In a double whammy for tradies looking for work, it is not just the number of new homes being built that is in decline, there are also fewer existing homes receiving major alterations.
Structural alteration work to an existing dwelling requires a building consent from the local council.
Such alterations are more than mere redecorating jobs such as repainting or installing new kitchen cupboards, which some property owners may do themselves, they are structural alterations to the building itself, such as adding a room or another storey, work which would normally require the services of tradies such as builders, electricians, plumbers and so on.
This type of work is a significant source of revenue for the building industry and their suppliers, with the total value of residential alterations consented over the 12 months to the end of January this year coming in at more than $2.3 billion.
However the volume of work has been in decline for the last two years.
The number of consents issued for residential alterations (year to January) peaked at 26,947 in 2022, then declined to 25,550 in 2023 and 24,049 in 2024, a 10.8% drop in two years.
That decline has probably been masked to a degree by the fact that although the volume of jobs has been in decline, their value has kept increasing.
The total value of alteration consents issued has risen from $2.18 billion in the the 12 months to January 2022 to $2.31 billion in the year to January 2024. That's up $130 million, while the average value per consent has increased from $81,010 to $96,161 (+18.7%) over the same period.
So although the volume of work has been in decline, the total revenue being generated form alteration work has kept increasing.
The reasons for the ongoing increase in alteration revenue could be inflationary pressures, with industry costs continuing to rise, and/or the type of alteration work being undertaken becoming more complicated, or a shift towards the higher quality end of the market.
The downturn in alteration work appears to be nationwide, with the number of alteration consents issued declining in all six of the main urban centres (Auckland, Waikato, Bay of Plenty, Wellington Region, Canterbury and Otago) over the 12 months to January this year, while Auckland, Waikato, Wellington and Otago showed declines over two years.
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51 Comments
There is normally a countercyclical swing between building new and renovations.
To have both decline at the same time is not a good sign.
I'm hearing of a lot of renovation projects being canned as soon as the quotes come back, as they are way over budget, and well outside any uplift in capital value that might be gained from the work. Most people are now choosing to simply sell and buy what they want rather than upgrade their home.
Yep, literally having this exact internal discussion with myself right now. Most likely will not proceed with plans.
Had a quote for renovating our 110m2 home to add garage and bedroom with on-site (no change to existing home)
300K + Design and Council Fees + Overrun = 450k This would be for a half renovated 1950s home.
Current value is 1,250,000 + 450,000 = 1,700,000 Value. Estimated value for sale would be 1,500,000 - 1,700,000.
So we decided not to proceed - lots of stress and no upside.
Sold the property for 1,275,000
Purchased 1000m2 section with 220m2 home (fully renovated 4 bedroom, 2 bath with double garage) for 1,850,000
It's a great time to buy at the moment with lots of stock and not many buyers.
You can really find an excellent property and not pay ridiculous money for it. Especially if you're taking a long term view.
Wow! What was the sq metre cost if you don’t mind me asking?
We bought a 3 bedroom house in 2019 with plans to renovate - assuming it would cost us 100k to make the kitchen/lounge open plan and add on another room. In 2021, we were quoted 350k to do that work ! It's better value just to pay more and buy an already renovated property.
We are doomed Captain Mainwaring
Don't panic https://www.youtube.com/watch?v=lI2mCG8trhc
😂
a rather personal question, do you prefer to live in a old villa in town, or do you prefer live in a bigger new build in suburbs?
An old Villa fully renovated/refurbished is a wonderful thing, but they are out of the price range of most, particularly if they are anywhere central. An old unrenovated villa is often a timebomb waiting to go off, that window that is a bit out of square because the piles have sunk a bit and need repacking goes pop as the rot in the corner of the window finally weakens the frame enough for it to fail. This is the start of a $100k chain of renovations.. repiling, replace the rotten window frames (its never just one) with double glazed units with the right look, and as soon as you rip the gib down you find a bit more rot.. and since you've got the gib off may as well insulate and rewire. Ka-ching....
it's just, there isn't such thing called big new build in central city, or it's way overpriced.
Way overpriced? Compared to a fully renovated villa on the same size/quality block of land? Can't say I've tried the comparison but I'd guess they should work out pretty similar, once you allow for ongoing costs of upkeep of the villa.
You need to work on your lingo Pragmatist.
