There were 38,209 new homes consented in the year ended November 2023, down -24% compared with the 50,209 in the year ended November 2022, according to figures released by Stats NZ today.
In November alone, there were 2958 consents issued nationally, compared to 4649 in November 2022.
The least drop was for stand alone houses, down -20%, but townhouse consents dropped -31% and consents for apartments were down -77% to just 123 in November.
The value of all residential consents was down -29% in November from a year ago.
Overall residential consent levels are now back to those we had in the 2017-2019 period.
The number of new homes in the construction pipeline continues to decline sharply while the cost of building them does appear to be stabilising.
The number of new dwellings consented per 1000 residents is now running at just 7.3 for the year ended November, the lowest rate since 2018. It peaked nationally in 2022 after a long period where it ran very low (less than 4 per 1000).
In Auckland, that rate is 9.1 per 1000 residents and down from almost 13 in 2022. In canterbury it is still running at 10.7, but in Wellington region it is only at 5 per 1000 residents.
The slowdown in this sector is embedding harder. We haven't seen a drop this quick or as long running nationally since 2011. For Auckland it is since 2008 even if it is off a much larger base in 2022/23.
Meanwhile, the value of alterations and additions are holding at recent levels, little-changed from October, or from November a year ago.
Building consents - type
Select chart tabs
- You can have articles like this delivered directly to your inbox via our free Property Newsletter. We send it out 3-5 times a week with all of our property-related news, including auction results, interest rate movements and market commentary and analysis. To start receiving them, register here (it's free) and when approved you can select any of our free email newsletters.
102 Comments
I guess you and I have very different views on when retail mortgage interest rates will hit 5.5% then. ;-)
If it takes 18 months to get CCC then we're talking July 2025 .... Wanna bet that 5.5% can't be got by then?
You might want to check the normal timelines for central bank action for killing inflation. 9-18 months at peak and then a fairly rapid decline back to normality, once again 12-18 months. The RBNZ has now been at peak for 7 months. The peak was hit May 2023. Even if it's 12 months in this cycle then expect declines in May 24. (I think it'll be earlier.) A CCC in July 2025 - 1 year and 2 months after May 24 - and we'll be close to normal again. Any hints at that time that rates have further to fall (e.g. the RBNZ has overcooked it as I believe) and they'll be factored into decisions at that time, i.e. cheaper interest rates coming.
And while poorly capitalised builders are forced to take a break, or downsize, or take lower margin / riskier maintenance work, the well capitalised are steaming ahead and negotiating good input prices from demand constrained suppliers.
Or perhaps you think it's somehow different this time?
18 Months for CCC?!!? we're about to start, slab down before end of this month and will be in by July. Same builders did the neighbours in five months. Good job too. I'm in industry too and they;re doing good quality at a reasonable price and thinkg 5-6 months to build is a good timeframe. OUr family business build nationally in the UK and can get a timber frame dwelling together in half that time so I wouldn't call it slap dash.
Must be an incredibly high end complicated build to take 18 months.
I'm guessing you're building a single story house on an empty section with good access?
3 story town houses in built up areas are quite different.
Can you report back in July and let us know how you've got on and whether you're in?
Building in the UK (which I've done) is quite different to NZ - mainly due to economies of scale and greater competition.
A large portion of developers these days need to get substantial pre-sales before they build. I don’t think retail rates will be less than 5.5% until mid 2025. That’s what I think is necessary to re-start new build demand. Then it will take time to build back construction momentum, so let’s say some early momentum starting to build again by late 2025 / early 2026
Of course quite a few builders will go bust by then, especially as the government will pull back on social housing building. That will impact on momentum in the next leg up of the cycle.
Look back at history and you will see that building booms are typically followed by busts running *at least* 2-3 years.
Far too few economists understand these basics. Very concerning.
By 2025 investors (the primary buyer pool) will be able to buy existing townhouses at pre-covid prices, after the price premium for interest deductibility has been removed. Only the brave or idiotic would build at 2024 prices and then try to sell 2019 prices while competing with other similar properties that are only a few years old. And there will be a flood of those similar properties after June 2024 as the Brightline period is reset back to 2 years.
You seem to really have a bias towards rising house prices. Let me spoil your hopes:
- consents are falling off a cliff, but a lot of new dwellings are still to be completed over the next 4 months
- Interest rates will reduce slowly. And they need to get down to at least 5.5% before there is meaningful impact on demand. Unlikely this year
- population growth will slow a lot as the job market keeps slowing
NPS-UD.
