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More multi-unit dwellings than stand-alone houses consented in a 12-month period for the first time as the number of new homes being consented goes through the roof

Property / news
More multi-unit dwellings than stand-alone houses consented in a 12-month period for the first time as the number of new homes being consented goes through the roof

The number of new homes being consented shows no sign of slowing down in spite of the prevailing economic uncertainties.

A record 5303 new dwellings were consented in March this year. That's the highest ever for any month of the year, and is up 26% on March last year, according to Statistics NZ.

Consents are also running at record levels on an annual basis.

In the 12 months to the end of March, a record 50,858 new dwellings were consented, up 24% compared to the previous 12 months.

That was the first time the number of homes consented had passed 50,000 in any 12-month period.

March also marked an important milestone in the type of dwellings being consented.

Over the year to March, 25,475 multi unit homes such as townhouses, apartments, home units and retirement village units were consented, overtaking the 25,383 stand-alone houses that were consented in the same period.

This is the first time more multi-unit dwellings than stand-alone houses have been consented in any 12-month period.

The growth in the number of new homes being consented has been particularly strong in the main centres, with the number of homes consented in March up 43% in Auckland, 58% in the Wellington Region, 35% in Canterbury and 31% in Otago.

There was also $2.469 billion of residential alteration work consented in the 12 months to March, up 22% on the previous year.

The total value of all residential building work consented in the 12 months to March this year was $22.157 billion, up 28.9% on the previous 12 months.

The interactive charts below track the number of new dwellings consented in each region of New Zealand each month, and the types of dwellings consented each month.

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Building consents - residential

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#issued in the Waikato
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#issued in Hawkes Bay
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# Nelson
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# Westand
#issued in Canterbury
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Building consents - type

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37 Comments

The ingredients for the perfect storm.. Inflation on materials still rising, consent hitting all time highs, sales at all time lows.. 

More articles like this to come

https://www.nzherald.co.nz/business/ebert-constructions-95-staff-face-u…

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15

Agreed!

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Agreed x 2

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Those 95 staff will walk into a job the day after they leave. Its construction.

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The article is from 2018.

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There's a significant time lag between doing all your plans and getting your pre-construction ducks lined up, and getting consent.

There's a further lag between getting consent, and completing a building.

Everyone loves a good anecdote, in the circles I bump into, there's swathes of consented homes being paused or cancelled that won't be breaking ground anytime soon. If a new home is a million bucks the cost to finance it has increased by near on 40 grand a year, and it'll be 18 months before you get it.

We in for a bumpy ride kids.

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16

I'm interested, what happens to those projects that get consented and never get off the ground?  Presumably they have developable land but if its uneconomical to build (due to falling prices, and rising costs) presumably the value of that land will take a sizable hit?

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4

Usually most of them will sit till circumstances improve.

It'll help the government build their own housing stocks up.

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This is what the gov't should do. Wait until the developers are desperate and then buy consented sites. It'll take a while - there'll probably be less pressure on construction labour + materials prices by then too.

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Haha that’s a good one.

The govt isn’t anywhere near that savvy. And it’s also far too ideological. All of the government’s housing needs to be much larger than the typical market equivalent, allow for wheelchairs, as well as a passage for a taniwha.

the govt won’t be able to save the sector

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12

So what you are saying is Govt. should set policies that help cause private businesses to fail so they can buy them on the cheap?

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If we can be certain that labour will win the election then the value of consented sites goes up significantly (circa 47%) relative to existing dwellings ($1,000,000 cost x 0.06 interest rate x 20 years of tax deductibility of interest x 0.39 tax rate = 468,000 of after tax credits).

As interest rates rise the value of the 20 years of tax deductibility of interest does as well. As soon as you build you start running down that 20 years so holding as land is better for now. At present this extra value is discounted based on the number of post construction years that labour is expected to remain in power. The irony is that if national commit to not repealing the tax deductibility of interest changes the whole 47% added value would get built into the price of vacant lots within a few months.

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Its land banking if the land is paid for.

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I suspect this is the backlog of applications made months and months ago. The front end sales of either developable sites or new build units has absolutely cratered

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4

We have been hearing of more and more pressure on developers (rising costs, falling house prices and supply constraints).  Yet consents continue to rise.  Id be interested to hear the thoughts of people more knowledgeable about the construction industry, as I find the rising consents confusing given the wider context.

My only guess here is that consents are still rising as the land purchase has already occurred and is a sunk cost, so they need to follow through to recover those costs.

I'm also assuming land prices will take an outsized hit if current trends continue.  If the price purchasers are able/willing to pay falls, and the cost of construction rises, then the price a developer will be willing to pay for land would presumably fall much faster.

