Fewer new homes being built in Auckland as building work dries up

Property / news

Residential construction in Auckland could be on the verge of a significant slump

24th Oct 24, 10:58am by Greg Ninness

There are increasing signs the large backlog of residential building work that built up in Auckland over the last few years may be finally starting to clear.

That's good news for anyone wanting get residential building work undertaken because there should be no shortage of tradespeople available to do it.

But the news is not so good for builders and other trades who may start struggling to find new work when existing projects come to an end.

The downturn in Auckland building work has been well anticipated because the number of new dwelling consents issued by Auckland Council peaked at 5920 in the third quarter of 2022.

By the second quarter of this year the number of new dwelling consents in the region had dwindled to 3302. But the number of Code Compliance Certificates issued by the Council for new completed dwellings, remained fairly buoyant at more than 5000 a quarter for much of last year.

That was because the number of new homes being consented at their peak in 2022 and the first half of 2023, created a greater volume of work than the building industry could comfortably handle, meaning a backlog of projects built up.

It is this backlog that has kept the industry busy as the downturn in building consents results in fewer new projects getting started.

But it appears this backlog may now also finally be clearing, which will leave the industry dependent on a much lower level of new projects for work.

Auckland Council issued just 1186 Code Compliance Certificates (CCCs) for newly completed dwellings in August, down 26.5% compared July, and down 20.8% compared to June last year.

The number of CCCs issued in June was also low.

As the graph below shows, there is now a definite slowing in the number of new housing completions in Auckland and if that settles at around 1100 a month, it would mean residential construction in Auckland could end up being down by about 40% from its peak late 2023. That could make things very difficult indeed for the building industry.

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37 Comments

by Zwifter | 24th Oct 24, 11:16am 1729721799

Just another reason for an uptick in house prices.

by bw | 24th Oct 24, 11:28am 1729722520

Really? "the news is not so good for builders and other trades, who may start struggling to find new work". Add that to many other professions/businesses who are likewise shedding employees, and how do those people pay the bills?

(1) they drop their prices/wage expectations to attract new work, which feeds though into finished product prices being lower or,

(2) they drop the price of anything they can sell to pay the bills.

Throw in the ageing demographic, and how are we different to Australia ? "Horror retirement trend causing major stress for millions of Aussie workers: 'I will have to sell'..... A worrying number of older Aussie workers are facing a bleak reality as they edge closer to retirement revealed around 30 per cent of people will still be paying off their mortgage when they retire"

by CN - new | 24th Oct 24, 11:44am 1729723475

A worrying number of older Aussie workers are facing a bleak reality as they edge closer to retirement revealed around 30 per cent of people will still be paying off their mortgage when they retire"

This is likely due to:

1) high house prices relative to incomes

2) purchasers of high house prices choosing to take on high amounts of debt (relative to income)

3) purchasers buying later due to high house prices and the longer time required to save the deposit.

4) bank of mum and dad assisting financing for the house purchase of an adult child due to high house prices

Calculations show that the higher the debt to income ratio for a borrower, the longer the borrower will be making mortgage payments. For the same monthly payments for a household, a debt to income of 1.0x will be paid off in a much shorter time frame than a debt to income of 6.0x.

This is one of the unintended social consequences of high house prices. What are the other unintended social consequences that we don't know about yet?

Given the high debt to income mortgages of some owner occupier buyers and the prevalence of bank of mum and dad financing in NZ in recent years, how prevalent is this in NZ?

by Eschaton | 24th Oct 24, 11:53am 1729723992

What are the other unintended social consequences that we don't know about yet?

Probably more stabbings, and general nihilism.

by Advisor | 24th Oct 24, 1:41pm 1729730473

You are such a DGM for wanting construction workers to have a stable job.

On the flip side, the so-called housing optimists don't care if the entire economy burns while their paper wealth grows and young, non-asset owning Kiwis are stuck in low-paying service jobs barely able to afford rent and food.

by sgtshortcut | 24th Oct 24, 2:00pm 1729731608

Advisor that’s a wee bit of a rock & a hard place scenario eh…if the govt won’t spend with this austerity mindset then construction requires some house price growth to incentivise the private sector to continue with new projects…? Construction industry (& the industries who feed from it) will be under continued pressure for a while yet, I think the cycle is underway again unfortunately, but I agree it’s a couple of years away from having an effect…& when it does…the damage will probably see us with not enough trade (left industry &/or country) & not enough homes…f*^k me, it’ll happen again 🤦🏻‍♂️😂

by Colin Cameron | 24th Oct 24, 12:17pm 1729725459

CN but I thought Aus roads are paved with gold and the most brilliant super scheme in the world and the hourly rate wages was the epitome of wages.

