Published in Insights, The New Zealand Initiative’s newsletter, 14 August 2015
Last week, the Prime Minister found words of consolation for people concerned about declining housing affordability. “Aucklanders are getting wealthier,” John Key said as he referred to front page stories about rising house prices in Auckland.
Key added that people around the country allegedly asked him “Can we have a few of those Chinese buyers in Wellington and other parts of New Zealand because actually we want our house prices to go up.”
The Prime Minister is entirely right: Rising house prices make homeowners richer. This is just the reason why we should extend the principle behind the spiralling Auckland housing market to other parts of the economy.
Fortunately we know how Auckland property was turned into a giant wealth creation machine. We never built enough, and made the construction process more difficult with ingenious pieces of regulation and bureaucracy.
And voilà: As a result, property owners have become a lot richer.
Now we are going to do the same with car prices. To complement the Resource Management Act, we will introduce a Vehicle Management Act. This will make it virtually impossible to import cars into New Zealand. We will also require some bureaucratic exercises for maintenance and repair of existing vehicles. Also, to close a potential loophole, it will be illegal to manufacture anything on wheels here.
As you will soon see, the wealth creation effects of our new vehicle management scheme will not take long to manifest themselves. Cars will become more expensive almost overnight. Since private vehicles are often the second most-valuable assets that households own (after property), people will start feeling even richer.
In the future, we will be able to borrow against the value of our cars because even if they get older, their prices will never fall. Such is the beauty of limited supply. People will soon realise what a nice little cash machine their cars are. Realising this, investors in search of capital gains will enter the market. This will reinforce the positive development and push prices even higher.
Of course, there will be the inevitable naysayers who will insist that cars are there for people to drive and rising car prices are limiting people’s mobility. But what do they know?
In the interest of an ever wealthier New Zealand, let’s make our cars more expensive. It might even help future politicians win elections on the back of a buoyant vehicle market.