Michael Barnett says Auckland house prices will stabilise only when the number of houses being built matches the number of people seeking them - and we are long way from that

Michael Barnett says Auckland house prices will stabilise only when the number of houses being built matches the number of people seeking them - and we are long way from that

Content supplied by the Auckland Chamber of Commerce

Gearing up the capacity of Auckland’s house building industry to build more new houses faster will be critical to solving Auckland's long-term housing shortage, says Auckland Chamber of Commerce head, Michael Barnett.

In a week in which the average sale price of an Auckland home topped $800,000, blame for the crises has been laid at the door of a web of factors – Auckland Council costs, red tape, availability of land, developers ‘land banking’, insufficient supporting infrastructure, and Auckland and Wellington fighting over Housing Accord detail.

“But even if all these factors were sorted – and they need to be, fast – Auckland will still have a housing crises with no end in sight,” said Mr Barnett.

“This is because the house building industry does not have the capacity to build the number of houses needed to meet current and future demand.”

A snapshot of industry and house supply numbers provides the evidence:

  • Five years ago it was assessed that for Auckland to keep pace with its population growth rate of about 26,000 people a year – or a Tauranga every five years - the city would need 13,000 new houses built every year for the next 30 years.
     
  • But a recent surge in net migration - partly from more people returning from Australia and fewer Aucklanders heading overseas - means that Auckland's population currently is increasing by around 100 people a day, or 36,000 a year – or a city the size of Tauranga and Timaru every five years.
     
  • This rate of growth may not last for long, but even if it’s just two years, the Housing Accord target of 13,000 houses a year set two years ago is now more likely to have risen to around 15,000.
     
  • But Auckland’s housing industry has never built 13,000 houses a year. A 2013 report shows the sectors strongest growth was over a 16 month period from 7300 consents in 2001 to 12,500 consents in the year ending January 2003. This was sustained until 2005 when the Global Financial Crises (GFC) hit Auckland.
     
  • Since the end of the GFC there has been a gradual lift – 6300 consents in 2013, and around 7700 last year.

“This is well short of the agreed 13,000 per year target every year for the next 30 years.”

Just 170 houses have been built so far of the 47,000 that has been targeted to be built in Auckland's 84 Special Housing Areas over the next few years.

If the target is achieved that will meet projected demand for the next 4 years.

What happens after that?

“I note that around 55% of Auckland’s house building firms are small-medium, employing less than five people. It makes sense for them to let new house construction supply continue to outstrip demand, to ensure a continuous supply of projects for the about 3500 employed directly in residential building.”

Further, there is a big skill shortage across the whole construction area. More than 35% of workers in the sector leave secondary school with no qualifications, even though some later obtain them. And there is a particular lack of people with strong management and leadership capability.

Against these numbers, it would be a major surprise if house prices weren't sky rocketing, said Mr Barnett.

“Prices will stabilise, I suggest, only when the number of houses being built matches the number of people seeking them.”

Looking ahead and beyond the Wellington-Auckland rhetoric, expansion of the house building industry will be crucial for Auckland getting anywhere near close to building the number of new homes it needs to keep up with demand. 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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.

49 Comments

Comment Filter

Highlight new comments in the last hr(s).

I would suggest that the reason 13,000 houses a year is not being built in Auckland's SHA is that section costs are $300,000 plus. Prices this high mean the building industry can only target the top end of the market and their isn't enough demand from that part of the market for 13,000 new homes a year.

Just what the country needs: Even more shoddy Weetbix box houses slapped together by cowboys.

A building inspector mate who began his days on the tools as an apprentice told me about something he's seen several times. A NZ construction company celebrates "cracking" the Japanese market, shipping kitset homes in a bunch of containers to that country. Then the celebrations collapse as existing unfulfilled orders are cancelled once the Japanese discover the kits (and houses) are crappy junk.

It's not until Kiwis travel overseas that we discover just how astonishingly low our building standards and practices really are.

+1 comment

NZ houses are 20 years behind the UK who is 10 years behind Europe and North America.

National's beliefs about new housing subdivisions is straight from the 1950s. So 65 years out of date.

Ah yes, but don't worry -- our avg. property price is the highest in the world. Does that count?

:)

Oh, honestly.

