How do you break the ice at a party in Auckland? Easy. Start a conversation about the latest eye-popping rise in Auckland house prices.

"The house makes more than I do." "My kids will be my age before they can get anywhere near the property ladder." "Half the mortgage, and the commute from Pokeno isn't as bad as people think." Such are the building blocks of small talk in New Zealand's largest city.

Small talk that points to some large issues. Over the last four years the average value of a house in Auckland has increased 70 per cent and is now heading for ten times the average household income.

The city on the three harbours has become a magnet to returning Kiwis and new immigrants alike.


What do we need to do to make sure that the city isn't beyond the wallets of the very people Auckland depends on for its energy and vitality?

How can we make sure that current inequalities don't deepen?

NZIER's discussion paper Growing up in Auckland? Mapping drivers of residential land growth goes some way towards answering these question. Between 1996 and 2013 population growth and internal migration expanded the city by 229 square kilometres to meet the additional housing space demanded, while reductions in land use per household only shrunk the housing space demanded by 19.6 kilometres. Auckland, like most New Zealand cities, has always found it easier to grow out than to grow up. Our residential land rises at the same rate as our increase in population.

If we keep on doing this, we'll need another 293 square kilometres of residential land by 2038. That's a Tauranga and a Taupo springing up along Auckland's perimeter. This is likely to be a conservative estimate as we based this forecast on Statistics New Zealand's population estimates which use 2013 as the base year, and national population growth has been running at roughly double the rate embedded in the forecast since 2013.

On the other hand, if we accommodated the future population by growing up rather than out, Auckland's current suburbs would each need to absorb a 50 per cent increase in population. Even if we said that 50 per cent of the needs of the future population would be met by growing out and 50 per cent by growing up, this would still mean that each Auckland suburb would have to find room for a 23 per cent increase in population. Very, very few Auckland suburbs have come anywhere near that level of intensification over the last twenty years.

Auckland's urban planners and consenting authorities should not expect a quiet life in the years to come.

Out or up is not an either-or choice. Given the projected population expansion to 2.5 million in the next 25 years, Auckland will need to do both, and each comes with its own problems.

Growing out means resolving how to fund the infrastructure needed to make rural land urban.

Growing up is more problematic, because it requires controversial changes to planning policies which will need to be more accommodative than those we have had so far. A stroll around most Auckland suburbs will reveal few blocks of apartments or clusters of town houses.

City apartment living is seen as normal by many inhabitants of cities overseas, but in Auckland it is largely confined to the downtown area.

Making it easier for Auckland to grow up as well as out will mean relaxing the current restrictions on lot sizes or building height, and probably both.

We will also need to think hard about the trade-offs associated with preserving heritage, protecting volcanic viewshafts, or providing land intensive public sports facilities to a fraction of the population.

It may be that these community benefits come at too great a cost to a city with a stated aspiration to be compact and liveable, but which expects to be home to a million more citizens over the next twenty years. Something will have to give.

The Auckland housing market is an emotive issue at the best of times, and the emotion can only grow more heated as the campaign for the Auckland mayoralty gathers pace.

Our aim is to replace some of the heat with light by helping Aucklanders to judge the difficult questions involved on the basis of evidence and analysis, rather than emotion or opinion.

Read the report 'Growing up in Auckland' here:

Laurence Kubiak is chief executive of the New Zealand Institute of Economic Research (NZIER).