Obviously not

by CN - new | 24th Oct 24, 12:38pm 1729726686

I thought Aus roads are paved with gold and the most brilliant super scheme in the world and the hourly rate wages was the epitome of wages.

Obviously not

People should also consider the cost of living relative to those incomes, rather than focusing solely on the higher incomes. Each person's situation is unique.

Also any owner occupier taking on a high debt to income mortgage does put themself in a position of increased financial vulnerabilty regardless of geographical location. There is a tipping point.

by Colin Cameron | 24th Oct 24, 5:20pm 1729743605

Totally agree was tongue in cheek

by Independent_Observer | 24th Oct 24, 12:31pm 1729726285

As a generalisation…Birth rates declining to non sustainable levels across nations with high housing costs.

Not an issue in Africa and India and they are breeding well.

by Toye | 24th Oct 24, 12:24pm 1729725894

Yeah maybe 2 years from now.

Long way down yet.

by 26@Main | 24th Oct 24, 1:36pm 1729730175

Not as much demand for accommodation either at the moment. Core Logic reporting rental growth at 1.2% in the year to September which is below the long-term average of 3.2%. They note slowing migration and more listings as reasons for the slowdown.

by Cote d'Azur | 24th Oct 24, 11:48am 1729723738

Nothing being built while credit taps are turning on again.

Use basic economics to determine price response!

🥂

by Toye | 24th Oct 24, 12:27pm 1729726025

Building pipe drying up does not affect things until a couple years later.

Use basic common sense to look like you know what you are talking about.

🥂

by FOTC | 25th Oct 24, 9:16am 1729801006

You have to have an income to be eligible for credit though, how many people are reliant on this industry for their income?

by Small Kev | 24th Oct 24, 12:08pm 1729724938

Same story different cycle.

by sgtshortcut | 24th Oct 24, 1:49pm 1729730959

Yep, I don’t the upwards growth will be as aggressive (not sure we’ll see double in 10 years kind of thing) but the 🔄 is unfortunately underway once more.

by HouseMouse | 24th Oct 24, 1:01pm 1729728119

I called a 40% drop from peak 2 years ago 😂

It’s a very significant fall, but applying glass half full it’s a fall from extremely high levels. By pre-covid standards the numbers are ok

I expect consent numbers to start picking up significantly from mid/late 2025, as:

- interest rates continue to fall

- fast-track legislation approvals start to flow through

Auckland Council’s new development contributions policy will be a major headwind in several parts of the city, but fortunately many parts of the city are not seeing big increases.

by bw | 24th Oct 24, 1:55pm 1729731312

Just another opinion, of course.

"Businesses are closing and unemployment is on the rise, and those who do find work often do so with a painful salary cut – like the customer we saw who took a $20,000 pay reduction just to stay employed. These are not isolated cases...... As we approach the end of 2024, the financial situation for many Kiwis remains bleak...... Despite CPI showing some signs of cooling, many essentials continue to rise in cost, leaving wage growth trailing far behind..... Without immediate action, the financial debt hangover of 2025 will be more than just an economic issue – it will be a crisis that defines the future of New Zealand’s expanding stretched majority."

https://www.nzherald.co.nz/kahu/the-stretched-majority-a-nation-in-fina…

by CN - new | 24th Oct 24, 3:43pm 1729737783

Without immediate action, the financial debt hangover of 2025 will be more than just an economic issue – it will be a crisis that defines the future of New Zealand’s expanding stretched majority."

FYI, estimated residential dwelling price values fall from peak to trough as a % of GDP at the peak of house prices.