When (not if) houses are built the same way as boats, caravans, and planes - that is - in factories, under cover, using CNC precision tools with sub-millimetre tolerances, with proper QC, with serial numbers and performance guarantees - the supply-side issue will start to be sorted.

Construction using SIP, modular design which can be multi-proof consented, is commonplace in the rest of the world.

NZ building has been characterised by the Productivity Commission as a 'cottage industry' - low volumes, low productivity, In addition, having houses bashed together by unskilled and very often chemically propelled hammer-hands, and then only on fine days, with the frame left out in the weather in the meantime until the builder can be arsed to come back on site, is not exactly a recipe for Quality.

It's Interesting, innit, that an increasingly common reaction to the building fustercluck is Tiny Houses. ....

I wonder what percentage of the current generation of carpenters have any real skill with manual tools? Most of them trained with nailguns and battery powered saws and never use hand tools on the job.

Crap materials plus low skill levels plus a focus on quick profits will always equal overpriced garbage fit only for ignorant victims.

LOL

I've heard of accountants who dont know how to use an abacus, and IT Support engineers that don't know how to change valves in a 1950s mainframe. God help us.

Your reply maybe to subtle for the IQ in question.

Your reply maybe to subtle for the IQ in question.

Would you employ a builder who hasn't been trained in the use of a hammer or a hand saw?

Seriously?

They will be trained in their use, the point is their skills are generally encompassing far more than knowing how to knock a nail in. Eg how many nails and what size to meet the loading is also important.

New "builders" are not trained in the use of manual tools. They are given nailguns and power saws from day one.

Most 'old hands' despair of the lack of skill among the current crop of alleged carpenters.

When you consider the fact that houses built by the old hands are garbage, it's not hard to understand why more recent stuff is even worse.

LOL

The skills are new and different, things move on. "Old hands" like this I'd consider senile frankly. As someone else said who needs to know how to change a valve these days? the relevant skill today is in knowing how to say program an eprom.

Power saws save time and cut accurately, nail guns save time and hence money, simple, and I dont consider that old houses were garbage myself, or at least any worse than anywhere else in teh developed world.

I know of old(er) programmers who earn an absolute fortune contracting to banks and insurance companies due to the fact they are a dying breed of coders who know how to write and maintain the languages of ancient-but-bulletproof operating systems and software used by these venerable institutions.

these are a) niche uses and as you yourself point out cost a fortune, something a bank can pay but not the average house holder. There is also no reason to as power tools make the work faster, better and hence cheaper. On top of that there are a lot of cases of builders once they get to 40 having serious problems from using a hammer all day.

LOL - you get what you pay for!!!

Good builders are hard to come by and the fact is people generally have to wait in line if they want a good carpenter......people who generally don't care about quality have the.......I have to have it now attitude...... while the more discerning person is prepared to wait........most of the housing stock that is being built today comes from housing companies who sub-contract the labour......

L.O.L. is absolutely correct: Kiwis pay a lot by world standards, and yet we get sweet bugger all for it.

Even the most expensive so-called "luxury" houses would be considered severely sub-standard by people in other developed nations, as well as grotesquely over-priced.

If you think you are getting sweet bugger all for it, then maybe you'd like to think about all the people who manage to suck a living of those who are doing the physical work.

If NZ didn't have so many people sitting on their arses in offices and more people actually undertaking the work then price and quality would change accordingly!!!!

Both these tools allow quicker construction at the very least and whether the work is done with a power tool or not is fairly mute except as a DIYer I personally I find using high quality power tools gives good quality results in a shorter time frame with less waste.

The important skills are a) how to measure and mark the work accurately, you can be great with a hand saw but if you are mm's out the result will be crap. b) Knowing how to build to the standards required hand tools matter to neither. On top of taht its a Q of taking adequate care and that certainly is where builders of any age can be awful.

Crap materials, now while I think std wood is poor it is adequate for framing which is its job.

Ours are cobbled together in the rain,

Nail gunned by sight. etc.

Made out to be a McMansion, by size, not quality.

Quick decoration, Quick flick...10 year guarantee...yeah right.

Earthquakeproof..just ask Christchurch. Insured...just ask Christchurch.

Builder long gone...Insurance Co, long gone. Present owners, Long suffering.

So, to replace all these over priced houses in Awkland, if the Encumbents have a quake....I would be quaking in my boots.

