Business Economics Report: Auckland Housing Market Analysis, 2019

This report provides a comprehensive analysis of the Auckland housing market, examining its structure and the impact of economic factors. It begins with a summary of the case study, focusing on the foreign buyer ban and its effects on the market. The analysis delves into the application of economic theories, including demand and supply, to illustrate the consequences of the ban. Furthermore, the report explores the market structure, specifically the concept of monopolistic competition within the Auckland housing market. It discusses the government's role in regulating the market due to earthquake risks and how this influences supply and demand dynamics. The report also references the impact of low interest rates, population growth, and immigration on housing prices, presenting a nuanced understanding of the market's complexities. The conclusion suggests that with appropriate government actions, the market could move towards monopolistic competition with a greater number of suppliers and buyers.

BUSINESS ECONOMICS

Market structure
Market structure is defined as the degree of competition and the nature of pricing policy
which prevailing in the market for goods and services (Businessjargons, 2018a).
Monopolistic competition- Here exist large number of organisations who produces
differentiated products that are substitute to each other (Tutor2u, 2018). In monopolistic,
large number of sellers produce similar but not identical and these products compete with
each other on other several factors other than price. With such an intense competition with
differentiated products, new firms can enter the market with unique features can outstand it in
the market (Tutor2u, 2018).
In 2002, there were many vacant houses and it was inexpensive. Recently, it is seen that
prices of the houses are skyrocketed due to increasing demand. With the growth of
population, low interest rates have boomed the Auckland housing market. Auckland is
recognised as the largest real estate agency but government has been imposing tax deduction
on foreign buyers and has introduced the concept of capital gain tax. Auckland population
rose by 17% that imply$240000 increase in prices. Interest rate declined for mortgage from
8.5% in 2008 to 5% by the end of 2016 (Reddit, 2019). The housing market was shortly
supplied for houses because Auckland is exposed to earthquake risks whereas the trend for
personal dwelling has been increasing. The prices of New Zealand house prices are going up.
The bullish 2019 market exists because of low interest rates that stay for two years, recent
immigration increases the demand of housing facilities, low unemployment that provides job
security, and the market is more stable (Reddit, 2019). After the housing crisis, it was at risk
of interested by several people interests to resolve two important question such as housing
affordability problem and availability of housing. Due to these crises, property prices are out
of control and property wealth accumulates in few hands. Until, the government has to

impose control on construction as it is exposed to natural risks so people with lower and
middle level income are already out as government imposes several regulations on the person
who dwells for personal house. The government is planning to improve residential consent
process in Christchurch and efforts related to it so that it can streamline planning and consent
in Auckland with the help of government`s accord and unitary plan. For now, the Auckland
housing economic conditions play the game of monopoly (Rose, 2015). As government
restrict the construction in certain areas, where exist earthquake damage the housing stock.
Recently, government has claimed that by combining three-year targets of Auckland and
Christchurch needs major mobilisation of national construction resources, which will lead to
stretching of builds (Rose, 2015). The above conditions reveals that with the even with the
unlimited resources with the people, they cannot acquire a dwell personal house. The
Auckland`s housing market is driven by government rules and regulation due to high risk of
natural disasters at some places while this is a sign of monopoly where government controls
the supply and demand is abundance. Due to attractive opportunities in Auckland such as job
security and high credit facility, many foreigners were attracted but Auckland house sales
slumped by 20% as the effect of government`s ban foreign buyers to hit the market in order
to protect local homes form wealthy overseas buyers (Rose, 2015).
Therefore, government is planning to mobilise the national construction, which will reduce
the risk of earthquakes pertaining to acquisition of houses by the public at reasonable rates.
With appropriate actions by government, the supply of houses will increase, demand is
already high, access to resources will be easy, and the number of brokers will also increase.
This market situation will lead to create a monopolistic competition market structure with
large of suppliers and buyers (nzherald, 2019).

References
Businessjargons, (2018a). Market Structure. Retrieved from:
https://businessjargons.com/market-structure.html
Tutor2u, (2018). Monopolistic Competition. Retrieved from:
https://www.tutor2u.net/economics/reference/monopolistic-competition
Rose, C. (2015). Housing Economy Played Like a Monopoly Game. Retrieved from:
http://briefingpapers.co.nz/housing-economy-played-like-a-monopoly-game/
nzherald, (2019). Auckland house sales slump 20 per cent as the foreign buyer ban hits the
market. Retrieved from: https://www.nzherald.co.nz/business/news/article.cfm?
c_id=3&objectid=12194306
Reddit, D. S., (2019). House prices stabilise thanks to flat Auckland market. Retrieved from:
https://www.newshub.co.nz/home/money/2019/01/house-prices-stabilise-thanks-to-
flat-auckland-market.html