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No sign of any slowdown in residential construction

No sign of any slowdown in residential construction

The number of new homes being consented is continuing to rise, hitting a 46 year high in the 12 months to the end of October, in spite of the effects of the lockdowns earlier in the year and worries about a subsequent economic slowdown.

According to Statistics NZ, 37,981 new dwellings were consented in the 12 months to the end of October, up 2.8% compared to the previous 12 months.

That was the highest number of new homes consented in any month of the year since February 1974.

The annual rate of increase is likely to rise further, with 3659 dwellings consented in the month of October, up 7.2% compared to October last year.

October was the second month in a row that consents have been at elevated levels.

On an annual basis growth in new dwelling consents was particularly strong in Hawkes Bay, where they were up 53.1% in the 12 months to the end of October compared to the previous 12 months, followed by Taranaki 22.3%, Tasman 18.4%, Canterbury 9.4% and Auckland 5.1%.

However on an annual basis consents were down substantially in Nelson -26.6%, Northland -23.4%, Otago -10.1%, West Coast -9.1%, Bay of Plenty -7.1% and Waikato -3.6%.

The full regional trends are available in the interactive chart below.

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Building consents - residential

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46 Comments

Useful data for working out "shortage " in Auckland would be:

Consents for residential since 2012 (last 9 years)
Pop increase
Number of people in Auckland paying rent v mortgage or owned.
Age profile of those entering Auckland

Don't forget the number of vacant properties in the region, which as per the last estimate was up to 40k (7.3 per cent of all dwellings).

2018 census there were 190,000 un-occupied dwellings NZ wide

Yeah but 25,000 of those were 'residents away on census night' rather than actually empty. 40,000 value is disingenuous and oft-repeated headline IMO. Even of the 15,000 that are left that value includes properties undergoing renovation... Hardly an issue for a property to be substantially renovated if it needs it.

What qualifies as an empty or vacant house? A holiday house? A short term rental i.e. Airbnb? A house in between tenants ? A house in between owners (having been sold and bought waiting for new owner to move in) any permanently empty houses? a new house or apartment that has just been completed and is waiting for a buyer? I'd honestly like to know the criteria?

Unoccupied dwellings that are being repaired or renovated are defined as empty dwellings. Unoccupied baches or holiday homes are also defined as empty dwellings.

Asking $$$ per bedroom. This is the key to making sure we are supplying affordable housing into the market.

I would suggest we are not. A $650K two bedder has a low asking price, but it's not that great in terms of what you actually get.

a lot of what is going on in the market makes little sense economically but one thing can never be defied is supply vs demand - this may be starting to be illustrated in the rental market, I live in lower hutt and have been watching the amount of rental listings for the area, back in mid Oct - there were just 80 properties available for rent, as of this morning , there are 144 listings - a doubling in 6 weeks. Now typically as Wellignton has a high student population , listings do tend to appear at this time of the year (this time last year there were roughly 120 listings) however what is unusual is roughly 10% of the listings are for brand new townhouses that are coming to market, this is just the tip pf the iceberg, looking around lower hutt , there are at least 50 development sites underway - with anywhere between 2 and 30 new townhouses been built on each site) Already a number of landlords have had to slash rental prices (one in Petone (3,1) listed in Mid Oct for rental in early Nov at $850 and is now in Dec still unrented with a weekly rent of $750). Already it looks like there may be an oversupply on rentals occurring in this one market, it doesnt take a genius to figure out that this will favour renters , but more so put pressure on investors who have overextended themselves in buying rentals (at the moment most rentals seem to be selling in the hutt for $800- 950K) and will need increasing rents (not decreasing) to fund their repayments- not just now but for the next 5 years (if they are to avoid the brightline test).

I have to move in the coming weeks (Inner-Southern Auckland).
We've just secured a lease on a large house. $750 p/w.
Did some research -- turns out the place was bought 3 months ago for... $1.9m.
That's below 2% return, before paying for rates ($3500), maintenance and management fees.
(I'm assuming they're buying to land-bank. Have insisted on a fixed-term lease.)