I wold not bet my last dollar on bailing them out....as the Taxpayer bailed out Cera and Uncle Tom Cobbled together and all.

But our new found BFF from China, might be a bit appalled at the cost to their sanity, never mind their Pocket. ill found investment, secure as houses...even if secured with a full Re-build insurance and everything imported from China, would take years, if not centuries to replace, if the present rate of building is an example. And poor builders coming over here to try to make ends meet...by knocking together more crap houses.

We cannot even cope with a few builders from the Philippines without packing them in like sardines....in RENTABLE ...yeah right ...housing, never mind the Student crap in Dunedin...etc.

If only they could speak English, some people might learn more than they bargained for.

The reality in New Zealand, is nothing like that portrayed in the brochures...nor sold on the internet...nor sold by one of my pet hates....unreal estate agents...sight unseen.

Some people will stiiff anyone...for a buck. Coming here is no different.

Welcome to the real world.

It ain't all rosy...on the way up...but it can be a bitch, when sold a pup...on the way dow.n..

Waymad I find your builder comments quite offensive. Where in Auckland can you find some flat land to put pre-constructed houses on?
I'd say the new building regulations that are trying to put a wedge between builders and home-owners is going to be a major concern with regards to good quality housing stock - many good builders will leave the industry.

Try Hamilton.

most of the rest of the world isn't modular design, it's reused antique (over 50yrs, without major update)

ive seen stories of such indoor house building companies starting up here

... cardboard Weetbix box ? ...

That's not shoddy .... bloody luxury , lad ...

... we're living in polystyrene down here in Canterbury !

Modern Japanese houses are a showcase in craftsmanship.

No leaks or creaks or sags, or cheapo veneered particle board.

Modern Japanese houses aren't built by people on a median NZ wage....

Explain your "logic."

Modern Japanese houses are built by typical tradesmen for typical Japanese people.

I'm not talking about mansions for movie stars: These are the normal homes constructed to regular Japanese standards by ordinary Japanese builders, and they usually cost less than the average NZ house, often significantly less. (Certainly much less than an average Auckland house.)

NZ houses are poorly-built from low-quality but over-priced materials by semi-skilled people who simply don't give a f--- even as they charge an absurdly inflated amount for building them.

Really? I was in India last year and our houses seemed pretty good compared to theirs.

India has huge problems with corruption. Every time they do a sweeping change things go ok for 6 - 12 months, then it gets cheaper to bribe someone or take a shortcut to stay on schedule, then it just snowballs as they all want in on it. Doesn't help that everytime they tighten the rules they set it to a theoretically good level which is actually unsustainable in practice, forcing the corruption they're trying to fit. no op-ex.

Utter garbage. One of Japan's more prominent housing companies, Sekisui House, produces the most advanced construction materials on the planet. Secondly, their housing designs are superb. Companies like this are setting the benchmark.

Just because a home can be constructed easily does not mean it is poorly designed and of low-quality materials.

Go read Amalgam's post again where it says kitset houses built by KIWI firms are shite and rejected by Japanese customers because they are shite.

I cannot believe Banks allow them selves to be so ripped off.

Just think what they missed out on by not being the owners of all the Awkland and elsewhere Houses and renting them out to all the beneficial citizens at low interest rates.

They could have cut out the middlemen. Lawyers, Real Estate Agents and Council Officials and owned the building Companies...and built smaller ticky tacky boxes and packed em in like sardines....cutting out the overheads. We could have more immigrants, packed up to the gunnels, no need to spread out into spoiling our fair cities...and leave the Country side lovers in peace.

Jeez what a loss to Society.

What's that you say?...they already do...Oooops....Slave Traders, Mortgage Serfs.....Fiat cars...beholden Holdens....Fiat money... QE, .whatever next.

Talk of supply problems is meaningless unless foreign purchases are stopped or significantly reduced.

I'm tired of reading endless articles which deliberately distract attention from the truth.

Stop foreign investment and there will be no shortfall of housing stock.

Stop the creation of foreign money like surrogates.

Back in 1981 Treasuries totaled $816bn, Agency Securities $324bn, Corporate Bonds $550bn and Muni debt $444bn. TDS ended 1981 at $2.134 TN, or 66% of GDP. At $1.382 TN, Total Equities amounted to 43% of GDP. This put “Total Securities” at $3.516 TN, or 109% of GDP.

