Auckland needs cheaper new homes built as affordability worsens, Department of Building and Housing says

Auckland needs cheaper new homes built as affordability worsens, Department of Building and Housing says

Auckland needs more affordable new housing as its population grows, affordability worsens, and rents stay high, the Department of Building and Housing (DBH) says.

In it latest Key Indicator Reports on New Zealand's housing and construction sector released on Tuesday, DBH said Auckland was New Zealand's least affordable city for both home owners and renters. It forecast rents would continue to rise as growth in supply of new housing remained low.

That supply was starting to show signs of life, with the number of consents for new dwellings rising slightly over the past few months.

However, the number of consents for alterations and additions work was rising at a faster rate.  

"This is likely to be a result of the lower overall number of new dwellings being built. People may be making the decision to alter their existing home rather than build a bigger home," DBH says in its Auckland report.

"Overall, pressure in the Auckland housing market for both rental properties and homes to own is rising. With the population expected to grow, Auckland needs more affordable new builds," DBH says.

Rising rents

"Weekly rent prices in Auckland are well above the national average. The forecasts show rents in Auckland are expected to remain high," DBH said.

Interest.co.nz reported on March 12 that the median weekly rent for a three bedroom house in Auckland jumped NZ$55 in February to reach NZ$550, the highest since we started tracking data six years ago.

Auckland rental affordability was similar to the national trend although it appeared to have worsened slightly toward the end of 2011, DBH said (see chart below). 

"As with home ownership, the Auckland rental market is also the least affordable in New Zealand," it said.

'Told you so'

In its briefing last year to incoming Ministers, the Department of Building and Housing said Auckland needed to allow for more house building on its fringes to help alleviate affordability problems in the city. It also said more townhouses and low-rise apartments needed to be built in the city.

See: Department of Building and Housing recommends policy changes to make it easier to build medium density housing in Auckland to help with shortage, affordability

The Productivity Commission is currently investigating housing affordability in New Zealand, and is due to release its final report this Friday.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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No worries...bang up some 50 story multi flat complex slums and pack em in...work for everyone..rorts and scams aplenty...think of the profits to be had...the council take....gotta be the way to go....

High Rise? A couple of months back BOB explained how high-rise apartment building stopped dead in its tracks in Auckland about 2007. None built since.

High rise itself is neither good nor bad, it depends on how it is done. 50 stories is too high.
On a recent trip to South Korea I stayed in a high rise residential apartment building for a few days, with the locals. Was quite apprehensive about it at first. But was quite an eye opener, how 10 million people are packed into the city.
The areas I stayed in were about 20 storey appt buidlings, dozens and dozens of them in a suburb. But nothing like the revolting downtown Auckland high rise apartment mess.
These building had been carefully planned, with trees and parks and carparking, and open spaces between the buildings. Excellent playgrounds for children, outdoor running tracks and fitness areas, basketball courts and shopping centres strategically placed. Public transport within a few minutes of wherever you lived.
The apartments were small but affordable, with plenty of natural sunlight. It was the amount of open areas of trees and gardens and fitness areas and really cool playgrounds in amongst the apratments buildings that really impressed me.
City planners could get some good ideas by visiting these places.
It made central Auckland apartment buildings look like a totally unplanned mess.
 
 

There is research to show that mental illness rates increase incrementally for every story you go above four. There is a pschological need to be able to perceive the ground, which gets harder as you go higher. There is a furthe design rule that you have natural light coming from at least two sides of every room. Higher density is certainly a requirement for good community to happen, but multistory apartments are not the answer.

There is nothing wrong with high rise living. I used to live in high rise apartments for more than 20 years of my life, and i am still as sane as the next door guy. (or so i believe)
 
The problem with Auckland's high rise is that it is badly planned and worse, there is no plan at all in their in their overall context of city living. It is haphazard and badly build. Most of them are so small to make even a normal Asian (who are used to apartments living) ashamed.
 
