Auckland's housing crisis starting to ease as supply starts to overtake demand and accumulated housing shortage starts to shrink

Auckland's housing crisis starting to ease as supply starts to overtake demand and accumulated housing shortage starts to shrink

By Greg Ninness

Auckland’s housing crisis may be coming to an end as supply starts to overtake demand.

The latest population growth and dwelling completion figures suggest that the number of new homes being built in Auckland has exceeded the demand created by population growth for the last two years. However housing supply probably remains tight because of the accumulated shortfall in homes being built relative to demand in previous years.

According to Statistics NZ’s latest figures, Auckland’s population increased by 36,900 in the year to June 2020, while the 2018 Census showed that Auckland’s average household occupancy (the average number of people per household) was 2.89.

To maintain that level of occupancy, 12,768 new homes would have needed to be added to Auckland’s housing stock in the 12 months to June 2020. But Auckland Council figures show that 14,353 new dwellings were completed over that period, giving an annual surplus of 1585 homes.

A similar trend was apparent in the 12 months to June 2019, when Auckland’s population grew by 25,700, creating demand for 8892 additional homes. But 10,080 new homes were completed over that period, which gave a surplus of 1188 new homes.

Those figures suggest that over the last two years, the supply of new homes being completed in Auckland has exceeded demand from population growth by 2773. However that would not have been apparent in the market because of the accumulated shortfall in new housing that had built  up in Auckland over previous years, when demand significantly outstripped supply.

That shortfall was substantial.

Interest.co.nz estimates that the annual housing shortfall peaked at 8919 homes in the 12 months to June 2015, than steadily declined to 3434 in the year to June 2018. Over the five years to June 2018 the accumulated shortfall is estimated to have grown to 34,150 homes.

But the tide turned in 2019 when the number of homes being completed started to overtake growth in the population.

That means that although Auckland still has a substantial accumulated shortage of homes built up over many years, the shortage is starting to ease, although it will likely take several years before supply and demand get back into some sort of equilibrium.

Current indications are that the rate at which the accumulated shortfall declines should continue to speed up over the next few years.

New dwelling completions in Auckland are still rising (see graph below) and new dwelling consent numbers are also up strongly, which suggests the number of new homes coming on-stream in Auckland should continue to increase over the next couple of years.

However the demand side of the equation is less certain. According to Statistics NZ, the natural increase (the excess of births over deaths) in Auckland’s population is reasonably stable at about 12,800 a year. But one of the features of the region’s demographics that gets little attention is the fact that more people leave Auckland to live in other parts of the country each year than move to Auckland from elsewhere in New Zealand.

In the 12 months to June this year, Auckland had a net domestic migration loss of 12,600 people, up from 11,800 over the previous 12 months, which all but wiped out the natural increase in the population. That meant the region’s population growth was almost entirely driven by overseas migration patterns, with a net gain of 36,700 people due to external migration in the 12 months to June this year, up strongly from 24,700 in the previous 12 months (see table below).

While the natural increase in Auckland’s population is unlikely to change dramatically in the short term, the outlook for migration, both domestic and international, is far less certain.

But a substantial downturn in migration-driven population growth at a time when housing supply is increasing significantly could put a major dent in the region’s accumulated housing shortage and relieve much of the pressure that has built up in the housing market over the last few years.

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76 Comments

11
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There has never been a housing shortage, just a shortage of affordable housing. That added to the 50K+ closed households debunks easily the myth. Should this be quality housing it is good news nonetheless.

31
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I suppose we will never build enough houses when there is a minority of state-supported investors whose aim is to own 20+ homes to enjoy tax-free gains and early retirement at the misery of the masses.

No politician will admit the problem is state subsidised landlords owning multiple houses and paying no tax! It is called vested interests.

27
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Housing shortage? There never was one. The problem in NZ is a shortage of empathy and an excess of greed.