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As above, consents are only part of a chain. They're telling us how positive things were 6-12 months ago.

I predict a rise in cheaper sections with plans available hitting the market in 2022.

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Thanks, appreciate the info.  I guess my assumptions were not too far off the mark.

 

Interesting times indeed.

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Since 2018, we saw a sudden spike in new development activity in my neighbourhood with builders banding together to buy up old houses on big pieces of land, demolish the structures and erect townhouses in close proximity on the land.

Since March this year, we're seeing numerous listings of such old homes with "consented projects" on the market. So yes, consents are at best a lagging indicator of supplier confidence.

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Lagging indicator indeed.

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In our case, we bought 2 years ago and have been waiting months for consents already (it's a debacle, we get building consent that relies on resource consent because we are moving a tiny bit of dirt, but resource consent is dragging on slooowwwwlllyyy).  We were confident (as were our builders) of being in a finished building by Jan this year... but it's probably 1-2 years away now.  So around 4 years to build a house... reasons are due to everything along the process jamming up, took 6 months for an engineer to look at it, similar for draughtsperson, consenting company took 4 months to look at it... etc etc. And that's before any building has taken place.

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I am a broken record but this data means diddly squat right now.

Building consent timeframes are really drawn out, for many of those March approvals the applications would have been made in mid-late 2021 when sentiment was far less glum. 
And if you are 50-70% of the way through a consent process, you may as well see it out to approval as you have sunk most of your cost already.

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9

Watch out for the surge of "Motivated seller, develop your dream with this fully consented site" listings?

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10

Yep exactly 

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Am seeing some people worried about having put a deposit on a build only to be facing losing their finance approval. Rough times. That would leave the builder holding a build the marketable price of which may be falling.

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When they can't print money to find their way out of a crisis, the government of the day usually switches over to printing visas. I doubt its going to help ease the pain that's yet to come.

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Bit of a lack of alternatives in parliament too, with National and Labour having become one and the same on these issues.

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The price-of-land might need to come down.. one way or another..

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7

Asking the question again (because I wouldn't know where to look)

But are delayed builds (delayed materials etc) giving (m)any purchasers an out by using the sunset clauses that have been used by developers to bump up the 'real' purchase price in recent times?

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housing new zealand moving the needle

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I've personally got two consents that are included in this latest March figures. One is a new house another a unit. Both were submitted back in April 2021. Go figure!

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The housing market is going downhill with no breaks. These people developer’s would be crazy to put more money into building when market is already flooded more defaults will be coming sending house price’s spiralling down.

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NZ needs to keep up these consents and importantly, the build of these different types of housing all the way through to completion; alongside the needed infrastructure, businesses, schools and new communities as the population of NZ increases over the medium (3 years+) to long-term with the transitioning through/out of Covid-19 disruption.

 

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This is what I mean by our supply and demand cycles now being countercyclical due to screwed-up Govt. land use and housing policy.

Just as the demand is reducing, supply that started to be organized up to three years ago is now just coming to market. In a typical countercyclical fashion, as one is decreasing and the other is increasing, there is a small moment in time when the market is in balance. 

In jurisdictions that have correct land-use policies, both supply and demand variables can react very quickly to each other, and the market cycles lie almost on top of each other, both on the way up, and the way down.

Thus the market is always in balance, with house prices being both stable (even though still cyclic in supply and demand) and very affordable (3 to 5 x median income multiple).

 

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Like what happened in Christchurch after the earthquakes.  There were big numbers thrown about on how many houses needed to be built/replaced, but it became a drag race on who could build and sell the replacements the fastest.  Suspect very little discussions were had around strategy.  

Then there was the overshoot.  Now developers are drip feeding sections.  

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It's been quiet on the design side for all of April.  Some projects I priced for were cancelled (I usually have a high rate of acceptance).  While May is picking up a bit there will be a slow down in 6-12 months.  Difficult to say which direction the design work will go but the combination of interest rates and supply issues with construction materials is putting people off even looking at starting a construction project.

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Crazy numbers new consent numbers at an inflationary time when interest rates are rising. In with House Mouse on that one, it won't end well.

I have a friend who just finished developing 62 apartments,  he did well. I told him I was very concerned about the timing of his next project of 82 new apartments, he still wants to go ahead, developing is what he does...

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Being a former architect and therefore having been involved in the development sector, like me you will have no doubt experienced the booms and busts of residential property  development, Yvil.

NZ may not really have had a house price crash before, but we've certainly had several residential development crashes! 

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