But again we have as so often, Goverment bodies blasting away about so much (more to deflect blame from themselves) but in reality nothing much happens. 
 
ask Len Brown what he is doing about "affordable" housing in Auckland and you get the usual PC Bshit....just like his Bs on the Port of Auckland...

There is nothing wrong with high rise living. Do you have some references to back that up? There is almost nothing right with high rise living and I have given you two of many good reasons, that are backed by research. Why do you think England has been pulling down tennement housing for thirty years? Although in terms of Auckland, outside of the CBD, even four stories is pretty much high rise. But your haphazard and badly built is on the money, you just need to add in badly designed.
 
My regular suggestion is to find the work of Christopher Alexander "A Timeless Way of Building". Copies are available in libraries around the country, although it such a siminal piece of work you will likely have to wait to get it
 
There is a quote from a 19th C Designer, Ruskin I think, which goes: You can kill a man with an apartment just as well as you would and axe".

Do you also have references to back up your claims other than reference to unspecified "research"?
Seriously I'd be keen to look at what evidence there is that apartments are so pshycologically bad etc.
 
Ruskin would not have used the word "apartment' to mean apartment.  He would have used it to mean accomodation and comment would apply equally to a free standing single level dwelling.

References are all through the book I have linked you to, your choice from here.
 
Oh and by picking on semantics you completely miss the point, degrading further your argument.

Thanks I'll have a look.  Sure I had some of his somewhere.
 
What do you mean semantic? what arguement?  Do you think Ruskin was saying apartments bad, houses good?

Replace "apartment" with accomodation, as it applies to all housing. But it loses its poetry then :-P

Ok that's exactly what I said.

England has also been building multi-level apartments for the last 30 years so obniously the tenements aren't going purely because they are multi-level.

Get rid of the rort in local council fees, levies , charges and costs  to subdivide property.
To cut a basic uncomplicated (NO Resource Act  fight) section into 2 sections costs $120,000.00, plus .
Of this , Auckland council gets anywhere from $80, 000 upwards . And they do nothing at all you still have to pay the land surveyor , private Engineer , and pay for  all the roads , drains , kerbs , lights and infrastructure, reticulaion of services , etc  
Auckland City Councils rorting simply compounds the horrendous cost of land in Auckland 

I can't believe that people are only just realising that Auckland needs cheaper new homes.  Good lord. 
 
I went up to Hobsonville Point recently, it's a new housing development at the top of the North-Western motorway.  It's nice - they're developing a bit of a community as well as the houses, and the places seem to be built to a reasonable standard.  It's a slightly horrible commute into the CBD every morning, but do-able.
 
The first development is all sold now (pretty much) and the second development is being made available soon, so I talked prices and nearly fell over.  A 3 bedroom house (on 2 levels, so they can squeeze it on a tiny, tiny section) will be around the $630K mark - maybe more depending on spec and final build prices.  Probably $650K.
 
The existing 2 bedroom "starter homes" that are in the first development sold for $450K.  There were only a handful of these built, and the people who bought these as "first time buyers" were apparently subsidised into them by the government.
 
Who the hell can afford to pay $450K for their first home?  And why is the government subsidising people into first-time housing that costs that much?  And why do you have to spend $650K to get a modest, reasonably built, 3 bedroom family home that is on the outskirts of Auckland? 
 
It is madness.  More than that, given the fact that this country is so underpopulated and rich with available, unused land, it is also morally wrong. 

Why is anyone surprised?
Olly Newland predicted all this ages ago and now the truth is dawning on the thick brains of the gloom merchants that prattled on and on about falling pices and empty suburbs.
For the smug renters out there it's almost to late.
Olly's advice is to get out and buy something decent while you can or stay  renting  for the rest if your life.
Read an extract his latest column here below:
Auckland rents skyrocket 

 JAZIAL CROSSLEY
 
20/03/2012
 
Auckland is the least affordable place in New Zealand to buy a house and the most expensive to rent, new figures show.
 
Auckland tenants are paying 7.4 per cent more in rent than they were a year ago, according to the latest data from Department of Building and Housing.
 