Surely you meant "This original villa is a renovator's dream, and is waiting for you to realise it's potential. Be quick!!"
technically a nightmare is a dream.
An old Villa fully renovated/refurbished is a wonderful thing, but they are out of the price range of most, particularly if they are anywhere central.
Irony is that for all the sought-after villas in central Auckland, cities like Whangarei have always had the Victorian style villa and the California style bungalow. Many of them just as nice or far nicer than what's available in Auckland.
Sure, but they are in Whangārei, which is a backwater. So you need to discount the price to overcome the loss of amenity.. Or the cost of relocating it to land somewhere you actually want to live.
So you need to discount the price to overcome the loss of amenity..
You mean like trendy cafes and restaurants? What are these 'amenities' ye speaketh? If you mean like easier access to TV3 or a PwC office to trade your labor to pay the mortgage, I understand.
The house I currently rent is like this, ancient house, the bathroom door hits the floor tiles in some seasons and it stops latching. Weve had the door adjusted once already in 3months. The conservatory and kitchen tiles grout is all gone and the tiles crack and groan when you walk on them
Well reno'd villa. More maintenance but these are old, native hardwoods that will last if well kept as shown through many earthquakes, and also have such a gorgeous feel to them with the carved skirtings etc. They are a piece of history built from hundreds, if not thousands of years of growth in the timber as well as blood sweat and tears from the builder. You just can't slap the term asset on something like that.
Old villa, but in the country, which is what I already have. Our Wellington house is also an old villa close to the CBD.
We rented a new build in Hawkes Bay for 18 months while between houses and it was horrible - an ugly mix of blocks and fake weatherboard with splitting joints, all the interior finishes were mediocre, there was no style, and despite it meeting building code it was much colder and damper than the Wellington house after we renovated it. The new build was on a concrete slab that never felt like it would warm up, and the windows cried all Winter. Over Summer we boiled. The kitchen was alright, I suppose.
And this was allegedly a "premium" rental, current RV on it is $1.52M.
Things must be getting quieter at the local home improvement store......
I'd say so. Bunnings used give away cardboard boxes for free, now they limit it on boxes you can take, and suggest you buy from the store instead.
A friend tried transferring jobs from Mitre 10 in one city to another due to a planned move. She was told "yep, absolutely, spoke to the manager and they have a position for you". When the time came a couple of months later, no job... This was about 6 months ago.
Searched "Wanaka" on realestate.co.nz today and there are 424 listings, 2 weeks ago this was 370 odd (the search includes Lake Hawea)
We must be at the tipping point now because that is a simply ridiculous amount. Queenstown listings are rising quickly too.
Just wait until July when holiday home owners look to offload.
Is it possible a number of individuals intending to sell when they bought in the first place; https://www.ird.govt.nz/property/buying-and-selling/when-you-need-to-pa….
...may find themselves paying CGT after all?
"The intention rule applies no matter how long you keep the property before selling it. The intention rule also applies before the bright-line property rule, which only applies to residential property sold within certain time periods"
Our Government is strapped for cash after all and more rigid enforcement of the "intent rule" does not constitute new taxation.
The alts data can be quite misleading - far from being "major alterations" a significant number of these are for installation of wood burners, relatively minor changes to plumbing or additions of garages and carports.
Last time I looked 50% were under 40K of value and 33% under $20K.
Great analysis. Love people who ask questions.
Would be interesting if the analysis was Brocken out more by price bracket.
Didn't they also adjust some of the rules so more work could be done without consent?
Just had an interesting experience with a house purchase attempt.
House was in need of some repairs to bring it up to the healthy homes level - fairly typical in a 1970's house. ANZ bank declined the loan application because they considered that the work required on the property didn't represent a sound investment to loan against. The fact that the loan was also being guaranteed by our 2021 built freehold property didn't seem to factor into their calculations.
This looks like a sign of the Banks over reacting to the market, and does not bode well for a real estate recovery.
You were putting up another freehold property as collateral and they still declined? That's absolutely insane...
Meanwhile they will lend 95% to someone on a new build because they have a "salary" which can be taken away the next day. There really is an opportunity for a bank that is prepared to lend on security rather than cashflow, I know which exposure I prefer.
"ANZ bank declined the loan application"
Assuming that you are classified as a non business customer borrower:
a) Which credit criteria of ANZ was not met?
