Examining critical factors affecting the housing price in New Zealand: a causal loop diagram model

The New Zealand housing market has become a public concern due to the significant surge in housing prices. The steep increase in housing prices has presented significant difficulties for individuals seeking homeownership, particularly for first-home buyers. Therefore, this research aims to identify the crucial factors of the New Zealand housing price system and their influence on housing prices. The system dynamics (SD) methodology was applied to organise the cause and effect variables into a causal loop diagram (CLD) illustrating the structure and interaction of the primary feedback mechanisms within the complex system of housing prices. Accordingly, population growth, macroeconomic stability, investment demand, monetary policy, and construction costs are key contributing factors to promoting affordable housing prices and increasing homeownership rates in New Zealand. The construction costs, including the land cost, are the most significant of all the factors. Hence, there is a call to prioritise optimising construction resources. This research’s developed model was validated by exploring experts’ views on the model’s components and system dynamics. The findings provide relevant stakeholders in New Zealand’s residential construction sector with solutions and guidelines for coping with supply and demand fluctuations and reducing economic cycles on material price and workforce development.