New home builds in Auckland continue to slowly decline

Property / news

Residential construction in Auckland facing a steady decline rather than a sudden crash - so far

25th Nov 24, 11:47am by Greg Ninness

The number of new homes being completed in Auckland continues to decline slowly and steadily rather than with a sudden crash.

The latest figures from Auckland Council show new dwelling completions in the region peaked over the three months from September to November last year, when 5801 Code Compliance Certificates (CCCs) were issued for newly completed dwellings, more than 1900 a month.

Since then the numbers have been in decline, although the monthly figures can be volatile.

For example, in May this year 1683 new CCCs were issued for residential completions in Auckland, dropping to 1322 in June, then rising back up to 1614 in July, and dropping back again to 1186 in August.

Using a rolling 12 month average smooths out that volatility and gives a better idea of the longer term trend, which is displayed in the graph below. This shows a clear trend with monthly dwelling completions peaking at 1630 in May and then steadily declining to 1534 in September. That's a decline of 5.9% over the last four months.

This suggests residential construction activity in September had declined by around 9.8% compared to September last year, but was still up 38.5% compared to September 2022.

Another interesting number in the Auckland Council figures tracks the percentage of residential projects that receive their CCC on completion within two years of receiving their original building consent.

Back in mid-2021 when residential construction activity was picking up strongly, more than 80% of projects were completed within two years of receiving their building consent.

By September this year that had dropped back to just 65%.

A likely reason for that is that a backlog of work built up due due to capacity restraints within the building trades during the boom time, but as the market has cooled and fewer new projects are getting off the ground, developers and builders have been slowly clearing the backlog of projects, many of which which have been sitting on hold.

While that has kept many firms busy, once the backlog clears its likely that the decline of residential projects being completed will start to gather pace.

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30 Comments

by HouseMouse | 25th Nov 24, 12:08pm 1732489728

Of course it’s a slow decline, because of the large number of projects in motion. Completions would only fall off a cliff if many projects were snow balled halfway through construction, as was witnessed at times in the ‘70s and ‘80s.

There’s been some of that - infamously the luxury apartment building in the Auckland CBD - but not too much.

The completions will keep declining steadily until a low point is reached some time in mid to late 2025. Completions won’t pick up meaningfully until 2027-2028, and even then it will be a mild uptick.

Would be great if there was data on starts. I imagine they are at least 40% down from peak. We won’t see that slump in starts show up in the completion data until next year.

by Pragmatist | 25th Nov 24, 1:53pm 1732496037

And the 12 month rolling average hides the rate of fall off. Averaging June-Aug figures in the article we're down to 1374 completions a month.

by HouseMouse | 25th Nov 24, 1:25pm 1732494353

Good observation

by ex socialist | 25th Nov 24, 2:53pm 1732499611

So 1,350 a month is about 16,000 a year. Well above all but the recent boom.

And two years at that rate is 32k, or homes for 85,000 people in Auckland.

by Pragmatist | 25th Nov 24, 3:04pm 1732500277

You think 1350 is the bottom? ROFL.

by ChrisOfNoFame | 25th Nov 24, 1:58pm 1732496313

"Would be great if there was data on starts."

Sure would. I'll be filing another BC before the end of the year. But as there is no information on starts, I'll be tendering for the best price over a long tendering period. Using a long'ish tendering period allows the builders to get their duck in a row while sharpening their pencils. Hopefully I'll get an offer along the lines of, "We can start next week if you'll accept a price 15% below what we originally quoted".

by The Person | 25th Nov 24, 2:14pm 1732497294

Which luxury apartment build is that?

by Averageman | 25th Nov 24, 12:57pm 1732492635

With the expectations around land price and the cost of construction build to sell is a near suicide mission. No one should be surprised.

by Dgm | 25th Nov 24, 1:25pm 1732494303

With net migration steadily decreasing and expected to be 0 by Feb 2025, there's going to be a huge over supply ..

A housing glut into 2025

by HughJorgan | 25th Nov 24, 1:28pm 1732494483

Gradual decline? Maybe.

What many don’t realise is that it is so uneconomic to build and nothing appears to be moving to correct this.

Those that think land values will come down are dreaming. Land banks will just continue to hold and the cost to complete the groundwork is not going to get any cheaper.

by HouseMouse | 25th Nov 24, 1:32pm 1732494739

exactly

Maybe HJ+HM should be writing articles 😂

however, I have long moved past writing articles for no compensation. Life is too short

by HouseMouse | 25th Nov 24, 1:34pm 1732494869

The only thing that might make a material difference is if the OCR went sub 2%. Possible, but not what economists are picking

by ex socialist | 25th Nov 24, 2:48pm 1732499337

Or perhaps not dreaming, just believing in a market economy.

by HouseMouse | 25th Nov 24, 1:30pm 1732494631

A good learning for Greg, and others who have fallen into this trap.As I said a couple of years ago, building consents are only a good proxy for completions during ‘the good times’. It was pretty easy to see the looming fundamentals 2 years ago, and that the conversion of consents to completions was going to drop a lot ie. it’s now 65% rather than 80%. It will probably get down to 40-50%, an outside chance of even lower.

by Greg Ninness | 25th Nov 24, 1:42pm 1732495377

The percentage of CCCs issued only relates to completions within a specific time frame i.e. two years, which the article clearly states. It's not a measure of total CCCs issued compared to total BCs. All it means is that on average the projects are taking longer to complete and a likely explanation of that is also given. You are reading things into the figures which the data doesn't support.

by HouseMouse | 25th Nov 24, 1:50pm 1732495816

Only slightly correct. You are missing by far the bigger issue which is that developers who secure consents will not proceed to build if market conditions are turning / have turned.

but feel free to ignore me *once again* 😂😂😂

by HughJorgan | 25th Nov 24, 1:50pm 1732495859

Kiwi Property announced that Resido (their BTR offering) which opened in June is now 50% rented, or 50% vacant for the DGMs.