This is ahead of the 5.1 per cent increase the rest of New Zealand has seen for rents in the year to February.
 
House prices have been rising in Auckland since the end of 2010, ahead of the increases nationwide.
 
"Overall, pressure in the Auckland housing market for both rental properties and homes to own is rising," the department's report states.

Read more here:

http://www.stuff.co.nz/business/money/6605627/Auckland-rent-skyrockets
 
and read his full column here:
 
http://www.ollynewland.co.nz/
 

Olly says a short boom is likely to be followed by a bust, so based on that advice I don't understand your logic of needing to rush in "before its too late "

If anyone ever tells you to buy something or you will miss out on it for the rest of your life, DO NOT buy it. I might be a muppet, but I'm not a chump.

Maybe in moaning about the artificially constrained supply of land in NZ, I have been going down the wrong track in the case of Auckland.  As I have noted previously it's overseas income earning is pathetic compared to the rest of the nation and it is really a very attractive but expensive national overhead.  Closing the city limits will choke off the blood supply to this non contributor and limit the it's drain on the rest of the nation.

People are increasingly renters CM and as such they have the mobility to head for the jobs...either aussie or Auckland...nothing will change so long as the regional centres continue to suffer from the death of employment.
A very simple govt action that would make a difference...rebate Gst on newbuilds and reno work carried out in the rural towns etc....but not in Auckland or wgtn.

Wellington, yes of course.  Mere choking is too kind for those leeches.

Not a bad hole CM if you can live rent free as I did...those were the days...12 months at sea and just a row to shore for fush and chups or a drive round the bay to work and a private carpark...

Great place on a nice day and the people are interesting and friendly, but apart from Peter Jackson and his mates, an overhead that contributes a hudge amount less than nothing. 

What a surprise, the biggest city has the most expensive houses - same as every other country in the world. Auckland houses aren't that much dearer than the rest of NZ - less than double the price of cities that are 1/30th of the population sounds about right to me.
I bet a house in London costs a lot more than one in Leeds. Or a house in Mumbai costs a lot more than a house in a Jeypur.

Yep, that's a fair comment.  Regional NZ might actually attract a few more people and drive some local growth if property was cheaper.
 
The problem is, property is just WAY too expensive right the way across the country.  If you're living and working in Waihi, you're probably going to struggle to find the $300K you need for a house there just as much as the average Aucklander will struggle to find $600K.
 
In my opinion, if properties dropped across the board by a third you'd be looking at fair value.  It'll never happen though - too many property obsessed people in high places keen on keeping values artificially high.
 
The gap between the have's and the have-not's is widening dramatically, and it's driving our young people overseas. 
 
Shame.

The mistake is thinking that there needs to be more low cost housing on the fringes of the city. There needs to be more low cost housing on the isthmus. This means developing medium and high density housing along arterials, allowing for much more effective infrastructure.
 

Interesting to see what house prirces in London are doing despite the GFC which has affected Europe and the UK  so badly.
 
http://www.primelocation.com/house-price-index/
 
Of even more interest is the fact that good properties are still in keen demand with prices still rising while the poorer properties are flat or falling.
This mirrors Auckland (and elsewhere in NZ) . Good properties perform well whatever the market is doing while rubbish is still rubbish.
You have to feel sorry for the muppets who were talked into buying slum-boxes in South Auckland or the wop-wops when the real profits are in the "leafy suburbs" of the better areas.
It is much more profitable to have one or two good investment properties in the right areas then a pile of multi colloured cheap and nasty boxes.
 
 

BigDaddy - you haven't addressed my point above, regarding Olly saying we are likely in the midst of a short sharp boom to be followed by bust
you are not being selective, now, in quoting Olly?  

Yeah, good properties are getting harder and harder to find.  Why?  Because people don't have the savings or cash-flow to renovate or maintain their family home, and they definitely don't have the inclination to renovate or maintain rental properties.
 
