The key announcement is a NZ$3.8 billion (US$2.7 billion) housing acceleration fund. The government also increased Kainga Ora – Homes and Communities’ borrowing capacity by NZ$2 billion – gross of offsets from land sales – over 10 years to boost its house-building programme.

There is no quick fix to the housing-supply problem in New Zealand. A 24 March ANZ research note argues the acceleration fund “is at least a step toward rectifying the fact that local government is not able nor incentivised to provide the investment that enables large-scale greenfields or densification development in a timely manner”.

The limited capacity of the construction sector and, increasingly, shortages of key building materials will cap the ability to lift activity from current levels no matter how lucrative it may be, argues Sharon Zollner, chief economist at ANZ.

Kiwibank’s chief economist, Jarrod Kerr, puts it more bluntly. “The idea behind the fund is brilliant but its execution is yet to be seen and it is already under-resourced. NZ$3.8 billion is a rounding error given every council in New Zealand wants to get access – it is not going to last long.”

Kerr expects more money to be dedicated to the fund in the May budget, with further funding every year after if the government is serious about addressing housing supply and New Zealand’s even greater problem of building long-term infrastructure. In the interim, it is not clear whether funding will come from the Crown balance sheet or if the government plans to establish a new standalone agency.

The goal is to close the gap on a longstanding construction shortfall. “We struggle to do long-term infrastructure in this country,” Kerr argues. “We have neglected infrastructure building for 2-3 decades and many councils are spending their money just trying to maintain the infrastructure they have rather than building what is needed for tomorrow.”

In response to the supply issue, the government hopes exemptions to its new tax policies will encourage a surge in new builds, according to Christina Leung, Auckland-based principal economist at New Zealand Institute of Economic Research.

The housing supply problem can also be further segmented. Stephen Toplis, head of research at BNZ, makes a distinction between those on the cusp of being able to afford a home and those who are nowhere near being able to do so.

While the acceleration fund may increase supply and force house prices down in a way that could see people in the former group finally afford a home, Toplis says more needs to be done in central and local government provision of housing.

Over the course of 2020 alone, the public-housing register increased by 51.5 per cent having already quadrupled in the four years prior. “Increasing housing supply or making it more affordable will not make much difference to this group. What might make a substantial difference is if the government is more active in the provision of state housing – and this is what the NZ$2 billion for Kainga Ora, in part, seeks to address,” Toplis says.

New policies could also have a big impact on expectations of house-price inflation down the track. “Expectations that a housing supply shortage will persist underpin house prices at a high level. Measures to increase housing supply should lead investors to reassess their expectations of house prices over the coming years,” Leung says.