Fast-forward to the end of 2014: Treasury Securities had inflated to $12.996 TN; Agency Securities to $7.934 TN; Corporate Bonds to $11.569 TN; and Municipal debt to $3.652 TN. Total Debt Securities grew to $36.152 TN, or 208% of GDP. Total Equities inflated to $36.457 TN, or 209% of GDP. Having inflated almost 2,000% since 1981, Total Securities ended 2014 at $72.608 TN, or an unprecedented 417% of GDP. Read more

HAHAHAHAHA.
"Further, there is a big skill shortage across the whole construction area. More than 35% of workers in the sector leave secondary school with no qualifications, even though some later obtain them. And there is a particular lack of people with strong management and leadership capability."

Tell me tradesman is the de facto project manager/client liason?
Tell of all the contracted tradesmen involved in a house building project, which one is paid the least?
And by what factor (ie is it a significant difference?)

John Key says there is no housing crisis. This guy clearly hasn't got the memo.

john key also says lowering the speed limit wont save people in crashes. must be surrounded by a lot of people with soar necks from all the nodding

... if you recall the olde days when NZ dropped the open road speed limit to 80 km/h we actually had far more road fatalities than we do now ... we topped out around 843 killed on our roads in 1973 ... the figure for 2014 was just 297 , only a tick more than the 246 killed on our roads 84 years previously , in 1930 !

Currently , there are some stretches that need slowing , sure .... but the complete answer to our road toll is a lot more complicated than a simplistic knee jerk reaction of a country wide dropping of the speed limit ...

... and that is analogous to the solving of our property speculation bubble ... it needs a lot more than the simple knee jerk reaction of one the policy that the media is fixated with , the CGT ...

No seatbelts or child restraints, no ABS breaking, no airbags, none of the other myriad of inbuilt safety features in cars, the only reason you might not drink and drive was because you might spill some but even that didn't stop most of us, but of course the only real difference was the speed limit. And it is not countrywide thats being talked of, which would be a bit more involved and time consuming but it needs doing. Take 1B between Taupiri and Cambridge, those are rural service roads with lots of lifestyle blocks off them, no way should that be 100k

... yup , there are some spots that need down-grading ...near me , on the Rangiora/Woodend road it is 100 km/h in an extremely busy spot with one tee-junction , and just 400 metres from it a 5 road junction ...

Every time I head along there I witness at least one near miss ... insane that it's still a 100 km/h stretch !

... but why punish all drivers everywhere , for the faults of a few stupid drivers , and for the incorrect setting of speed limits in particular situations ...

I don't think blanket lowering of the speed limit was what was suggested, it was John Key up to his usual tricks, that made out it was

Yeah, I love it how the cop had explicitly stated that the speed should be lowered on secondary 'back country - winding-roads' and then Key tries to imply that he didn't think lowering the speed on our main-roads would work.

Talk about a straw-man. Can Key answer any question straight without his BS?

Given the sudden surge in road deaths it could be argued the price of petrol (and thus miles travelled) affects the road toll more than any single factor. When most fatalities happen under the posted speed limit then the scope for improvement is limited.

The 80km/h was for fuel savings, not for safety. They couldn't set it much slower because it took too long to get anywhere, so 80 was the compromise.

the cop sujested a whole range of measures based on all they have learnt from country road crashes over the years, wire medium barriers, camber on corners, get rid of the poles by the side of country roads and last speed. as usual he who knows best said it wasnt speed but tired drunk locals crashing

My beef about 100k on a lot of secondary roads is that many of them for various reasons just should not be 100k and reasons vary from topography (Rimutakas for example) and the number of side roads and driveways off them and people using them for other than just driving, like cycling. I also reiterate that I reckon there are plenty of didvided multi lane roads where speed limits could increase

Only institutionalised morons would see that it's a 100 kmh limit and think that means that you shoudl drive at 100 kmh.

Spend too much time playing with paper and health and safety, that without their nanny they can't think. drive to the conditions, take personal responsibility, or get off the planet.

Plenty of morons on the road, you see them in your rear view just about up your tailpipe when you driving under 100k on road unsuited to it, so indeed the limit do need to come down on them, because of those very morons