Waikato and Bay of Plenty should be at the top of the list for property investors chasing growth with Taranaki, West Coast and Southland at the bottom, Greg Ninness says

Waikato and Bay of Plenty should be at the top of the list for property investors chasing growth with Taranaki, West Coast and Southland at the bottom, Greg Ninness says

By Greg Ninness

The housing shortage may be far worse in several regions than it is in Auckland, the latest census data suggests.

Interest.co.nz compared population and dwelling data from the 2018 Census with the same data from the 2013 Census to get an estimate of how much population growth had exceeded the supply of dwellings in all regions of the country over that five year period.

The results were surprising.

They showed that while Auckland had the biggest shortfall in the supply of homes in terms of absolute numbers, when adjusted to allow for differences in the scale of regional markets, the housing shortfall was greatest in Northland, Marlborough, Bay of Plenty, Gisborne and Waikato, suggesting those regions are likely to be facing the biggest squeeze in their housing markets.

At the 2013 Census this country had a usually resident population of 4,241,448 people and 1,747,077 dwellings, giving an average occupancy of 2.4 people per dwelling.

At the 2018 Census the usually resident population had increased to 4,699,089 people, which would have required 188,505 additional dwellings to keep average occupancy at the same level as 2013.

But the number of additional dwellings recorded in the 2018 Census was just 108,549, leaving a national shortfall of 79,956 dwellings throughout the country, equivalent to 4.3% of total housing stock.

In Auckland the estimated shortfall between the two censuses was 22,980 dwellings, easily the biggest in the country. But because the Auckland market is so large that was just 4.3% of its total dwellings, exactly the same as the whole of New Zealand.

The table below shows the size of the estimated housing shortfall between the 2013 and 2018 census, both in the actual number of homes and as a percentage of total dwellings in each region. The higher the percentage, the greater the shortage of housing is likely to be. By that measure, the housing shortage should be greatest in Northland where it was short by 9.2% of the region's total housing stock, followed by Marlborough at 7.8%.

Those numbers should be of interest to residential property investors because areas with the biggest shortages of housing are also likely to be the areas with the biggest potential for growth in rental income and capital gains. So Northland and Marlborough could be happy hunting grounds for potential investors chasing growth.

However the relatively small size of those regions' housing markets can bring their own problems. It only takes a small movement in the number of people arriving in or leaving from such a market, or in the number of homes being built, to change those numbers. In smaller markets, today's housing shortage could fairly quickly turn into tomorrow's surplus, so investors should weigh-up potential volatility.

A better bet might be the Bay of Plenty (6.6% shortfall) and Waikato (5.2% shortfall). They both show dwelling shortfalls that are greater than Auckland's, have good prospects for further growth and a reasonably good sized market that's less likely to be subject to extreme movements in supply and demand.

Regions that don't look so promising are Taranaki and Southland where the supply of housing appears to have come much closer to keeping up with growth in population, and the West Coast where the population declined between the 2013 and 2018 censuses, which wouldn't have helped landlords in the region.

Estimated Accrued Housing Shortfall between 2013 and 2018 Censuses
Region Housing Shortfall Shortfall as % of total housing
Northland Region         7,307 9.2%
Auckland Region      22,980 4.3%
Waikato Region      10,178 5.2%
Bay of Plenty Region         8,329 6.6%
Gisborne Region         1,077 5.8%
Hawke's Bay Region         4,220 6.4%
Taranaki Region            982 2.0%
Manawatu-Wanganui          4,118 4.0%
Wellington Region         5,744 2.9%
Total, North Island      63,823 4.6%
     
South Island    
Tasman Region            659 2.9%
Nelson Region            715 3.4%
Marlborough Region         1,730 7.8%
West Coast Region    
Canterbury Region         9,983 4.0%
Otago Region         2,650 2.6%
Southland Region            490 1.1%
Total, South Island      15,738 3.3%
     
Total All Regions      79,956 4.3%
     
Total ex-Auckland      56,693 4.3%

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?

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13
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meanwhile we have politicians from both the main parties holding the doors open as wide as they can for growth,

What do you expect when they employ yes people for guidance, and pamper only to those that give them donations.

We have flawed planning rules, which need a big shake up. Supermarkets and offices require a certain amount of carparks to function efficiently.

If large scale horticulture or tourism businesses want employees, surely they should have to provide appropriate accommodation also. Put the onus on the land devel.

I worked in the skifields overseas, and the resorts had to provide worker accommodation. Why place temporary accommodation requirements back on the system, which is struggling to create enough accommodation for the local and permanent residents as it is?

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Which is why the new foreign worker scheme is including requirements for worker accomodation if you want to certified to participate in it. Which makes me really mad at the likes of Zespri who in the BOP, conveniently turn their head the otherway and lay it all at the feet of their contractors who have been found highly culpable of worker exploitation. Meanwhile theres no housing for permanent citizens because hundreds of orchard workers have moved into the area, but at least Zespri and the orchard owners are making money.

I guess with all those additional taxes and rates coming in from increased economic activity in the area, local bodies and the central government should respond immediately with more housing solutions to keep the industry growing.

Unfortunately, these bureaucrats don't snap into action until the glitch doesn't turn into a full-blown crisis.

local bodies and the central government should respond immediately with more housing solutions to keep the industry growing.

What? The industry wants to import workers...and now folk are asking for more subsidies for the industry in the form of infrastructure?

now folk are asking for more subsidies for the industry in the form of infrastructure?