Auckland is the same. Huge amount of building going on. Infill and green fields.Ford rangers and Range Rovers galore. Meanwhile NZ has been losing 2-3 k people per month consistently over the past few months. More houses, less people. NZ Government keen to keep the border closures going Ad infinitum. Tertiary sector being told it will be 2022 before you can expect any fresh international students. Our Covid free status will have us at the back of the queue for vaccinations. Health minister is very vague about the status of our vaccine orders. Not stated if those that can prove vaccination offshore will be allowed in without an MIQ stay.
A negatively geared rental is a shitty asset when you can't find any tenants. If the rest of the world opens up from Q1 next year. Watch all of those newly returned brains drain right back out again for pastures greener. At the same time thousands of home owners on full mortgage deferral will be getting the call from the bank to at least start paying interest again. How many will be able to afford it? FGS do not borrow against your increased home equity to buy a boat for the summer.

Have heard the same re:international students not expected until at least 2022. Have a family member whose work contract was not extended as the intertnational school had to close down because borders won’t be open any time soon.

Expecg a glut of apartment vacancies come January once the lease of this year’s international students expire, and there won’t be many that will be renewed. Landlords will have to make a tough choice of extremely lowering rents, leave property empty, or sell st discounted rate. Either way, they will be out of pocket. The sudden oversupply of apartments will get the ball rolling on the lowering of house prices.

781 rentals available today on the North Shore alone, I think it was 3 weeks ago 645. Renting may become more attractive again.

Family members in Wellington are wanting to buy a character home in a leafy suburb (yes, I've told them all of that! ). They have been beaten numerous times by others paying fabulously stupid money. Interesting to me is that 5 of the ones they recently considered closely or tendered for and missed were listed for rent shortly after at a gross return on capital of 2-3%.

Yep, I've seen the same in trends in LH. Here's one in Fairfield;

https://www.trademe.co.nz/a/property/residential/rent/wellington/lower-h...

Asking $725/week - but according to this site, https://www.calculate.co.nz/rent-affordability-calculator.php

... you'd need a household income of $125,000 for that to be (at the high end of) affordable.

This is good new. Consents are getting up there. About 7.5 houses per 1000 residents for NZ as a whole. Canterbury got up to 11 in 2016 as part of its residential rebuild and that calmed the market. Given a bit more of a ramp up then NZ might see the same in a couple years time? Especially if monetary stimulus is no longer required.

Reforming RMA should take us there soon enough.
Apprentice hiring is up dramatically in the building and engineering space due to high new order volume these employers are facing.

Good news, let's just hope we are building quality housing in a coordinated way with public authorities.

Not altogether sure that 'Quality', Co-ordinated' and 'Public' can all be used in the same sentence.....

I just did, why not? Public building initiative must be coordinated with councils to provide basic services, and of course both must do their jobs properly for this to work.

If you spent as much time as I do inside recently built houses, you will understand that "quality" does not feature at all

We're finally building new houses that cater to a wider market.
Consents for townhouses, apartments and units have shot up in the year to October, now making up 42% of all approvals issued (whopping 60% in Auckland).

This was also somewhat evident in the fact that value of building consents grew at half the volume growth rate (1.4% vs 2.8%).

No surprises. What other industry is there to invest in which comes with a govt and RB guarantee?

What seems to be overlooked is the input costs are higher, even though more is being built.

Land is costing more, building supplies more, forcing prices up more on new builds. Prices rises of sold properties are enough to cover the increase in costs, so the builders are in many cases making less profit.

AND wages are not increasing enough to make up the difference, even when taking into account lower interest costs.

Thus more housing being built and prices increasing.

This still shows a systems imbalance between supply being able to equal demand as needed.

This means the only way prices could come down, considering costs have already been fixed, is for developers to overbuild for affordability and then the developer and/or any late purchasers to wear the loss, ie a classic boom and bust cyclic curve.

The land is still being restricted, otherwise, the price of it would be cheaper.

Right enough. Land prices have been jacked up enough that we can only reach genuine 'affordability' with a fall in prices or an increase in wages.

Targeted tax on unimproved land, particularly building in infrastructure value capture, should help solve that problem.

It was mighty stupid of the government to think they could make new housing more affordable alongside a 'no new tax' promise.

What is easier is to allow the presumptive right of development on all land, except that land, zoned out for elite soils, environmentally sensitive, future infrastructure corridors, etc. This would give a potentially huge surplus of supply at very good prices and would make most of the land bankers who paid vastly higher prices to bring that land to the market at the cheapest price they could before the other cheaper still land came on the market.

This is what jurisdictions do that have truly affordable development land.