Everything saved goes into scraping the mortgage deposit together, then everthing else goes into paying the monthly payment. 
 
The overall standard of property across the country is shockingly low, to the point where anything that is healthy, sound, secure and efficient carries a huge premium.

Im not so sure on the premium in that does that premium reflect the cost of making a house healthy, sound and secure?  I suspect not...
For instance about 10 years ago I extended my property. I added a staircase and a new master bedroom. It cost me more than I expected, $25k v $16k I had budgeted..  If it wasnt for my labour being free the increase in CV at about $30k wouldnt have exceeded what I spent if I had used a builder.  Based on the overspend and poor return ive stopped major improvements, it simply makes no economic sense IMHO.  Now when I replace something I put in a good quality solution, sure rather than just replace...but new work I just dont do.
regards

nice in theory, very difficult to achieve in reality

That's a facile rebuttal. Actually fixing the problem may be difficult, compared to not fixing the problem. The current model of extending the city is easy to achieve but is expensive to achieve and maintian, and fails to deliver low-cost housing.

Bull. I've worked in the development industry for 15 years so know what i'm talking about. And you? A naive urban planning uni student? Please reveal your wisdom to me.
There are plenty of reasons why peri urban development isn't affordable in auckland. Most of them can be easily overcome. The barriers to medium density are much more fundamental. And i never said one form of development is better than another. I'll let robust evidence speak for itself. That evidence prepared since the auckland plan was first notified clearly demonstrates that the goal of realising 75% of the city's Housing in the existing urban area was totally unrealistic and that's why it's changing to 60%. Even that will be difficult. But is a reasonable level of aspiration.

Matt in Auck, you have been away from Auckland a long time now.
Things are changing here and you are not totally up-to-date.

Ummm, 6 months a long time???? What has changed that has suddenly, miraculously made building apartments suddently feasible? Have building costs dropped? Land costs dropped? Council processes got any easier? Development charges dropped? Communities got any more accepting of higher density development? No, no, no, no, no! Nothing has changed!
In any event, I still have some involvement in projects in Auckland, as well as keeping up with old colleagues
The level of debate is so ill informed here (save for one or two good commentators), its like primary school stuff, some of the comments are so naive as if a primary school student was asked to draw how Auckland should look like. I'm taking a break. If the quality of debate here versus the Australian macrobusiness site is anything to go by, NZ'ers should be very worried about their country's future. Not to mention PM Key's recent inane and ill informed comments
Look I'd love to see parisian style apartmenr living throughout Auckland! I'd also love to see free university education! There is usually a vast gulf between fantasy and reality. Sorry to spoil your fantasies
good night!!!!

Well excuse me Matt in Auck.
At least I live here and can comment on the situation first hand. You have left the country.
Are you becoming another 'foreigner' trying to tell us what to do?
Your general bad-mouthing of all commentators on this site ("save for one or two good commentators") does you no credit.
Do you think yourself superior now that you live in another country?

Now he thinks he is high and above coz he is living in aussie-land and can "look down" on the kiwis, trying to tell us what we are doing wrong.  However what he doesn't realise is that reading his general bad-mouthing of all commentators on this site, we will just laugh at him.

Typical kiwis - cynical, unconstructive with tall poppy syndrome. Muldoon was wrong - the emigration of kiwis to aus doesn't raise the IQs of both countries. This website is becoming the domain of loonie lefties and juvenile pro property mugs

Bahahahaha
I hope you were thinking of me when you said "juvenile pro property mugs" me old mate Matt in Adelaide.
Time to put my rents up.....again
Buying those rentals in 2009-2010 wasn't a bad idea :)
Seriosly though, hope your doing well in Oz
Regards

If you have had a position in the Auckland development industry for 16 years, that would seem to be a disqualifier for informed commentary. I think we can all agree that Auckland's planning and development over the last 16 years has been dismal.

Developers find "peri development" easy--taking empty land and putting in infrastructure is straightforward. I'm not surprised that, if you have worked in the development industry for 16 years, you would like to see this moribund process continue. That it causes broader infrastructure problems is outside the calculus of the development industry as it has existed in Auckland for the last 16 years.