MDRS.
RMA reform.
Three Waters.
Just really big ones. With massive cost reductions to both building new houses and ongoing costs for existing households.
But dumb Kiwis wanted to keep the status quo. They don't like change ... even if it carries massive benefits for them.
NPS-UD only highlighted pockets of land in the RUB and MUL that they wanted to be developed now, which in the context of the RUB and MUL the NPS-UD is LESS LAND being available and given that it was signaled in advance only made that land more sort after amongst a greater number of developers, hence the price went up. And secondly, it was still less than the overall purchaser demand so just allowed the fewer developers that did end up owning it a greater monopoly. All that happened was smaller houses got built at higher prices.
That and the MDRS were on the backs of even more limited infrastructure, so the policy of supply was implemented sooner than the ability to supply the infrastructure which created a demand-supply imbalance in favour of those few that could access infrastructure, thus the price went up.
RMA reform, being as bad as it was, just caused councils to hold up many consents in the system while they tried to work out (and still are) what the new rules mean for them. Thus less properties consented.
And yes the 'Waters' needs reforming but Labour Three Waters were never going to work in helping housing affordability, and in fact, would only add to the cost.
Kiwibuild was Labour's best effort at housing affordability and look what that got us.
Yes change is needed, but only the right change.
The Coalition has better overall housing policies, but needs amending to work, and then still to get through all the council bureaucracy and third-party vested interests to see if any savings ever reach the house purchaser to allow a cheaper purchase price.
JJ just said 'it curbs investor demand', and you are saying it gives them a stronger incentive to build more new, which they could have done anyway before a change in the tax law and would have done if it made economic sense.
Also if building new, it is more expensive than buying existing. All the landlords that have recently bought new are at best neutral on return and are expecting house prices to have good capital growth so rent increases are neutral, but are still increasing.
If these capital growth increases, ie house prices rising, don't happen, then the only recourse to recoup is higher than expected rents.
What is needed is to make new supply cheaper to build than present, and this can only come about with reform in land use policies. None of Labours policies did this.
They always could but lets face it, the majority bought an old house and competed with FHBs in doing so. Right now there is a strong disincentive from doing this as if the buyer uses a reasonably sized mortgage they will very likely be cashflow negative. They could take their money elsewhere but most NZ investors seem to be scared of shares, so it's a choice between losing money after inflation in TDs or building a new house to rent out.
Fully agree more supply is needed and the country as a whole has failed at this for years - both parties and local councils. The interest deductibility policy was a neat tweak around the edges to stop investors fighting over the same turf as FHBs, or at least redress the balance somewhat. Once NACT remove the rules (if they don't decide to partially keep them to pay for tax cuts), the flood could be unleashed again and FHBs will suffer.
Hands up who wants to be the one to tell FHBs to shuffle aside and make room for some investor's third or fourth property purchase.
For me, when we're talking about the finite resource of existing houses, I think it's quite reasonable to encourage FHBs with all the social and personal benefits that entails, vs investors who can't think of anywhere more creative to put their money. Some of them might even be pushed into investing in something productive that benefits the country.
How many of these "investors" are using their own money? Many would be leveraging the deposit and then taking out a mortgage. Paper rich and cash poor. For many taking out a mortgage and buying property is their only option. Worse, this leverage "magic trick" is facilitated by banks that can create money out of thin air.
I think residential property will be a terrible investment over the next decade or two. I am overweight property through my own home, and until my share portfolio has a similar value I don't plan to consider an investment property.
I did have an 'accidental' rental property until a year or so ago which I am now thankfully free from.
Yes, it's certainly been a bull run for a long time. My thought is much of that was supported by falling interest rates and that road can only run for so long. Add in the head winds of building social pressure to improve housing supply and reduce prices, and I don't see the future looking like the past. NZ has a particular situation where the average investor is so myopic they only see property as investable, and that bulk of money has pushed yields down to the ground.
I could certainly be wrong, everyone else can put their money where they see fit.
I'd feel much more comfortable with industrial and am invested via some NZX REITs, which trade on much better metrics than residential property as well as having numerous other benefits. Not least of which, they never call me because the toilet has broken in one of the buildings.