14
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Yes, the greedy and self entitled who without "equity" would not have the means to acquire additional property surplus to their requirements, displacing first home buyers from ownership and "saving" them from homelessness at the same time.

Children are dying in Sudan as they have no food. I have $3,000 I was going to spend on hiring a campervan to tour NZ. Do I lack empathy and am I greedy if I choose a holiday over donating the money to feed the starving children?

35
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Your comment is not clever. I know you think it is but nobody else does. Perhaps try harder next time to justify the fact that your actions DIRECTLY affect the poorest in society and creates intergenerational problems where kiwi kids live in horrendous conditions and poverty because their parents are trapped renting from the lowest form of humanity, the not so humble speculator/property investor.

13
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Well said, Orrsum. It is high time to call a spade a spade,

Bravo

Pretty much sums up the wolf in sheeps clothing (property investors) situation here in NZ. We need to make it clear who and what they are, what they stand for, and the social/economic issues they are creating but taking no responsibility for.

'I don't pay any tax because I'm a clever property investor, but my tenants receive welfare, paid for by other tax payers, which in turn ends up in my hands via rent and I have no responsibility in dealing with the long term economic and social implications of this distortion/rort'.

15
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Only if you earned that $3000 by overcharging for a basic human need

Is getting a 3% return on a rental property overcharging? If it is the norm, is it overcharging?

3% lol. What about the capital gains

The conversation is not about how you spend some honestly earned money, but how you got this in the first place and whether it required taking advantage of those less privileged.

Your second sentence - contender for comment of the year.

In my view something changed in NZ around 2013 and greed became a stronger motivator than empathy in the typical kiwi. Its only gained momentum from there - to the point that the greed has become manic in the form of FOMO. This is how good quality communities and societies die. And we've witnessed it here in NZ the last 10 years or so.

12
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Without tax reform to restrict house investors and speculators from pouring out money into housing market, I don't think housing crisis will come to a end. Most kiwis are seeing houses as investments now and think housing price will only go up and never come down. If you want money to flow into productive sector, you need to change people's mindsets.

21
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Mr Orr has basically guaranteed that he will only ever let house prices rise. This is so irresponsible I find it hard to comprehend such actions. Now every man and his dog who previously were wary of investing in property want in on the action. Does he seriously have any idea of what his short sighted, infantile actions have created?

Mr Orr does not answer to our Government, or by extension to any of us. The RBNZ is not a democratic institution, given their past record the interests they defend are far from being those of the majority.

17
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100% agree. That's why a land tax offset by lower income tax is the only option. Incent working. Disincent idle debt speculation (banking masters might not like this). Without this change, nothing will change and the gap of have vs have not will continue to grow.

Funny that it's getting worse at a faster pace now there is a back to back Labour govt with a ruling mandate. They are screwing over their core voting block. Actually...not that funny.

And here is me thinking MMP might be providing an unnecessary handbrake or causing inter-party compromises so the full benefit of any policy could not be achieved.

Yet it would look like without an MMP coalition pointing Labour in the right direction - with a self-governing majority, it is rudderless.

10
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An over supply would put an end to the crisis. Investor prices will not remain high if its hard to find someone to live in them. FHB prices will not remain high if there are more houses than people looking. It can all flip around alarmingly quickly, here's hoping!

There is bipartisan consensus in NZ on protecting house prices (National wants relentless demand and Labour underwrites suppliers).

The government of the day will simply use oversupply as an excuse to open up the immigration floodgates and repeal FBB. Easier for INZ to scale up their issuance process than our councils to do the same.

Don't be so sure. There are plenty of places in the world with lots of empty houses (i.e. an oversupply) where the value of those houses has increased. See Vancouver, Sydney, Melbourne, London or the 50-80m empty apartments in China etc etc. Reserve banks of the world propping up house prices...

Exactly, what people forget, is the underlying overinflated price of the land was set/purchased years prior and is baked into the present price, and cannot be made to disappear even if there is a looming oversupply.