FYI, I am not a student. Perhaps doing some research would help you develop a better understanding, however. In the meantime, I know better than to treat you as an expert because of your 16 years of experience in the "development industry."

Another pathetic comment. How do you assume that my career is associated with crap development? I've actually worked on some of the better development in Auckland including the beaumont quarter and viaduct

There's plenty of poor development in the Beaumont Quarter and the Viaduct, and some good work. Perhaps you did some good work? It doesn't matter. It certainly doesn't qualify you to talk about "affordable housing".

I don't really care if you think my comments are pathetic; I have no respect for what you write. You can whinge about being a tall poppy all you like, but your opinions here offer nothing other than arrogant and vacuous denigration. You have nothing to add to the conversation. That is why people are deriding you--not because they are jealous. That is the only message I hope you take away.

Well Matt in Auck, you certainly don't seem to be a very friendly fellow since you left New Zealand.
You sound off at anyone who suggests anything different to you, or disagrees with you.
What's the reason for all this grumpiness? Are things not going too well for you there? 

This arguement pops up quite a lot on interest.co.nz
 
"You are an expert/involved/have knowledge of the industry therefore your comments are invalid because you have a vested interest/I once saw a nasty development. 
 
I, on the other hand, have no knowledge/experience/involvement in the industry therefore my views on the industry I know nothing about are far superior as they are unsullied by knowing anything about the subject I'm commenting on"
 
Love it.

Expertise is good. In my experience, it is usually accompanied by sound arguments, good research, and substantial ideas. It is also seldom found in internet comments.
There are plenty of self-proclaimed experts out there; Matt is one of them. Matt, however, has shown only ignorance, whatever his background. He needs a better argument than "I have 16 years experience; you must be a loonie lefty/pro-property/anti-tall-poppy hater/grad student in urban planning" before I'll treat his ideas seriously. I was hoping to lampoon that--forgive me for missing the mark.
Of course, if you want to sit at his knee and listen to his bile, go crazy. I wouldn't call it wisdom.

OK. So land values outside the urban zone is under a tenth of that inside.
Bring in much more land but put it up for tender by asking for bids on how much each land owner is prepared to pay to have their land released.
Then use the revenue to subsidise the building consent process. Any land owner that holds out  for too long and once a large part of an area has been developed, can start by paying council rates as if the land is already developed. They would not be allowed to develop unless they pay an agreed levy based on recent averages.

I think you will find that the developable land outside the MUL has already been brought or contracted by land bankers .  Like it or not the the rules where set on urban limits and to undo all that drives todays values cannot be simplistically resolved.   
 
For a start those who own just on the other side now don't want to see prices fall!  
 
I query the absolute fundamentals of the affordability states for the emophous area that is now collectively known  as Auckland and the leap in thinking that extending the MUL will bring land values down.   For instance you can buy a good three bedroom house in Huntly for less than $280,000 which is about 30 mintues drive from Manukau City Centre and Hamilton. Also a 30 minute drive to Manukau, in rush hour, is Otara where you can buy a similar property  for about $10K more.  BUT to rent the same property in Otara will cost you $390 per week but only half that, around $200, in Huntly.  Is anyone really looking at the detail of these affordability figures?  
 
An average 3 beddie in Pukekohe is $320 per week or you can buy it for $260,000.    Your can buy a home for $320,000 in Mount Wellington or rent it for  $390.  Given there is a known correlation for distance travelled between home and workand rent values, however, the differences in the  rents given above cannot be wholely explained.  Otara has a payback of about 14 years and Huntly one of about 27, Pukekohe is 23 and Mt Wellington is 17.  The average seems to be about 20 years ie the value of the property divided by 20.
 
Perhaps the Government should therefore be looking instead at tying rent subsidies to house values rather than house rents so that low income house rents are more in line with returns for medium to higher income housing?
 
