The number of new homes being built in Auckland is likely to decline by more than 25% over the next two years

The Auckland Region is likely to face a serious decline in the supply of new housing by next summer and it will probably continue to worsen over the next couple of years.

A downturn in residential construction has long been signaled by a decline in the number of new dwelling consents issued in Auckland. But so far that has not translated into fewer homes being built because of the length of time it takes to build a home after a consent has been issued.

A rough rule of thumb is that it takes about two years from the time a dwelling is consented until construction is completed, so the residential buildings being completed now were probably consented around a couple of years ago.

And so far the supply of new homes being completed in Auckland is running hot.

According to the latest figures from Auckland Council, 1728 Code Compliance Certificates were issued for new dwellings in March this year. That's up 14% compared to March last year, and is a record for the month of March.

That should not be a surprise because the Statistics NZ figures show the number of building consents issued for new dwellings in Auckland two years previously, in March 2022, was also a record and the highest number in any month since Statistics NZ began collating the figures in their current format in 1990.

So to get an idea of what is likely to happen with new residential construction in Auckland over the next couple of years, we should look at building consent trends over the last couple of years.

The chart below shows the number of Code Compliance Certificates issued for new dwellings by Auckland Council every month from January 2021 to March 2024 (the blue line).

Code Compliance Certificates (CCCs) are issued when a building is completed and so are the best indicator of new housing supply.

The graph below compares the CCCs issued from January 2021 to March 2024, with the building consents issued in the same month two years previously (the orange line).

So the March 2024 CCC figure is compared to the March 2022 building consent figure.

This shows that both sets of figures follow very similar trends, suggesting the building consent figures of the last two years should provide a reasonable indication of dwelling completions in Auckland over the next two years, as shown by the orange line in the graph.

What this suggests is the number of new homes being completed in Auckland is probably peaking about now, will remain relatively high over the next few months, and by the beginning of summer will probably start a slow but steady decline.

If building consents continue to provide a reasonably reliable indication of future dwelling completions, then the number of new homes being completed in Auckland in two years time could be about 25% lower than it is currently.

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