For it to disappear the developer would need to wear the loss and they have plenty of ways of first passing on debt to FHB, eg FOMO, lower entry deposits, carrying vendor finance, etc. etc. And the banks will support the developers in loading this debt on to as many small purchasers/borrowers as they can, rather than get caught by one big borrower holding all the debt. It helps spread the risk and homeowners can pay off the negative equity from income over the rest of their life. It's plan C, but it still works.

That can happen through sufficient competition.

Tax reform will not change the mindset, but you are right the mindset needs to change, the government needs to state it will do all it can to make house prices go down, not act to make house prices go up as soon as the seem to be settling down. It is too late for a soft landing in the housing market, a generation will be homeless. I don't know who the government is protecting, banks or property investors, but it needs to stop, its the governments job to protect weak, not help the rich get richer. People need to believe house prices will go down in order for them to go down tax or no tax. As an owner of 2 properties I welcome the reduction in value of my houses I want my children and other people in society to be able to live in there own home, not to feel rich with my over inflated asset, when even the most simple of maintenance like painting it costs $30,000.

As the owner of one house, the house that I live in, I don't see why I should take a long term financial hit on my only-ever-occupied home when people who own more than one could take a bigger share.

It needs to be a whole tax structure change, not just introduction of one tax. Flat tax rate on all sources of income.. you won't have a 'long term financial hit' and not on a basic need such as the house/land you live on (except if you sell at a profit that income is taxed).

The tax you speak of is probably a Financial Transactions Tax

tax reform specifically CGT has not inhibited excessive price rises in residential property in most OECD countries. Its a revenue gathering tool but should be viewed as investment option ballancing exercise although even with a CGT residential investment is still more favourably weighted due to leverage against other properties. Additional tax measures are needed to curb residential property investment as opposed to a owner occupied residential property. Unrealised capital gains come to mind. A similar situation to many shares which are taxed on unrealised capital gains.

Good news. It won't affect prices for some time, though -- not til a substantial number of landlords can't find tenants and are bleeding money faster than their theoretical capital gain. We're not there yet.

19
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What's the bet Labour's already planning on how they can flood the country with immigrants post-COVID to 'stimulate the economy'. We can't have supply outpacing demand, that might lower people's cost of living rather than increasing it!

10
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Lower cost of living?? Sounds like deflation and that must be stopped!!!

You don't have to do anything about living costs, just be 'concerned' about them.

I'll believe it when I start to see nominal house prices falling YoY.

Notice those negative net internal migration figures. Very concerning. That should be positive. Our major city is failing (high houses prices vs income, insufficient infrastructure) and Kiwis are fleeing to the regions as a result.

Clearly the city works for immigrants but not New Zealanders.

This has disastrous ramifications for future productivity growth if we can't make Auckland attractive to New Zealanders.

18
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It is never mentioned but it is the beginning of white flight. Auckland Kiwis no longer feel they are in their own country as their local shops are predominantly run by foreigners with a different language. So they sell up, make a capital gain and move to Tauranga or New Plymouth. Visit London and wonder where are the English people and you will get a glimpse of the future of Auckland.

English are foreigners too. Your descendants came from elsewhere too.
So what if people speak other languages. It shows their multi lingual ability. Can you speak more than one language?

Xenophobe alert!!

I'm sure there is some dreary gated community far away where the karens and Keiths can roam, rant and ruminate in bland isolation.

Ok well unless you live in Ethiopia - your descendants came from elsewhere. Classic response to anyone who complains about high levels of immigration - shout Xenophobe. BTW Ptamanz have you ever wondered why you don't live overseas? Maybe you are a Xenophobe!

You are the one that mentioned white flight and 'auckland kiwis'. Pakeha? Kiwis can be descendents of many races. It's you that has the xenophobic tendencies. Gee. Just admit your prejudices.

There's been net negative internal migration from Auckland since 2016. I must know a dozen "Auckland refugees" who've cashed up their house and escaped the traffic and overcrowding. Some also don't like the demographic changes.

