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Submission to the Productivity Commission inquiry on Housing Affordability

Reserve Bank of New Zealand

Executive Summary Changes in house prices matter for the Reserve Bank of New Zealand (the Bank), both through their cyclical implications for monetary policy and the longer-term implications of the level of house prices for macroeconomic and financial stability. Demand for housing can change, at times quite quickly, and, as in any market, it is important that the supply of houses quickly responds to changes in demand. Supply response moderates potentially damaging swings in house prices. Policy can have an influence on housing market outcomes through a variety of channels, in particular over the longer-term, by helping ensure that the regulatory regime facilitates the ready adjustment of supply to demand.