Hands up who wants to be the one to tell FHBs to shuffle aside and make room for some investor's third or fourth property purchase.
For me, when we're talking about the finite resource of existing houses, I think it's quite reasonable to encourage FHBs with all the social and personal benefits that entails, vs investors who can't think of anywhere more creative to put their money. Some of them might even be pushed into investing in something productive that benefits the country
Silly sarcasm
Perhaps, but this was very much front of mind of every educated young kiwi now settling, or having settled, into Australia or elsewhere. For a lifetime of paying tax not in NZ to boot. After 20 plus years of healthcare and education investment by tax payers, this is a worst case outcome.
But I'm sure you are "Allright Jack".
The speculative leverage tax rinse society either dosent get this, or simply dosent give a bleep. Perhaps if they paid more tax, they might give more of a bleep?
Say what?
I thought you were picking OCR cuts early this year? Once that happens we'll see things ramp up and by December it'll be quietly humming along. Case in point, I'd bet the Feynman (from Ockham) is underway come January 25.
When you say, "Ridiculous negligence from economists", to whom are you referring?
Even the scoundrels infesting retail banks said construction would slow down (of course they would as its in their interest to restart FOMO). Non-bank economists were more forthright and used words like "crash" and dramatic, drastic in front of the word contraction. And the RBNZ economists acknowledged their actions could create a recession and construction is always a casualty in a recession without government support.
Let’s touch base again in December. I see little chance construction will be ‘ramping up again’.
btw. What do you think will be the stimulus to facilitate that? You think the OCR will be cut to circa 3.5-4% by then? Or do you think retail rates at circa 6 to 6.5% will be low enough to sufficiently stimulate demand?
I certainly don’t. And if the OCR *is* cut that much then the economy is in big trouble, which won’t help with new build demand.
Oh, I am. It's either Feb or Apr for the first cut. The negligence is multi-layered:
- RBNZ team for their hyper aggressive monetary policy response in 2020 (causing the housing boom) and 2022/23 (causing the recession we are in). Their response was misguided both times. They responded to the inflationary episode as if it was primarily a story of excess demand... they were wrong
- Govt economists (Treasury in particular) for their austerity fetish - advising Ministers that Govt spending needed to reduce to 'tame inflation' - also plain nonsense. Govt spending could have reduced inflation as it did in other countries - I bet that was never in any advice.
- Our professional economics commentariat for egging RBNZ on and bombarding the media with the 'higher rates will bring inflation' down dogma, and the relentless 'labour market is hot' reckons (i.e. some workers have a tiny bit of power and secured wage rises that nearly cover rising costs). The bank economists were particularly guilty of this (with a few notable exceptions)
I think December for 'humming' is a bit optimistic given the lags in the impact of higher rates, the pace at which RBNZ will bring the OCR down, delays in lower OCR being passed through to market rates in the construction market, and the time it will take the construction sector to get back to building. But, happy to be proved wrong. Lord knows we could do the the houses.
If the residential tenancy bond data and immigration statistics are to be believed. New Zealand has the capacity to absorb a massive increase of immigrants into a modest increase in dwellings. The only explanation would be massive overcrowding withing existing dwellings. On the flip side. A large number of those immigrants are working in the construction industry on casual arrangements with labor hire firms.
We can thank innovation in the $20 billion rental industry for absorbing all of those extra people. Incredible creativity goes into converting garages into dorm rooms, creating special night-shift bedrooms (windowless to help the poor sods get some sleep), and providing special inflatable mattresses that can appear in minutes on the kitchen floor at night.
Exactly. I had the Ak Council explain how much more traffic was on my road due to the 12 new houses which have been built. Alas they totally ignored the 3 large houses which used to be here. This demonstrates thinking which has a desired outcome in mind. Plus not a very mathematically minded Council worker.
I was actually being sarcastic, but I guess my sarcasm levels are a bit out of whack today. Will try harder in future. Also, forgot it's 128,000 for 12 months since the last immigration update.
And that's assuming that of those consents the average number of rooms is also 3.14 or above. And that they get built within a reasonable time. To be honest, I'm a bit concerned that we seem to have a policy of letting people in, crossing our fingers, and hoping for the best! Even if building costs are more or less the same, land prices are going through the roof. There seems to be no strategy to align housing, infrastructure, or demand for labour. Property prices are already unaffordable for an increasing majority of people relative to average income, heaps of Kiwis leaving, and no one seems to know what skills the immigrants who entered NZ in the last year have, or where they are even living.