Since 2016? Try since 2001, possibly since the 1996 (both are census years).

Should we do an Ireland - ramp up the building/supply while people decide to leave because its too expensive to live here?

Tens of thousands of victims of the 2008 Irish property crash found asylum in the Aussie building sector, most quoting high property prices and cyclical construction market as reasons to not return to their homeland.

So to answer your question - looks like Ireland has been doing an NZ for almost a decade.

https://www.irishtimes.com/life-and-style/abroad/ireland-or-australia-th...

Now there's a headline I didn't think I would read in my lifetime

A few things that do not add up here, to me.
Firstly, pop increase does not have to mean need for more housing.
Pop rising includes lots of kids and they may not need another bigger house?
Secondly, average is highly misleading.
Pop of Auckland aged over 65 compared to under 15, according to Auckland CC figures, is rising 7 times faster.
These older folk live in single person or dual person households
Thirdly, immigration is primarily of people aged under 40 into Auckland.
Impact on housing "shortage" and also on house prices from "demand" is v questionable therefore.
Also there is key question of WHAT housing is Auckland short of?
As Shamubeel Eaqub said this week, we are building lots of houses of 4-5 beds for rich people and sod all for people who need good quality rentals of 3 beds for larger families.

"we are building lots of houses of 4-5 beds for rich people and sod all for people who need good quality rentals of 3 beds for larger families."
I would suggest covenants have a major factor in this and insufficient margin in building houses in the 100-150m2 bracket. My daughter lives in Akl in a 100m2 house with only one child and spouse. Garage is about 40m2 extra. 150m2 is quite adequate for a family of 5 and could even go to 7 at a squeeze. I view anything above 200m2 including a garage as a mansion.

14
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Dont worry. Once the borders open up the nonsensical mass immigration policies will return.

It's pretty clear the government is keen to open the door to 'high value' migrants so businesses don't have to pay skilled Kiwis what it costs to live in Auckland.

Yes, high value people like fishermen and fruitpickers. Even sheep shearers apparently need to come in!

Davo..Yeah, saw that poor old English lady on TV complaining she "could not find skilled workers" for her food truck in Wanaka. Wonder how many Wanaka based migrants just signed up for the free unemployment money we are generously and needlessly throwing at them.
Not to mention we have a serious shortage of highly skilled liquor store employees. In some other countries there is a strict and publicly available list of specific jobs foreigners are permitted to do (with huge penalties for businesses who transgress and immediate deportation and lifetime ban for migrants who flout the law). We need the same.

No labour supply shortage as long as the pay and cost/quality of living in Auckland remains somewhat better than in Mumbai, Shanghai or Manila.
Nothing against people from these locations: plenty of gifted individuals leave those locations for greener pastures every year but we aren't interested in attracting them over here.

Our immigration settings would rather allow businesses to scrape the bottom of the barrel for 'skills' instead. For example, INZ has issued more work visas to ICT support workers since July 2020 than to software engineers and ICT business analysts combined.
So much for not letting a crisis go to waste!

I squeezed in to NZ 17 years ago as an experienced programmer/analyst with some special skills. It was clear in 2017 that INZ didn't know anything about computing. Seems like nothing has changed. It is embarrassing.

Under national certainly.

Labour not doing too badly. immigration policy called Covids

Supply demand immigration more land less red tape.

All is just a distraction, we have capital asset bubbles built on increasingly cheaper lines of Credit.

And we can't turn these credit lines off as we are addicted to the GDP growth it facilitates.

Soooo we going to keep on lowering rates indefinitely?

What's the plan?

- Big reset once rates need to go up (remember the trigger for the gfc)

- Continued disenfranchisement of the lower / middle class leading to extreme popularist political movement?

