Residential construction in Auckland on a slow but steady slide

Property / news

The number of new homes being built in Auckland is slowly declining from last year's peak

22nd Jul 24, 12:09pm by Greg Ninness

The number of new homes being completed in Auckland remains relatively steady, after dropping down from its peak late last year.

Auckland Council issued 1683 Code Compliance Certificates in May. That's up 12% compared to May last year, but down from the peak of more than 1900 a month in each of the three months from September to November last year.

Code Compliance Certificates are issued when a building is completed so are the best indication of new housing supply, unlike building consents which are issued before construction starts, so are an indication of future supply.

The latest figures show the depth of residential construction in Auckland over the last 18 months. With 19,560 dwellings completed in the 12 months to May, this was up 32% compared to the 12 months to May 2023, and an all time record for any 12 month period.

However, the number of dwelling consents issued in Auckland has been steadily declining for two years. This means fewer new homes are being started as existing projects are completed, suggesting Auckland's residential construction industry is on the downside of last year's peak.

But so far the amount of residential building work appears to be slowly deflating rather than suffering a sudden crash.

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34 Comments

by Retired-Poppy | 22nd Jul 24, 12:29pm 1721608169

Cue the shortage of homes being built will lead to higher prices crowd......

In reality, while there exists a glut of still severely overpriced inventory, prices will remain under pressure.

Regretfully, continued affordability issues means more homelessness and people sleeping in their cars. On a brighter note, along with falling house prices, it's an encouraging sign to see rents now topping out.

by ex socialist | 22nd Jul 24, 12:32pm 1721608339

People have been saying that - but, as I have argued previously, - there is conduit of supply continuing. And although building consents have fallen they are only back to 2022 levels - which is 4 times the number in the post GFC slow-down.

by HouseMouse | 22nd Jul 24, 1:17pm 1721611057

Yes that’s interesting isn’t it.

Developers tend to be glass half-full types. They have to be to do what they do, although rose-tinted glasses are dangerous. I suspect many are securing consents and positioning for the upturn. I suspect many of them think the upturn is closer than I do, and greater. In fact I know a couple of developers who think it’s going to be boom times in early ‘25.

At the very worst, a consented development has some value in terms of on-selling a site.

by 1689 Baptist | 22nd Jul 24, 12:41pm 1721608886

four straight months of 1500+ completions. This is not a decline but an increase on a quarterly basis.

I really appreciate this site but so often the headline, or picture of a house on a cliff edge, does not reflect the data in the actual article.

by Retired-Poppy | 22nd Jul 24, 1:11pm 1721610693

...the picture above does indeed illustrate not much work getting done 🤣😆

by HughJorgan | 22nd Jul 24, 12:52pm 1721609541

Feels dead to me out there.

Only people I know building or planning to are those that have already committed, mostly from purchasing a section.

The economics of building are still off by a mile so once those that have committed to sections stop building I can see it getting worse.

There are a few newish houses around me that are for sale well below replacement cost so I why would you bother.

by Uninterested | 22nd Jul 24, 1:08pm 1721610538

Yes correct. There is a time lag.

If you had a development property its a case or grin and bear it and continue on because you would definitely not be able to sell it to another developer in this current environment.

by HouseMouse | 22nd Jul 24, 1:03pm 1721610214

This data is all good but doesn’t tell us anything about building starts (ie. forward momentum). I suspect starts are way down, but there’s no data to corroborate.

by Zwifter | 22nd Jul 24, 1:42pm 1721612576

People that think building is still booming are delusional, I personally know of one builder who has gone into liquidation last week. Things are tanking out there.

by 1689 Baptist | 23rd Jul 24, 12:28pm 1721694517

And I know of three that are busier than ever. It's variable across the board. But four straight winter months of 1500+ completions is historically very busy for Auckland. It may slow down as there is a time lag.

by MintyLambChops | 22nd Jul 24, 1:54pm 1721613249

Have been in the new home construction game for over 35 years. We haven't started a new home in 9 months and am aware of many others in the same boat. We've been through some tough times before but never this level of inactivity. The squeeze (more a choke) has well and truly worked. Contractors, staff, subbies all whistling thru their tight little ....

by Zwifter | 22nd Jul 24, 1:57pm 1721613471

Exactly.

by HouseMouse | 22nd Jul 24, 2:28pm 1721615315

Exactly. But I imagine you have some builds that are not completed that will cone through in the completions data in the coming months? Which is why the completions data is a poor forwards indicator

by Pragmatist | 22nd Jul 24, 3:12pm 1721617963

Just visited a supplier whose customer base is construction related, more tilted to commercial/industrial rather than residential, and he's looking at the numbers and seriously considering closing it down and retiring.