We seem to be on the same path that is causing Canada to go downhill fast.
I personally know of 4 new houses that have been build by friends of mine. All are uneconomic, if they sold them today they would lose a ton of money.
The economics of building simply don't work and I have no idea what the solution is. All I see are prices holding and volumes being low.
Developers can't get projects to stack up at prices people can buy at- qualify to borrow at. Full stop. Many are exiting the land, and struggling if they overpaid for it. Inflation has lifted the salarys of many, some more than others, and people still cannot qualify. So what is the main cause...?
The greed of those holding undeveloped land. Also known as speculation. What to do...
I really like what the Christchurch council did. Rates double for owners every six months untill a consent is lodged.
Time to implement a land tax. There really is are no negatives. Holders of undeveloped land are incentivised to either sell it or develop it. Land price falls until it is economic to build on. Land gets utilised instead of sitting there, accumulating capital gains from the development around it.
Whenever taxes are implemented it pushes prices up, not down. The Labour govt. cancelled the deductibility of mortgage interest on rental houses thinking rents would go down....but rents went up. Any time the government gets involved, prices go up.
Property prices around Auckland are going up this year, absolutely no doubt about it. Pile in...get rich!!!!
Labour fully expected rents to decline and landlords to sell. I don't know about the selling, but rents went up. If it's the road to riches, why aren't you doing it?
I'm always reading posts from whiners about 'rich' landlords and untaxed property gains....if it's so damned good and so easy, why don't they do it themselves?
Why don't they borrow a million and give it a shot?
Yo are against land taxes because you have a vested interest in land and property therefore it would come at a cost to you. If folk like you, who have profited off the lack of incentive to use land productively over the last few decades, then good for you it's great to hear you have found some avenue for financial success. However, there is a grave injustice in the level of tax paid by PAYE vs other avenues, and removing incentive to speculate on property via land tax would take the burden off workers for which the country rely on to function, allowing workers extra money via tax bracket indexation and offsetting this with land tax costs. This would offer more funding for core infrastructure, healthcare, policing, and anything else that the government provides to keep a certain standard of living in a modern western democracy. It would also lower house prices to more affordable levels, which would quite likely increase the birth rate from lack of financial pressure, and have a happier and healthier population overall. Better living NZ
Nothing is going to send the price of land and property down unless the population decreases. Anytime governments stick their dirty fingers into it, prices go up, as per the last useless government tinkering with tax deductibility.
We've already had land taxes in this country, and guess who was responsible? That's right, a Labour Government. It was a pointless, absurd attempt led by Bill Rowling and his 1974 Property Speculation Tax, which I deftly managed to avoid. I was young at the time, but still smart enough to figure out it was never going to work. Speculators didn't sell and guess what happened....you guessed it.....property prices went up...Hallelujah!!!!
It was repealed in 1979, an abject failure.
removing incentive to speculate on property via land tax would take the burden off workers
You are forgetting they didnt apply the interest deductibility rule to corperate landlords with large portfolios and multiple properties. In this implementation the people bearing the brunt are the mum and dad investors who are likely primarily PAYE workers.
The way to get investors out of property is to incentivised other investment forms. Property has been the approachable and understandable investment form for the layperson for the last several decades. Turning that around requires more than an ill conceived change that doesnt account for the second and third order effects.
A rusty shank in the side of the people who worked to the point of affording one or two additional properties is not making up for the lack of taxation on international corperates.
I think the idea of removing the deductibility of interest was to dampen speculator demand - rents have pretty much gone up at the same rate as they have for the last 20 years and will likely continue to do so. However, NZ house prices are extremely unaffordable in relation to average wages relative to other countries in the world. We either need a capital gains tax or the removal of interest deductibility to rein in speculation. If we don't NZ will struggle to attract and retain skilled workers from overseas, and we could also lose a lot of skilled NZers overseas as well.
Dampen building with a CGT or interest deductibility removal will result in a lot less construction, and probably many being left empty. Did you know there's 40,000 empty houses in Auck owned by people who can't be bothered with the hassle of tenants?
Less houses being built = higher prices and rent.
Not a very difficult equation to solve.
