The number of new homes being completed in Auckland is slowly declining.
The latest figures from Auckland Council show that it issued 2935 Code Compliance Certificates (CCCs) for new dwellings in the first quarter of this year.
That was down by 10.4% from the 3275 CCCs it issued in the first quarter of last year.
Code Compliance Certificates are issued when a building is completed, unlike building consents, which are usually issued before building work commences.
That makes CCCs the most reliable indicator of the supply of new housing.
The number of CCCs issued is each of the first three months of this year was lower than it was in each of the corresponding months of last year.
That suggests the decline in the number of new homes completed in the first quarter of this year was not an aberration.
The monthly rolling 12 month average figures, which give a better indication of the long term trend, show that the number of new homes being completed peaked at about 1200 a month in June/July last year, then steadily declined to just over 1100 a month and dropped down to just under 1100 a month in March this year.
However the number of new homes being completed in Auckland is still considerably higher than it was prior to 2021.
The graph below shows the long term trend.
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30 Comments
If Auckland's population is not growing then surely all these new homes being built are going to become difficult to sell or even rent.
I did a search on TradeMe for houses in West Auckland in the 600-1000k price range and got quite a few results, over 900, many of them new or near new homes.
1000 is still a lot really given low/neg pop growth. Of course a few demolitions to subtract, but still a solid rate of building. Unless people have cancelled, based on consents there must be a huge amount of half-built or not yet started stuff.
So far this is playing out exactly how I have said it would play out.
gradual decline in CCC’s in 2022, and will probably bottom out around mid to late 2023.
by end of 2022 I think monthly CCC’s will be down by 20-25%, and by mid 2023 down by about 35-40%.
we should also start seeing building consent approvals start to drop, I think they will be down 40-50% by year’s end.
I am unsure - I think there is a truck load of consents out there- especially in the Auckland market. There is a slow down because of material supply and construction prices. However, I think there is a couple of thousand building consents that people have invested heavily in and a reluctance to turn off the tap.
In addition, while there is a shortage of skills there is a large number of apprentices in the system now. Our traditional pattern, given our commitment to boom bust patterns, is to have a lot of builders arriving in the market when demand slows. I suspect construction will go back to being more competitive in a year's time. And even if prices drop they will still be three times the cost of the construction.
Materials supply is only part of the problem. Rising interest rates and falling prices is just as much if not more of an issue.
I wonder what all the tradies will do HouseMouse? No point sticking around if there's no work.
Bugger off to Aus…whoops they are going to face similar problems
I agree HM but that was entirely predictable with rising interest rates. The problem I see is that less new builds does not equate to lower house prices which I what I said when it comes to a self regulating market. Builders are not going to build a new house unless there is a market to sell it in so building could fall off a cliff and this just keeps current prices high. Just logic really they are not going to sell you a house for less than what it cost to build it.
Surely that depends how much they've already sunk into it?
Say you've paid $2m for a site, demolished the existing house, and got consent to put up 4 townhouses. You expected to get $1m each for them, with $1m construction costs - profit $1m.
Prices fall 25%. Instead of receiving $4m, you expect to receive $3m. No profit. But you've already paid $2m, and now the site is only worth $1.5. You can't rent it out. So the rational choice is to proceed with the unprofitable project - or sell it on if you can to someone more optimistic or better capitalised - rather than eat a substantial outright loss.
That's a short term problem not a long term ongoing problem. The housing market just hit the wall in record time, it was like a matter of weeks not years. Empty sections now will remain empty sections, the building cycle is not that long it will adjust very quickly. Things go that bad you could see just concrete pads or even the framework on it just left. Houses beyond a certain point will be completed, agreed and even sold at a loss but they will be in the minority. The same old people stand to gain from this so nothing really changes, there could be the odd bargain to be had for those with cash.
What doe you mean, we've been building up to this point since we dodged a bullet during the GFC! So this isn't a matter of weeks, is well over a decade to get into this situation....as soon as we couldn't/can't save the market by dropping interest rates, its death letter is confirmed.
Perhaps we get lucky and this situation turns deflationary very quickly and the RBNZ can start dropping rates, but that will be reliant on the Fed going in that direction first and they couldn't care less about our insane property bubble.
Nope its been weeks. Everything would still be burbling along at record low interest rates had it not been for recent rises and more importantly the signal of more rises for the rest of the year. The brakes have suddenly gone on and gone on hard and fast. I have been watching the market down here for a long time, its hit the wall in a matter of weeks.
Lol - I love the narrow view you take on issues....its great for entertainment.
