Agreed that the relevant factor is the "real" demand absent the additional demand from speculation, but what reason do we have to think that "they" (which includes me) want it that way? Some do, and they're the ones with the money and influence, but "they" are not a monolith and have a range of opinions.

Auckland does appear to have legitimate supply constraints even absent demand (see articles with families living in tents, cars, etc in this first world country) and the geography does put constraints on efficient sprawl.