Wingman, I get where you're coming from with the 'easy equation' of building less leading to higher prices and rent. However, the real-world scenario, especially with something as complex as the housing market, often isn't that linear. Take the UK's CGT approach – it's targeted at reducing speculation, not necessarily impacting genuine development. This shows that market balance isn't just about the quantity of houses but also the quality of investments.
Now, consider the impact on skilled, high-paid workers. New Zealand needs to attract these professionals for our economic growth, but if they're priced out of the housing market, they'll go elsewhere. This isn't just about today's housing demand; it's about securing future demand too. A housing market that only caters to certain segments and neglects the needs of potential high-earning residents isn't sustainable. It could lead to a long-term demand slump, which affects everyone.
Moreover, skyrocketing land prices don't just affect the housing market; they ripple through our entire economy. Essential workers, first-time buyers, and young families find themselves unable to afford homes, which disrupts community cohesion and social mobility. Businesses considering investment in NZ also weigh these factors. If their employees can't afford to live comfortably, it impacts their decisions, affecting job creation and overall economic health. So, the equation might not be as straightforward as it seems; it's a delicate balance that needs careful consideration.
Immigration - a fair number of recent immigrants are now jobless living in cars as they cannot afford a room to sleep in. Many more will be jobless in the coming months. I don't know that immigration numbers will hold with the downturn in available work. National seem keen to bake this in by removing jobs and increasing the pool of redundant workers.
Inflation - we're fast approaching a point where more money exits the economy than enters. The effect of this will be clear in 12 - 18months as the taps dry up. Lowered OCR will take as long to re-ignite things again.
Labour - "up" is not what I'm reading or hearing in NZ, maybe in the states. But here it's liquidation, shops closed, for lease signs everywhere. Looking like there will be much fewer jobs in 6 months than today. It could unravel fairly quickly - retail, hospo, construction, RE, fairly choked for a year or so and no relief in sight.
I'm going to build in Riverhead....here's what's happening there.....close to Westgate shopping centre, 1800 houses planned in Riverhead by a Fletchers consortium, road widening currently underway between Kumeu and Waimauku, new intersection planned at SH16/Riverhead/Coatesville Highway, a 422 unit retirement village planned in Riverhead, next to Coatesville, NZ's most expensive suburb, located between SH1 & SH16, new subdivision planned in Riverhead, on the outskirts of NZ's biggest city.
It'll be a millionaire's mile.
The approach of diminishing consent and generating market scarcity not only opens up opportunities for certain individuals but also enables the already wealthy to amass more wealth. The manipulation of data for electoral victories must be subjected to regulation and control to prevent the loss of the voice of humanity in New Zealand. This impact extends beyond the Maori community, which is deliberately marginalized, to the creation of additional societal classes and divisions among existing populations and ethnic groups. Essentially, the root cause of the rift among us lies in the artificial divisions imposed by artificial intelligence and manipulated by state-sponsored actors, including those who claim to be allies of New Zealand. Recognizing this reality sooner rather than later is crucial for addressing these issues.
The vast bulk of those townhouses were sold to investors. Now that mortgage rates are 7% those new builds are so cashflow negative that the meagre capital appreciation of them of them over time won't make up the difference. They are terrible investments, so investors have stopped buying them, which means developers are unable to build them. A couple of big developers in Chch (WC, MG) are now trying to offload their land bank rather than building what has already been consented and for sale OTP last year.
If immigration keeps up at current levels, then there will be a rental crisis as soon as the flow of townhouse completions comes to a grinding halt.
Plus the new building code regulations kicked in Nov, so I imagine people are getting shocked at the quotes coming back and are deciding not to proceed.
Got any data to support the statement in your first sentence? At least in Auckland I think FHBs have formed a large chunk of townhouse buyers. Where we live, 70% of the homes are owner occupied with most being FHBs.
Either way, townhouse development is going to collapse. Most potential FHBs can’t afford the asking prices at 7%+ interest rates. 6% wouldn’t make much difference either.
Christchurch is investor led. Maybe Auckland is different. I suppose in Auckland FHB cant afford to buy actual houses so are forced to buy townhouses. But are FHB buying Auckland apartments? In Chch the developers target investors, either for long term rent or for AirBnB, or to Singaporean (aka Chinese) investors who just leave the property empty. Of the 7 that were built on my street last year, 6 were available for rent as an example.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.