 

It does not matter. They would still have to tender a price ahead of the pack to get their zoning changed.
 
My suggestion is to make re-zoning contestable on a pricing basis.
Later on any balance would have to pay an "upset" price to get any cahnge.

Thousands of sections could be created in central Auckland in suburbs such as Onehunga Royal Oak, Ellerslie, Sandringham, Balmoral, Mt Eden, Mt Albert, Waterview, Pt Chevalier, Avondale, Remuera etc
All that council need to do is immediately change the Res 6a and Res 5 Zones to permit 300m2 sites rather than the 750m2 and 1,000m2 sites that are currrently required before a second dwelling can be built.
At the same time only one carpark per 300m2 should be required in these zones.
This change would allow existing landlords to create an additional rental unit on the rear yard of properties already owned and allow builders a supply of land that is urgently needed.
Combine this with a government subsidy for first home buyers of these new homes and the economy will get a major kickstart. The subsidy could be a refund of the GST content on the land and building package or an interest free loan on that GST component.
At least that would make up for the GST increase that has effectively killed of land develoment and building of new homes.
It's a no brainer! Just do it!
 

you'll never get widespread upzoning of Res 5 zones in the eastern suburbs, darrrrrrrling.

Creating "thousands of sections" is an impossible dream.
The bureaucracy would be bad enough but the fall out from those who feel crowded out would be unbearable for the poiticians both local and central .
And then there is the practical problem of providing services to these sections.
Power, water, gas, roads, footpaths, transport, schools, sewage and other amenities  would all need massive upgrading to cope.
The cost would be enormous, and would take decades to achieve- far too late to cure the present crisis.

There are many thousands of site equivalents available by incentivising multi storey on existing ridge lines and on shopping strips. Most of these already have good bus services and single parking per  lot is all that is needed.

No - there is plenty of scope for building within the existing bulk rules.  The current density rule does not differentiate between an 8 bed, 8 bathroom, 4 car mansion and a 1 bed, 1 bath flat.
If the 8 bed, 8 bathroom, 4 car mansion was converted to 3 x 2 bed flats why would it suddenly require a whole lot more infrastructure? - could be the same or less people living there.  The density rule is a leftover from the 60's when everyone household unit was deemed equivilent.  Nowadays that's nonsense.  Control the bulk and total inhabitants if you need to, but not how that is confugured into household uits and there would be more affordable housing.
You couldn't even tell the difference from the outside.

Agree with that. They call it "invisible density" in north america.
You can still see plenty of "villa conversions" in central Auckland. It's a low impact way of getting more density. They banned it in just before the rma was introduced I think - rather ironic as the Rma was supposed to be about managing effects

Auckland could also follow tauranga's lead and charge development contribution on a per hectares basis. It's a good incentive to increase density

Ehem..has anyone bothered to check houses on sale in Papakura, Manuwera, Otahuhu and other south Auckland burbs?  3-bedroom house on large sections for less than $300k.

Still way too expensive.  Go take a look at those properties - would you honestly pay $300K to live in them?

Huh?  Expensive?  Do you know that an average 3-bed home on 500 sqm section in Epsom is around 1.3M (Land 800k + House 500k)?  Don't faint.

Interesting how and article about cheaper homes has turned into one about cheaper land, or absence of it as the case may be.

I agree with John Keys - build some cheap affordable housing in Auckland and its environ just like Porirua and Wainuiomata. 
 
Who did you vote for?
 
cha cha

Has no one given thought to de-centralisation and regional development as a partial solution to Auckland bursting at the seams?
And surprisingly from a property manager, comes this article.

I've read the article...and it's a load of nonsense that guy is talking...
He says:
"House prices are determined by supply and demand and the cost of new housing."
And then:
"My logic is that it is hard to see how house prices could drop significantly and that Government and councils can really do little to encourage this."
Why is it a load of rubbish? Because Govt & Council's have a huge influence on the supply of housing - it's called zoning. You'd think he would be familiar with Council zoning since he's in charge of a large development.