1) debt servicing at the bank's stress test rate
2) Maximum LVR for non owner occupiers (including the amount required for renovation in the loan amount as well as the purchase price in the loan amount in numerator, value of both properties in the denominator)
I suspect that the 2021 built freehold property has fallen in value and the current value is used in the denominator.
If you are classified as a business borrower customer such as property trader, what credit criteria of ANZ was not met?
1) interest coverage
2) maximum LVR
Not happy...? go to another bank...
"People willing to pay $80/hr for an apprentice in steady decline"
We don't even bother to ask for quotes for structural work now - builders seem only to quote in multiples of $10ks and always starting at $50k.
we know a few people who are choosing caravans and cabins in place of extensions now - they simply add extra bedrooms for the oldest child that way. It seems to be way less than 50% of the cost of extending and the cabin can simply be onsold afterwards.
Builders all turning up in late model Ford Ranger Raptors and so on definitely doesnt help their cause anymore btw - i recommend any builders reading (who struggle for biz) to switch to a old rusty van with a sticker on the site with a simple name 'daves builders' and no logo... it tells prospective customers they will have a sharp quote as they watch their costs
Builders all turning up in late model Ford Ranger Raptors and so on definitely doesnt help their cause anymore btw - i recommend any builders reading (who struggle for biz) to switch to a old rusty van with a sticker on the site with a simple name 'daves builders' and no logo...
You have the kind of business smarts I admire. You'd never get this advice from McKinsey.
Made a similar choice myself - instead of adding a bedroom (which I didn't even bother getting a quote for) I had an internal wall installed to divide up a large space to create an extra bedroom. Can easily be taken down later if desired.
I’m at the coal face. I run an electrical and air conditioning business specialising in the residential sector. All trades are not replacing staff when they leave and reluctantly making people redundant. It’s bad enough that new housing tank but also factor in the lack of renovations/additions. It’s slim picking out there for work. It all comes down to the work being too expensive and no one wants to extend their debt. Hard landing incoming.
Realistic price drops impending
Desperate backpedaling from RBNZ impending.
Over in Aussie, looking dire. Water cooler crew even shocked by this.
Award-winning, 50-year-old Canberra construction and management company Project Coordination is in voluntary administration.
Chairman Paul Murphy, 72, described himself as being “devastated’’. He was one of the original employees of Project Coordination when it started in Canberra in 1975.
“The economic and regulatory environment that building companies are working in now is more challenging than any other I’ve experienced in the past 50 years – worse than the recessions in the 1980s and 1990s and the Global Financial Crisis in 2007/2008. Nothing has been as bad as this,’’ he says.
https://citynews.com.au/2024/building-company-crashes-never-thought-wed…
But it’s all fine and dandy here according to some.
It’s starting to get bad.
It’s the beginning of the beginning, not the beginning of the end.
The train is picking up speed and getting ever so closer to the cliff
Buy a new townhouse and keep all your renovation worries away from you, don't get too excited it's max for 10y ;)
And deal with the body corporate....no thanks.
This is what happens when you need to borrow 200k to add 100k to the value of your home
I recently posted about a suburb where there's a huge amount of work in progress and lots more on the way. I even listed them all - I believe I listed 13 reasons why this particular suburb and environs was about to absolutely boom and fortunes made. It's like a golden triangle where huge companies have a stake.
I never got a single thumbs up. Which for a financial website I thought was quite strange, however there does seem to be an undercurrent of socialism here.
Disclosure: I own land there.
Sorry, must’ve missed your original comment. What is your point? And what is the suburb?
My point is that many here disparage investment in property, and obviously hope for a bloodbath involving those with the audacity to chance their arm. More than likely it's never going to happen, but the endless posts here predicting and hoping for a property crash become very tedious indeed. Drive from Kumeu to Waimauku and check out the road works. There's also lots of info on the NZTA website. Drive through Riverhead, there's road-widening on the drawing board and a huge retirement village going in behind the gas station.
https://www.nzta.govt.nz/projects/sh16-brigham-creek-and-waimauku/
The area is Westgate - Kumeu - Riverhead.
Ahh gotcha. There’s always gonna be knockers mate just gotta box on. Huge growth out that western corridor and has been happening for a while. Can’t make land anymore so the longer you hold the better your price! Good luck
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