Council infrastructure value capture is no more than another revenue grab by the council. The capital cost of infrastructure is what it is, and there is no need to capture anything. Rates cover operating costs.

This is the main issue, - what you and I see as costs that increase the price of housing, others like land bankers and council see as revenue sources. And the best way to leverage that is with restrictive monopoly rules.

Yes, I can't see the Govt. having the ability to 'control' stability, to even allow wages to catch up, which would take 20 to 30 years.

After the Kiwibuild and now the last few months house price increases by them 'tweaking' money supply levers, they must realize that they don't have any real control over how this ends.

The only thing I can see they might be aiming for, is under the guise of a 'Climate Emergency' ie an external problem, is thinking this allows then to make the same drastic changes (but for housing) that the threat of Covid allowed them to make. Knowing that without this external greater common enemy threat, we would never have allowed them to do anything like what they did.

The developer is protected through layers of companies and family trusts. One development can't fully sell for the expected profit margin and the financing deals for all others are at risk. Projects fall over. Subbies get screwed. Bank gets some half finished housed to sell. The developer goes off to lick his wounds and rises like a Phoenix when the market has lost it's institutional memory. Which doesn't take long

Some developers might still get away with that, but banks have tightened up on all that over the years, ie 100% presales, so if the market goes pear-shaped the purchasers still have to settle irrespective if the value of the property has declined. It's easier to sue for specific performance many smaller individuals with equity/cross security in other property than try to get blood out of stone developers.

Homeowners take the full hit first if needed developers take next hit, banks declare record profit for the year, the land banker who has already been paid out earlier buys new anything they want.

Who are buying these over expensive boxes in Auckland that have zero aesthetic, zero privacy & absoloutely zero land? Can we please get a mix of new builds to cater for everyone.

People who see more to life than just owning a big house, perhaps?

Wouldn't mind a slightly smaller home, abit of a garden & privacy...

Try the west coast sth island.

Same in Hamilton, seas of black roofs almost touching each other, no room for any greenery in the form of trees, no place for birdlife. And inside them, white, white, white, not one sign of individuality.
Slums of the future, and given the lack of quality, the not too distant future

Oh and those horrendous synthetic brown "carpets"

What we need is a dashboard that shows the overall shortage/oversupply with associated modelling for population growth, immigration, new builds/demolitions etc. It's too difficult to understand without a full overview of the data.

Ironically what we needed was more houses and a lull of people coming into NZ. I didn't think it would take a construction boom during a pandemic but I'll take it. The unitary plan is working.

Keep an eye on the areas that are showing a decline. In many it is because of land supply constraints.

Once the heat if off around the world and a vaccine is widely available, do not be surprised to see a major exodus of many who are here to escape Covid, people with residencies and citizenships of convenience. Also if we manage put the lid on rorting of immigrants, using them as virtual slave labour, expect fewer to come here to take advantage of our easy going culture.

Don't be so sure. Anecdotally many of my friends came back to NZ at the start of the year but as soon as the world is largely vaccinated they plan on heading straight back as the money over there is far far better. I too will be heading over as I'm at that point in my career (post grad qual w/ a few years work experience under my belt). NZ a place to retire sure but if you're in your working years and the world is vaccinated then NZ isn't attractive at all.

I came back to nz after being away for 20 years for personal reasons in nov 2019 , returned back to oz in October, unless u got serious coin it makes no sense at all from an economic perspective, here in oz my wages are higher and cost of living significantly lower and I just can’t see a stampede of returning kiwis coming back to nz.

A topic on the FB property investors page;

‘I’ve just sold my rental. Settle tomorrow. Bank called and is going to use entire profit towards the mortgage on own home. Help. Can we get lawyers involved...’

Then in the comments sections other people saying the same thing is happening to them. Guess buying the boat with the proceeds of the rental is off the cards for now.

Interesting.

Rookies. This is why people spread their rentals across various banks & don't cross collateralize owner occupied property.

Yeah Nifty 1 Remember Crafer farms? That was their way of operating. Disguise your real liabilaties and keep buying. In the end bankruptcy.

I.O.. makes sense. The banks are probably very worried, as they should be. Their share prices are another indication of how quickly they could face very serious problems. IMO Orr (and the Govt) also recognize this and it is the main driver behind them doing everything possible to (try to?) prevent prices from falling. I think they are fully aware of how easily things could go south.