean asking price for new listings across New Zealand fell 3 per cent to $403,474 from a month earlier.

"We are now more in favour of sellers than buyers in the vast majority of regions, but the market doesn't appear to have realised it," Helm said.

- NZ HERALD ONLINE

Experts report gradual pick-up in market led by Auckland, Wellington and Otago. Photo / APN

National house sale prices jumped $10,000 last month, pushing up the median and leading economists to conclude a recovery is well under way.

Following strong figures from QV this month, new Real Estate Institute figures show the national median rose from $350,000 to $360,000, listings stayed tight and agents complained of stock shortages.

QV said Auckland house prices had surpassed the peak of 2007. It uses a three-month residential price index whereas the institute compares one month to another, using median figures.

It said Auckland had prices rising in many areas, stronger volumes and high demand.

ANZ Bank spokesman Mark Smith said the recovery was patchy, with volumes growing in Wellington, Auckland and Otago but falling in Taranaki, Hawkes Bay and Southland.

And while sales in Canterbury fell 20 per cent from May to June, activity was considerably above April levels, he said.

"Sales have continued to lift from their late 2010 trough but remain around 20 per cent below historical averages as a portion of the dwelling stock.

However, the 16 per cent increase in sales volumes since April suggests the market is on an improving trajectory," he said.

Nick Tuffley of ASB said the underlying picture of the market remained of a gradual pick-up in demand, with turnover outside Canterbury up further and the days taken to sell edging down.

"House prices are starting to register increases in Auckland, up 4.9 per cent year-on-year," Mr Tuffley said.

The REINZ said it took 45 days to sell a house in May but 44 days in June.

Helen O'Sullivan, its chief executive, said the data showed a gradual change.

"The June results show activity levels are recovering slowly, with prices more or less flat, but we are getting strong indications from agents in many of our regions that the supply of properties is really tightening.

"Rather than an influx of buyers, we are seeing very low levels of listings as sellers continue to sit on their assets."

Trade Me showed Auckland rents grew 9 per cent from the second quarter of last year to this year's second quarter. Auckland was a "standout great place to be a landlord," said the site's property head, Brendon Skipper.

Rents nationally grew 3 per cent and supply grew 2 per cent, he said.

View full story by Anne Gibson here

By Brian Fallow, NZ Herald

Westpac economists are forecasting a 4 per cent rise in house prices over the coming year as the housing market stabilises due to low interest rates.

The Reserve Bank cut the benchmark Official Cash Rate to 2.5 per cent in March, and is expected to keep it at the record low until either the end of 2011 or beginning of 2012.

Along with low interest rates, banks have again begun offering mortgages with as little as a 5 per cent deposit required in a bid to fuel a flat national housing market.

Westpac is currently advertising widely its 95 per cent home loans and is also discounts on fees.

"The latest drop in interest rates will add zing to the housing market - we now expect 4 per cent house price growth this year," Westpac chief economist Dominick Stephens said in the bank's latest quarterly economic overview.

"House price growth should contribute to a slightly better consumer mood and some growth in retail sales, although nobody is talking about a return to the helter-skelter of last decade," Stephens said.

Stephens said Westpac was forecasting 1.3 per cent GDP growth in 2011 due to disruption caused by the February 22 earthquake in Christchurch.

However, outside of Canterbury the economy was displaying "surprising resilience," he said.

"Nationwide, consumer spending and house sales were actually up in March," Stephens said.

After a slow 2011, Westpac said reconstruction activity in Christchurch would help propel economic growth to 4.6 per cent in 2012.

"Construction costs could rise, and inflationary pressures could force the Reserve Bank to hike the OCR.

Rising interest rates and the higher cost of construction will crimp the economy outside of Christchurch. To some extent, we will end up with a two-speed economy, with growth concentrated in a single region," Stephens said.

Westpac expected the Reserve Bank will wait until early 2012 before beginning a series of OCR hikes.

"The OCR hikes won't start until there are cranes on the skyline in Christchurch. But once interest rates do start rising, they could rise rapidly," Stephens said.

"The exchange rate is expected to stay close to its current highs for some months, underpinned by stellar prices for New Zealand's main export commodities. Global food prices are soaring. As the world's biggest net exporter of food relative to GDP, New Zealand is well-placed to benefit," he said.

A slowdown in the Chinese economy was also a possibility for later this year, and the exchange rate could fall in that scenario, Stephens said.

View Full Story Here