His lease was put up to market rates from the bargain lease he had, so it doubled, and now he's running at less than half capacity, with most of his customers twiddling their thumbs with nothing in the pipeline he can't see any reason to try to weather the storm till the uplift in a few years(?). And in his niche he's the only supplier in Auckland doing what he does locally, everyone else is importing from overseas and the quality is lower, plus they are not able to do custom sizes, or at least not without months of notice if its a sufficiently sized order to make it worth while.

by Middleaged | 22nd Jul 24, 10:31pm 1721644295

One of my clients provides materials for residential construction. Last month or two significantly quieter than over the summer.

by DIYman | 22nd Jul 24, 2:12pm 1721614379

I've seen plenty of temporary fences go up, diggers and trucks clear the site, on one site they had to excavate an old swimming pool, pegs get placed in the ground, and then nothing for months, until a section for sale sign goes up. they sell for pretty much what they sold 4 years ago for, thats less than current RV

I see one has poured a foundation and stopped. There are rules around doing foundations in the winter on the hill, and they probably got to a point where they had to keep going, or have the council on their back.

by K.W. | 22nd Jul 24, 2:47pm 1721616457

If the new builds are anything like those in my area, all the completions go straight on the for sale market. Unlike in normal times, recent developers thought they would make more money by selling on completion rather than off the plan, so they took the plunge without any guaranteed sales. Now they sit there, side by side with two or three other developments in the same area, in the same street even, all now discounting prices in a desperate attempt to get them sold. All while slightly older new builds return to the market at prices $100k-$200k cheaper as the Brightline is reduced, and over leveraged owners sell up. Their buyer target market (investors) has fled these over priced new builds in favour of buying older stock for cheaper prices, and hgher rental yields. This is why rents are now falling - over priced new builds are being quickly subsituted for older, cheaper housing now that the premium for interest deductibility is no longer worth anything.

As they say, "you **** around, you find out".

I keep seeing ads from staging companies offering AirBnB packages - so developers can rent the property out on AirBnB while it sits on the market looking for a buyer. Desperate times call for desperate measures.

by HouseMouse | 22nd Jul 24, 3:24pm 1721618683

Greed. As well as poor judgement. Why sell off the plans when they might sell for 20% more 18 months later?

Oops…..

by rolande | 22nd Jul 24, 2:44pm 1721616267

8 Tuakiri St, Point England, sold in March 2021 for $1,845,000.

8 townhouses completed since.

1 has sold. 7 still on the market.

I think they've been on the market for over a year (or two?)

That's a long time to be paying a development loan.

There seems to be quite a few similar schemes around where they have completed and not selling. Also empty sections that were going to be developed, but the developer or bank has pulled the pin.

by IT GUY | 22nd Jul 24, 7:06pm 1721631971

Lot 2/8 Tuakiri Street, Pt England

Sold April 2024 for $920,000

A lot of coin for that location IMHO

I suspect that the funding is not via a bank....

by HouseMouse | 22nd Jul 24, 7:39pm 1721633966

Certainly is a lot of coin for a 2/3 bed terrace house in a low/medium value location

But that’s the sort of price developers need to sell for to make a reasonable profit, on top of the high costs of development

remember the stick I got recently for suggesting a mate’s townhouse development needed to sell for circa 750-800k, in a similar location to this, to turn a profit?

by IT GUY | 22nd Jul 24, 7:44pm 1721634274

I think there sunk costs about 6.5mil maybe 7

by Eschaton | 23rd Jul 24, 7:40am 1721677243

Yep, the developer paid way to much for that section. And, they should've put up 2-3 nice big houses with space.

by Eschaton | 23rd Jul 24, 7:34am 1721676844

Developers need to wake up, people don't wang to live in sardine conditions with one carpark for 4-5 occupants.

by Pa1nter | 23rd Jul 24, 7:59am 1721678353

Probably not, but it's what more people can afford in a large city.

by Pa1nter | 22nd Jul 24, 5:18pm 1721625499

Always interesting watching industry trends in construction activity. Right at the moment, supermarkets are tendering like bananas, both for total remodels, and new builds.

Pretty smart, they've been underspending the past 5 years partially due to be overwhelmed over COVID, and they're making the most of the spare capacity in the construction sector.

Where you'd normally have 2-3 crowds bidding on work, there's now 8-10.

by wingman | 22nd Jul 24, 5:35pm 1721626545

I'nm starting a new build this week. Can't wait.

Got a fantastic deal on the land. Buy in gloom, sell in boom.

Often pays to be a contrarian.

by DIYman | 22nd Jul 24, 6:22pm 1721629372

what city?

by wingman | 23rd Jul 24, 3:23pm 1721704981

Auckland.

by HughJorgan | 22nd Jul 24, 6:31pm 1721629896

Good luck with the credit risk. Fingers crossed.

by Flying high | 22nd Jul 24, 6:37pm 1721630268

How's your new build HJ

by HughJorgan | 23rd Jul 24, 9:51am 1721685112

All good. Move in in 6 weeks

by wingman | 23rd Jul 24, 4:37pm 1721709420

What credit risk?

by HouseMouse | 22nd Jul 24, 7:34pm 1721633651

What’s the build cost