Steadier path to later & higher Auckland house building peak could be better for first home buyers, construction industry and high school leavers looking to enter the trades, PM English says

A steadier route to a later peak for Auckland house building might bring benefits both for the construction industry and first home buyers, Prime Minister Bill English says.

Responding to the latest MBIE National Construction Pipeline Report, English, like Building and Construction Minister Nick Smith on Sunday, trumpeted projections for nationwide house building over the next few years.

But, as David Hargreaves wrote on Monday, the figures for Auckland on their own look rather demoralising, seeing as we’re told the city needs 14,000 new homes built a year to keep up with population growth, and that MBIE has previously said the city’s shortfall might not be closed until 2030.

The 2017 pipeline report indicates building will continue to increase in Auckland, but that the expected peak in house building will now be 2019/2020 rather than 2017, which on current consent projections could come in below last year.

Speaking at his post-Cabinet press conference, English said the Auckland figures on their own shouldn’t be considered disappointing, despite the expectation that building activity won’t peak until later.

“This is the industry making its own projections about what houses are going to be built and they show a pattern of a higher peak a bit later, and building spread across the country,” he said.

He tried to argue this was good news for first home buyers. “What they need is more houses on the ground faster, and the construction pipeline shows that.”

Wouldn’t it have been better news if the peak was coming sooner? “Well, it’s, probably the industry’s running about as fast as it can, as they point out themselves,” English said. “The rate of increase has been pretty impressive for the last four or five years. And the projections confirm that that’s going to continue, but on a broader basis than just Auckland.”

“There are some capacity constraints in the industry, because it’s been increasing so rapidly, both on the people, building supplies [fronts] and also, anecdotally, some pulling back by the banks from the financing of developments that they think are a bit riskier.

“So, it’s not surprising. In the long run it’s probably not a bad thing – that you get not quite so sharp a peak and a longer, flatter profile of continuous work,” English said.

And that was good news for the 60,000 young people who would be leaving school in the next three or four months, due to the steady job prospects in the construction sector over the next five or six years, he said.

Even so, should we be confident that the projections could be hit, given this experience? “We have reasonable confidence in them. The industry itself takes into account the availability – the supply side, materials, labour – and they’re indicating this is what will happen,” English said.

“What’s important to understand about this is the sheer scale of it. For quite some time there’s been a lot of public discussion about whether enough houses can be built. I think people will be surprised to know what 200,000 houses represents, and that is, building Dunedin twice and almost Hamilton twice, over the next six years.”

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39 Comments

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17

this guy is a jack ass... they refused to restrict demand stating that building more homes was the answer, now without blinking an eye, he states that its better for FHB's if this happens later...

Perhaps it's not the actual houses, Mr. English, but the ownership distribution?
The lower the sticker price of a consumption item ( which houses are) the more that will be bought; the more of it that will be produced. Isn't that what Consumerism is? Lower prices = more capacity to pay = more production.

I think cost and profitability will have an impact on supply. Under your logic if houses were $100 each then millions would be produced as everybody would want one, two or 10?...

Yes, if costs are kept low by employing reasonable economies of scale.

Unfortunately we are talking about Auckland that has reduced land supply, because Auckland hates the idea of poorer people buying houses.

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21

Would people also be surprised at the sheer scale of immigration, the population of Dunedin twice and almost Hamilton twice, over the next six years

I'm not even sure Sir John would have had a crack at spinning this one Bill...

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21

A bunch of nothing from a PM who was a part of denials of a housing crisis up until last year. Even though the PM was struggling to feed his kids so he needed $900 per week to live in his own house to survive.

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14

He's making himself look like an idiot. They have no control over the issue anymore, they are totally at the mercy of the market.

I agree with you wholeheartedly Mr. English. GOOD THINGS TAKE TIME. We have confidence in you and we believe you will do your very best for your country because you're the rock of New Zealand. Let's do this, Bill.

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13

Bad things seem to take time too. 9 years to be precise.

I agree with the general sentiment that good things do take time. How can they reduce incentives to invest in real estate and bring housing prices down, as well as driving investment in productive sectors such as technology and innovation? That's definitely going to take some time.

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18

BREAKING NEWS ... POLICY STATEMENT FROM NATIONAL ... BEEP BEEP BEEP

PM Bill Whatsisname says "It's too hard so we're just going to give up and sit in our own filth." Also stated that the public are dumb enough for anything and have fallen for this before. He then left the press conference, mumbling something about snorting a line of coke out of Gerry Brownlee's cleavage.

Not funny

I'm pretty sure it's factual rather than satire.

mmmm, its pretty funny

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13

I can hardly tell if Im watching the muppet show or a PM press conference these days. The only give away is the colour..

"We've tried nothing and we're all out of ideas" - Bill

He is rather boring when he tries to billshit. Give it up Farmer.

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13

spin, spin, spin, spin, spin. spin....
utter garbage from the PM

I have written a long form paper on city spatial economics to counter some of this spin.

Nb. In the paper I refer to spin as pseudo-science or bloodletting.

Auckland's slow building response in response to fast population growth is addressed a fair way through the paper in -"The allocation of privately built spaces within a city" section.

New Zealand can and should do better than this.