What subsidy? Isn't infrastructure investment a key reason companies pay taxes.
What you're saying is that it's all good when the government rakes billion in tax dollars from 'export' industries such as education, horticulture, dairy, tourism etc. but it's not okay for them to demand better infrastructure outcomes in return.

I never said the government needs to erect those houses but at least a proactive approach towards freeing up capital, land and workers would be appreciated. For example, instead of endorsing cheap business courses to international students, why not incentivise construction trade qualifications? How great would it be if foreign students pay 30-40k towards a diploma that could actually be of good use to the country?

You do have a point there and using BOP as a succinct example, I was part of a very concerned group of National supporters who literally kicked the door in on Bridges office as the gfc began to create some serious difficulty in that regions construction sector. We suggested something akin to kiwibuild to keep the virtually collapsed housing and commercial construction sector afloat as virtually all activity was at a standstill and tradespeople were fleeing elsewhere for work. All that happened was tumbleweeds. I suspect the party was so busy persecuting beneficiaries they forgot to support those of us who actually provide the employment.... Eventually the eastern link RONS project got started but it was a couple of years before anything happened there and by that stage a deep, protracted and avoidable recession had badly damaged the bay economy. When the asian buyer influx triggered a wave of moneyed up Aucklanders to move down to Tga and surrounds the construction industry was swamped and couldn't cope, still can't. If a programme to keep tradesmen in country had been set up quickly following the gfc instead of doing nothing, we'd be much better off now, in every aspect, I'm convinced of that.

Additional taxes? Kiwifruit contractors are notorious for not bothering with pifiling things like paying taxes. Even if they did why is it the bureaucrats problem.

Waikato eh .... I know some fh buyers and investors have already realised what is available in areas others than Auckland. Time will tell whether they continue to outperform. Very good insightful report from your interest.co.nz team cheers.

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'Property investors chasing growth' are a direct cause of poverty and homelessness. Cause and effect are straightforward and well-attested. Bidding up house prices and rental yields puts many people on the breadline and others on the street. It's a hell of an economy that sees regional communities merely as prey.

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And what's most important is that we not dare tax the tax-free unearned income from these properties! That would be truly horrid, nevermind these slight effects on wider society.

I think Greg meant to say 'Kind hearted philanthropists looking to support those unable to afford mortgages'

So this is all based upon the premise that the occupancy level should stay the same?

such a primitive way of reporting..

the houses built in Auckland between 2013 and 2018 increased in size, which enables higher occupancy rate..

and based on the 2018 census, Auckland had a occupancy rate of 3... so the above numbers are reported for the purpose of speculation..

"But the number of additional dwellings recorded in the 2018 Census was just 108,549, leaving a national shortfall of 79,956 dwellings throughout the country, equivalent to 4.3% of total housing stock."

How about that empty homes tax ?

What about more building...council has shown an appetite to free up the planning rules but more is needed

Supply-demand-price always balances, so there's never any 'shortage' as that's already priced in and is the reason the price sits where it sits on the curve in the first place! I.e don't buy BOP thinking there's a shortage that markets over last 7 years haven't reflected in higher prices. Duh.

Just to highlight, that Grendel & Simon are talking about different types of supply and demand.

1) Grendel is referring to underlying supply vs underlying demand.
2) Simon is referring to effective supply vs effective demand.

Each demand vs supply metric above has their own specific purpose. One is useful for town planning purposes, whilst the other is useful for developing future property price expectations. That is why there can be an underlying housing shortage whilst at the same time there can be an effective housing oversupply (as evidenced by longer days to sell, a buyers market, sales by cashflow stressed property owners, mortgagee sales by receivers of property developers)

The article that Greg has written is referring to underlying supply vs underlying demand & assumes 2.4 people per dwelling.

Correct.

Hence don't speculate using the numbers in this article- but useful for town planners.

Had a long discussion with Tony A over this distinction, think you explained it well

That misunderstanding caused a lot of financial misery.

Saw a lot of underlying supply vs underlying demand shortage house numbers quoted in many markets which justified a lot of property buying by owner occupiers and non owner occupiers. Then property prices collapsed, and many with high leverage faced financial stress.

Refer this analysis of the US market prior to the property price fall - https://www.macrobusiness.com.au/2011/05/us-housing-what-happened-to-the...

"Housing shortage may be far worse in several regions than it is in Auckland...". I've just been in Christchurch (from Auckland) and I've seen places what've been on the market for months and months (one overpriced apartment since beginning of the year), with a lot still being built. We can't ignore what's really happening on the ground in quite a few places. Not exactly selling fast in Auckland, either.

I'm not sure why the stories of OVER supply aren't being covered. Up in Weiti Bay a developer has just had 29 sections put up for sale by their bank. Phase 1 buyers, still yet to develop their plots are now competing with a morgagee sale to exit their 'investments'. In Hobsonville there are tons of empty new builds and developers offering discounts to offload. There is a myth of a housing shortage which is not backed up by reality.

Yes there will be properties that sit on the market for a long time, as they are not what people want and/or overpriced.
There are a lot of cheap apartments being built in Christchurch without garages or onsite parking, which are going to be absolute lemons for the buyers of them, in the future.
However, any well presented property and well priced property is selling no problem at all.
Christchurch prices have remained steady with small increase for several years due to the fact that there is no shortage.
There has been thousands of new homes built, but reality is that when the building dries up prices will rise significantly.
However the steady prices is just fine for property investors as yields are significantly higher than average.

I'm hearing a lot of stories about people getting laid off in CC and having no choice but to relocate North now that the earthquake building works are finishing

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