Read up on basically every major revolution in the past 1000 years and there are consistant themes:

- disenfranchisement with ruling classes and political systems
- unbalanced tax policies
- conditions that promote unbalanced wealth distribution

and all completely avoidable if leaders had the courage to make hard decisions earlier, rather than kick the can down the road.

We need to spend less borrowed money on pretty houses and more on figuring out climate change and fossil fuel dependance.

Interesting eh - I tend to agree. I read the book by Adam Zamoyski on Napoleon (https://www.amazon.com/Napoleon-Life-Adam-Zamoyski/dp/0465055931) a few years ago. Had a reasonably long section on the revolution there - motivating factors etc. And I couldn't help but think that the landlording class in NZ are at risk of being completely hated by other members of society, to the point that I don't know how long it will be tolerated - yet they don't see that (yet)....Its the ignorance of those that have, to the suffering of those that do not, that ultimately leads to their demise.

At risk?? I think that ship has well and truly sailed.

Its not conscious in the populous yet....but the enlightenment is happening (in my view). Some are aware of it but not the majority. When that happens, I wouldn't want to be a landlord!

Anchors away, then!

Maybe it's time for the pressure to be ramped up on residential landlords in terms of PR.

A media campaign to shame them as useless leeches, revealing that their success comes from no actual investment acumen, just the application of leverage on a scarce asset and the tailwind of demographics, supply and interest rates. Unlike other investments, it is a zero sum game and the landlord is destroying society by stealth.

do we know that the gain in housing completion is net, i.e. that houses that are demolished to make way for 1 or 2 new ones is taken off the figure?

One thing this is missing is taking into account demolished buildings, so using a net change in stock, rather than count of completed new builds.

If they used a build rate per 1,000 existing houses. then it is relatively easy to work out as the replacement ratio is about 3 per 1,000 so anything above this is adding to supply.

A heap of sh*t boxes and ridiculous prices. Nice.

‘’Property investors’’ are social leaches. Returning to NZ in November after spending 20yrs overseas my first observation is that the obsession with multiple house ownership as a form of ‘’investment’’ here is nothing short of a cultural illness.
When I see a media article about a 25yr old who owns 3 houses and is held up to be some kind of commercial ‘’hero’’ success story it underlines just how sick the societal belief system has become. Is this really something we should ‘’value’’? https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=123...
How about applauding a 25yr old that saves his money, works hard and creates actual value – ie what about investing in house building? This creates employment and more housing which are both needed.
Let’s be honest, if someone buys 3 houses they do so to enable someone else to pay their mortgage and to capture capital gains & to become wealthy from it. That essentially means 2 families missing out on the possibility to capture that value themselves as house prices are pushed higher by so called ‘’property investors’’. When you consider the household savings rate in NZ is -0.3% ie we are spending more than we earn (https://www.rbnz.govt.nz/statistics/m6) then most likely when these people who are renting retire they will have limited savings and assets. They potentially become a burden to the state, homelessness, drug abuse, lawlessness – this is the potential result.
Yet for the ‘’property investors’’ who have purchased multiple houses they now spend their time justifying why and how they are doing a great job for society because people need to rent. Let’s be clear they do this to make money and it prevents that wealth from being distributed to others, most likely the lower socio economic part of society that is becoming an ever larger group who are forced to rent because they cannot afford to buy a house any more. These ‘’property investors’’ in my opinion are the LEACHES of NZ society, hard work and investment shouldn’t default into owning multiple houses at the expense of the broader society we all live in. https://www.stuff.co.nz/life-style/homed/real-estate/119511533/crackdown...
Putting up with these property leaches is one thing, but parading them in the media as being successful & aspirational is sickening when they are in reality selfishly accumulating wealth without creating any value and adding to a rapidly growing social dysfunction.
If Jacinda wanted to be remembered for anything other than a good communicator in a time of crisis, then now is her chance – step in with taxpayer funds and keep up the rate of residential housing being built as it inevitably declines in the coming months. Sell these house at cost and enable ‘’normal’’ people a chance to own their own home and to build up an asset for retirement. And whilst you’re at it tax the heck out of people who own multiple residential houses.
https://thespinoff.co.nz/society/nzier/01-05-2020/whats-up-with-new-zeal...