It would be impossible to have seen any of this coming....its only been visible for 2 week! (umm no there have been warnings for years from local bank CEO's, to economist, to the RBNZ, to the IMF.....)
Meanwhile for nearly a decade we've had runaway credit being extended to a property market - that was only possible because interest rates could continue to be reduced as we imported deflation from cheap labour in China and Vietnam. At some point, that was always going to end in tragedy....and to say its only been 'knowledge' for 2 weeks is pretty funny!
Using QE to sustain the unsustainble is a fools paradise.
Yep. This has built since the GFC. We have been able to kick the can down the road by putting savers to the sword, and importing gdp through immigration. Anyone looking at NZ as a potential immigration route, will be looking at house prices and what they can earn and should be having second thoughts. Then there is inflation, the game changer in this market. Rates must still rise significantly. The fact that the NZD is in free fall which will continue to increase inflation until interest rates are at a level that the currency is defended. Finally there is our biggest trading partner, looking a bit sick(pun)... and perhaps about to probe Taiwan... If you cannot see the writing on the wall... you probably won't get out of the way when the wall collapses and flattens all those whose eyes are open but refuse to see.
Perhaps that’s a good thing as many of those “new builds” will come across quality issues future down track (leaking home 2.0) Supply and builder shortages caused by the pandemic. All that rushed jobs here and there, I even heard about contractors working on the wrong houses…..
All that will support price on quality existing dwellings.
Lower prices in nominal or real terms Carlos? (the difference is important if you take the time to consider it long enough).
Firstly, yep very predictable but not many economists have been talking about it have they?
second, a drop off in house building will not help support prices in the short term. So much is in the middle of being built and due for completion in the next 5-6 months, there will be more supply than demand.
where I would agree is that a slowdown in housing construction will help support the next up leg of the property cycle, likely starting in 18-24 months time.
If everyone trades up, then we can free up some of the houses at the lower end for the homeless & the moteli-ites. Perhaps the NZG could acquire some cheaper housing as prices plummet [I read by up to 30%] over the coming year. I understand GR has got billions to spend.
I think at this stage there are too many factors to predict what is happening in 12 months time. If the our goes to 4 % interest rates will be around 9 to 10% with out huge wage increases there won't be much demand .
The people in the emergency housing system (motels) are on rents fixed to 25% of income max. Just like Kianga Ora tenants. If I was one of them I would try and stay in that system and assume I get priority of any Kianga Ora houses come available in the areas I could live. The jump to a private rental even with accommodation supplement would push you further into poverty.
Surely an impact form Omicron & supply chain shortages impacting CCCs granted in Q1 though, which delayed properties being finished. I wouldn’t really put too much into this report given those factors.
It would be useful to see what proportion of these are being funded privately versus public. Kainga Ora has a large number of units in development.
I can’t see how the building industry can continue at its current rate. Inflationary pressure on materials, compliance costs are absolutely unbelievable combined with zero/negative population growth, a heap of properties coming onto the market, rapidly rising cost of borrowing. When money was cheap people didn’t care as they knew whatever extra costs were involved they would make up for in capital gains in no time. That has all changed now and I think after a lag we will see the building industry collapsing.
Might be like Ireland....as credit contracts, and the building rate slows, many of the tradies pack up tools and leave for better opportunities else where....they sell the homes they own and vacate the rentals they had....which adds another marginal impact on the downward cycle of the bubble.
This Labour government is likely to step in and partner with the private sector to build social housing or even launch a revamped Kiwibuild scheme. I understand the original scheme failed largely because land and build prices were shooting up, making it impossible to build lower cost housing. State housing was built in partnership with the private sector, as was much of the post bridge development of the north shore. I’m actually living in one of those very modest houses now - a small, mid-60s Neil housing home, and it’s just lovely - full of sun and light and a feeling of warmth due to the simple, well thought out design and a decent build quality.
They already has extended the 75 percent subsidy to private social housing providers. The houses only need to be new to the system. Watch some statics be revealed where supply of social housing has gone up. A Google search quickly finds social housing providers who will take on existing rentals.
This is best and only rental game worth while as it's Tax deductible , government subsidized and provider dosnr charge management fees.
With high interest and no tax deductibility on rentals but tax deductibility on social housing something has to give, sell or switch to social housing.
Shouldn't be too long until we see the govt announce it will buy new or nearly completed housing stock from developers at cost to avoid a disorderly collapse of the residential building sector, help protect the banks and deliver new social housing. Three birds with one stone.
Kiwibuild 2.0 LOL
Kiwibuy.
Kiwi Bank Profits?
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