That a pretty slow uptake for the housing shortage that we keep getting told about.

Luckily the Government is going to underwrite large BTS for its donors.

by mfd | 25th Nov 24, 2:31pm 1732498304

If you look at their results presentation, they were expecting to have leased a little under 30% at this point. Actually achieving 50% looks great to me as a shareholder, and with good achieved rents.

Takes a while to fill up a few hundred similar units - the company expected 12-18 months.

And then you remember the synergies of bringing hundreds of professionals and families to live just outside the shopping centre they also own...

by CN - new | 25th Nov 24, 3:44pm 1732502673

"the housing shortage that we keep getting told about. "

How do people define "housing shortage"?

How do governments define "housing shortage"? - each has their own definition of the problem that they're addressing through their policies.

For each relevant geographical location:

1) shortage of number of residential dwellings in the ownership market relative to the current population

2) shortage of the number of different types of residential dwellings relative to the current population

3) shortage of number of residential dwellings in the ownership required relative to future population growth

4) shortage of the number of different types of residential dwellings relative to the future population growth

5) shortage of number of affordable residential dwellings in the ownership market

6) shortage of number of affordable residential dwellings available for rent in the private rental market

7) shortage of number of residential dwellings provided by social housing providers

8) other?

by ThePropertyCycle | 25th Nov 24, 1:59pm 1732496396

Expect the Auckland volume to drop further now for 2 reasons.

1) About 50,000 properties are now earmarked as being "development constrained' which means they may not be able to be developed now (even if zoned for intensification) because the watercare infrastructure cannot cope with more dwellings. It is estimated to take a decade or more to rectify this issue.

2) Even if properties are allowed to be developed then the additional cost PER NEW BUILD dwelling is estimated to be between $30k to $100k for added infrastructure charges.

So MANY potential sites ripe for development are no longer able, or viable, to be developed.

We can only expect another housing shortage to loom large in the next few years.

So much for achieving affordable housing when the infrastructure costs alone are about the same as an entry priced dwelling construction cost now.

One must only wonder what happened to the Billions of dollars paid to the council in "development contributions" over the last 20 years which we were told was in part to maintain/upgrade infrastructure. Perhaps that was spent on secret payouts to owners of leaky homes (that the council consented) to be remedied?

https://www.gra.co.nz/articles-by-matthew-gilligan/the-auckland-infrast…

by ChrisOfNoFame | 25th Nov 24, 2:11pm 1732497104

Auckland has a huge amount brownfield site potential that isn't constrained by inadequate infrastructure. Ergo, I'm not sure that particular issue amounts to much.

But if Auck Council starts ramping up 'development contributions' to rob Peter to pay for Paul's new pipes then that will be a problem. Commercial monopolies are bad enough - but elected ones are even worse.

by ChrisOfNoFame | 25th Nov 24, 2:45pm 1732499140

That "box that need to be moved 20cm" example in the link made me LOL.

Am I to conclude that you've never put in an outrageous quote for a vexatious bit of work? Seriously? That should be seen for what it was. Not what Mr Gilligan & co would like it to be an example of.

by ThePropertyCycle | 25th Nov 24, 2:43pm 1732499002

For the record... I am not Matthew Gilligan and only put his article up as background info.

Here is more info about how serious this matter is for Auckland property development fyi

https://promising-sparkle-d7f0c0cfc9.media.strapiapp.com/network_capaci…

by ChrisOfNoFame | 25th Nov 24, 2:58pm 1732499905

The link is old news. And with very broad bush strokes. One needs to get down to a specific site to understand whether one is affected or not.

I'm reminded of one development I did while another similar one across the road and few houses down started before me. I checked utilities thoroughly before I started. They didn't. They got clobbered replacing a waste water pipe, adding a manhole, and doing it around other infrastructure. I was finished and sold / rented while their 'for sale' signs hadn't even gone up. This was developer with 10+ years experience, or so they told me.

by HouseMouse | 25th Nov 24, 4:12pm 1732504326

And some quite big chunks of the green areas are proposed to have much higher development contributions

by ChrisOfNoFame | 25th Nov 24, 2:44pm 1732499053

Further to the link ... What sort of developers apply for a RC without checking all the utility implications first? Mums & Dads? Johnnies Come Lately? Dumb land bankers?

Watercare et al are generally pretty good in answering utility capacity & constraint questions before an engineering plan approval (EPA) is applied for. Just make sure you get stuff in writing / email so if they somehow change their minds you have ammo.

by Nzdan | 25th Nov 24, 5:27pm 1732508865

Would've thought it'd all be on GIS maps anyway so one could know well in advance. Unless there's a delay in updating the database for recently installed assets, but you're right a simple question via email.

by rastus1 | 26th Nov 24, 12:05pm 1732575913

No longer viable because they purchased the land at prices too high. The infrastructure cost represents the value add - easy to remedy as it can be knocked off the land price until it works.

Perhaps a few land bankers need to go broke?

by AN Other | 25th Nov 24, 3:10pm 1732500620

In vaguely related news,

Du Val's Charlotte and Kenyon Clarke could be homeless by Christmas | BusinessDesk

From reports by others on this site, this should have happened a whole lot sooner.

by John Mendel | 25th Nov 24, 5:00pm 1732507229

The only thing that pays to build now is Townhouses.