1) Japan 1990's : -258%

2) Ireland 2009: -125%

3) US 2008: -62%

New Zealand: -93%

by Averageman | 24th Oct 24, 2:33pm 1729733624

Time to crank either state housing programs or new build available to foreign investors, or just like GFC, another entire generation of young tradie's will be paying all their tax in Straya.

by tomjones_04 | 24th Oct 24, 3:40pm 1729737645

I can't wait till next year when we get rid of all the dead head 'house prices are going up" comments.. with no supporting information. Purely a Na Na Na naaa na attempt to stir things up.

by agnostium | 24th Oct 24, 3:41pm 1729737668

I've been following the Auckland Council building inspector team leader on LinkedIn. He has been posting videos of some of the building inspections he is attending.

Based on the crap he's encountering there is going to be a whole lot of builders tied up in remediating already 'completed work'

by Zaphod The Flatulant | 24th Oct 24, 4:24pm 1729740284

Same here - some of that stuff is shocking. Thanks to ACC most of it will get sorted before CCC issued but just imagine if we were to relax restictions allowing builders to self-certify, say, granny flats across the country...

by HouseMouse | 24th Oct 24, 4:28pm 1729740511

Yeah lots of bad work out there

by ChrisOfNoFame | 24th Oct 24, 3:46pm 1729737970

I have about $4m of projects ready to go. ... I am in no hurry to start any.

by HughJorgan | 24th Oct 24, 4:01pm 1729738898

I’ve been banging my drum about this for a long time. As someone that just built, I can’t see prices coming down from the hideous levels they are at.

It’s uneconomic to build. That’s not going to change in the near-term.

The recent Government underwrite will only benefit those with over 30 houses being built and has been crafted for a select few party supporters.

by CN - new | 24th Oct 24, 4:17pm 1729739833

"I can’t see prices coming down from the hideous levels they are at."

Just to clarify - are you referring to

A) prices. Which prices?

1) construction prices

2) residential dwelling prices in the existing dwelling market

3) residential dwelling prices in the new build market

4) other e.g a particular segment of the property market

B) what geographical location are you referring to?

by HughJorgan | 24th Oct 24, 5:13pm 1729743230

The cost to build. Even the Group homes are costing what an architectural build used to cost a few years ago.

by HouseMouse | 24th Oct 24, 4:20pm 1729740000

Good post as usual. I am probably too bullish on the upturn. Given build costs, retail interest rates would probably need to sit below 4% to really stimulate residential construction. Those rates may only get down to 4.5%.

And fast track doesn’t really affect those fundamentals.

by HouseMouse | 24th Oct 24, 4:22pm 1729740156

Upper/mid and high end might pick up late next year, but not mid end

by Rampart | 24th Oct 24, 4:18pm 1729739883

From the coal face - It’s so quiet out there. In 2021 I installed 4 full timers. Now I’m really struggling to justify having one full timer. Electrical and HVAC

by HughJorgan | 24th Oct 24, 5:15pm 1729743343

The tradies that I have had decent discussions with have all said it’s far worse than the GFC.

It’s really just starting. The train has stopped and it’s going to take a lot to get it moving again.

by HouseMouse | 24th Oct 24, 6:29pm 1729747769

Yep widespread view is worse than GFC, in terms of building prospects. I’d say, at least for now, that the design side hasn’t been hit quite as bad. There’s still some animal spirits amongst developers, rightly or wrongly. I know a few who are advancing design and looking forward to resource consents. They think the lower interest rates will give big support to the market in a year’s time. I think they are a bit too bullish.

by HouseMouse | 24th Oct 24, 7:22pm 1729750958

Greg, with all due respect…. Last year, and in 2023, when consent numbers were booming, you were saying something along the lines of ‘the vast majority of consented dwellings get built’. If this were so, completions in the second half of this year should still be high. But they are not, and that’s because, as I said repeatedly last year, what you said doesn’t always hold true. It holds true in booming markets, but when interest rates start soaring higher, it flies out the door, I am afraid.

I guess you won’t need to bother about ignoring my comments from March 2025.

by Zwifter | 25th Oct 24, 10:11am 1729804283

Are you gone in March HM ? Still you do feel you are wasting your time here in the comments section some times.

by Greg Ninness | 25th Oct 24, 11:19am 1729808357

Your views may well vary from those contained in articles published on this website HM, and whether you continue to express them in our comment stream after March next year is of course entirely up to you. However either way, we hope to continue to attract a wide variety of opinions into our comment stream next year and beyond.