The first step would be getting rid of the politicians who believe the failing status quo is a sign of success.

Check out my article here -titled "Successful cities understand spatial economics"

https://medium.com/land-buildings-identity-and-values/successful-cities-...

Weren't National claiming only a few weeks ago that they had the biggest building program ever!?

And now for a quick Uturn since property prices are falling, now that their are not Overseas Investors available to asset strip in Auckland.
Guessing that even the money launders have worked out that that there's no point in investing in residential property in AKL.

Seems that National have truly been caught with their pants down this time!

I think the Auckland peak will sometime after 2022-2026, when Auckland finally allows some reasonable-ish size pieces of land into the city. Then they shut off land supply again until 2040.

Talk about conceding defeat

Huge FAIL!!!

It's not his fault but Bill will oversee the largest fall in New Zealand paper wealth, ever.

haha, it is quite amusing to see all the Blunt knives drawn at the "Rock" - no matter what he says, he wont be popular ... slingining the same mud time and again ...
Some clever dudes honestly believe that the Gov has the magic wand or can change things by the stroke of a pen ! the same hopeful dudes really believe that Labour /Green can build 100,000 ( partly affordable) homes in the next 10 years ... if it was only that simple!! ---
Yes, things do take time, we are not a communist country and Gov cannot issue orders and change bureaucracy and industry when and how it pleases them ... Such a dictatorship would struggle to complete a full term, let alone get anything done !.... the Euphoria of these impatient hopefuls has made them lose their sense of basic facts on the ground . this will only get worse after a defeat on election day when they realise that the majority of people have cooler heads and wiser approach to a problem affecting everyone.

One of these facts is that there was a trade off between getting Growth and be in a Better economic and financial position to be able to cope with population demands and Inflation, Asset prices' run away, increased demand on rent, goods and services, infrastructure and population blowout ... Every cheerleader of the LEFT is selectively ignoring what was achieved and blindly moaning about what was temporarily compromised ... Any half brainer knows that the benefits of such economic leaps are extremely important and good for the country and creates opportunities and prosperity ...

I second DGZ : Let's Do This, Bill ...

LOL thank you.

"Every cheerleader of the LEFT is selectively ignoring what was achieved and blindly moaning about what was temporarily compromised"

Please elaborate on what you mean by "what was achieved", so we can all understand your point of view better.

What Eco Bird means is 'the paper wealth and narcissim that has been achieved by darklords' is what the left have been selectively ignoring...

So our election options are either Head In The Sand (Bill "nothing to see here" English) or Pie In The Sky (Jacinda "if wishes were houses" Ardern)?
Somebody please pass the scotch...

'Some clever dudes honestly believe that the Gov has the magic wand or can change things by the stroke of a pen !'

Ah, no.

I think many here would hold the view that it's been far too little, far too late. We realise you can't wave a magic wand but...
The govt has had nine years to make meaningful progress. They have had plenty of time, but have patently failed.
They hold an unwavering belief in the ability of the market to respond with supply, when clearly it won't / can't.
Yet, they have stubbornly refused to come to terms with this reality, and take alternative actions on both the demand and supply sides.

Serious case of cognitive dissonance at work.

Oh, go read up on some history, will you.

Start with this sort of thing. It's short and easy, so no excuses for willful ignorance: http://bwb.co.nz/books/home-truths

I don't think anyone can really disagree with Bill English here. He is being very sensible and realistic. The NZ economy needs stability and the task of fixing Auckland's housing construction issues needs to be approached cautiously.

Utter nonsense - NZ needs a swamp drainer

We have had 9 years of total so-called stability - Otherwise known as total Inertia

On Sunday Billy Blunder went from reverse gear to 5 kph on infrastructure and ya'll supposed to feel warm about it

This government is totally impotent!

Promise the world, achieve nothing, deny everything.

Im ashamed I voted for them.

To be fair they got the Waterview Tunnel done which was something Labour couldnt do.... Still not getting my vote this time.

But can Adern do better?? I like her optimism and energy.

The facts are that after 9 years of failure it is the Kiwi way to give someone else a go otherwise the world would think we are thick.
Wait on.......

Kiwis so dumb lah.

Slower building activity is not ideal but an upside is that this will help prevent profiteering like what happened during the Christchurch rebuild where companies charged EQC typically about 3 times normal trade rates for repairs.

Case in point was on Fair Go

I think it is obvious that the construction / building industry will take time to build up a larger resource base, labour etc. to be able to build more than currently.

If the peak building rate was to appear now or in the near future, then the additional resources needed to be added is small. I don't think this is the case,

I believe there is a resource gap in meeting the total market opportunity (building more houses faster). in the next couple of year additional resources will be added - more people employed to build more houses, more skill labour trained etc.

At some point in the future the market opportunity will be fully addressed - enough houses will be produced to meet the market need - and there will be a over supply which will impact prices, that is the point of peak supply.

Once reaching over supply there will be a period of continued activity at the higher than necessary level. At some point businesses will stuff and resources in the industry will again reduce bringing the market into a new equilibrium.

So peak building is some way off, perhaps 2020 or even later.

Once we reach over supply, prices will fall relative to today, at that point all buyers, including first home buyers will be better off and all existing home owners will be slightly worse off.