Great to see some other people are starting to see this for what it is - like you I came back to NZ from the USA after watching their property bubble explode about 10 years ago to watch NZ turn into a bunch of self absorbed narcissists who only cared about the price of their house and how many of them they owned. Its insanity and it destroys the quality of societies.

Something I have been warning of for years. I was in real estate when the rentier culture had it's genesis. I knew it was a bad path then, and nothing has happened to change my mind since.
Thanks Robert Kiyosaki and co

I agree. Lets round up all the poor people, and put them in 20 story cheaply constructed apartment blocks, where the lift breaks down after a year or two, and nobody can be bothered to clean up the daily graffiti. If they complain, you can tell them "you could have rented a nice detached house and garden in the suburbs, but the socialists took that option away from you because living in a cheap housing ghetto is in your best interests".

Just remember that foreign buyers are still allowed to buy up to 60% of residential developments, and while some are not permitted to live in the property, they do not have to sell it. Ideal for all those Chinese buyers who prefer to leave their property investments empty. How many "ghost" apartments are being built?

Having lived overseas for many years I have heard that NZ renters are a little hard on the property. So its a no brainer to sit on an asset that's making you 10-20% with no hassles. The Chinese and anyone else who invests in another country are not stupid. Plus the rental rates are pitiful compared to ROI. Here in the states renters seem to be considerate and look after the property and we get around 10% ROI annually. That would be the equivalent of an Aucklander paying $100k/annum for renting a median sized house. I love hearing the stories about how "high" rents are. Wait till the interest rates go up. But I suspect prices will come down and rents will remain about the same.

Something doesn't add up. The total housing shortfall is around 30000 according to these stats. At the average occupation rate, that means about 90000 people's homes. But the number of homeless people in Auckland is 20000.
So what exactly does the shortage mean?

As JA mentioned the only way to deal with the housing crisis is the 'supply' as pointed out in this article.. the supply is creeping out to overcome demand. We don't want any price correction as like across the ditch right? - remember, any little correction in NZ, will run the potential spooking the dominoes or house of cards.
Here's why we have to support/request RBNZ, to ease their FLPs into housing, keep the lid on LVR despite govt. request letter, after all Banks are now can be seen prudent enough to do it themselves. What RBNZ need to do is to quickly implement the negative OCR, and govt. balance it by removing bright line test & continue flexi subsidy for at least 24-48months, if possible to anticipate rental increases, increase the amount of flexi wages subsidy as well. With these, the feel good economic prognosis can be maintained thus RE part.

The vested interest that Governments in New Zealand have neglected for 30 years are Median Income Families and helping them buy a family home.Kiwi Saver came one generation too late. Baby Boomers were incentivized to take away 40% of Auckland's singe family homes from owner occupiers. In countries like the US that would never happen. Firstly, their baby boomer since 1970 were incentivized into IRA's&401k's by exempting any tax being paid on their up to 15% annual contributions, followed by no taxes on the growth of their stocks and bonds in their Kiwisaver like Retirement Portfolio. Add to that Renting a Single Family Home would change its status and draw higher rates, and then Capital Gain Tax at the end, whereas the Family purchasing a family home gains the benefit of buying at 5% deposit(2% if a Veteran), and then tax savings in the form of deducting from total earned income the annual amount of property taxes and mortgage interest. . Hence for tax purposes a $100,000 gross income could become $80,000 net income for tax purposes. Add in Mortgage Insurance offered by Govt to insure the Banks don't suffer with less than 20% down payments and you a have a very proactive Government that keeps Single Family Homes in Families hands and not investors. Do that and you have a very different Auckland--right now that $90k to $100k Median Family with 2 kids is condemned to paying a Landlord $30k for a place to live.

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