Auckland's housing shortage continues to worsen by the month, with current consent rates suggesting the shortage is increasing by nearly four thousand homes a year.
In December 2012 Auckland Council estimated the City had a shortfall of 20,000 to 30,000 homes and would need at least another 13,000 a year just to keep up with the current demand that was being fuelled by the city's rapid population growth.
On average that would require 3250 new homes to be built every three months, just to keep up with population growth before making any headway into reducing the 20,000 to 30,000 shortfall that existed prior to 2013.
Since the Council made those estimates the number of new homes being consented in Auckland increased by 83%, from 1238 in the first quarter of 2013 to 2267 in the second quarter of this year (see accompanying table).
Unfortunately while the increase is impressive, it's not nearly enough.
The 2267 homes that were consented in the second quarter of this year was still nearly 1000 homes short of the 3250 that would be required to meet the target of 13,000 a year.
And things will get worse before they get better, because as long as Auckland's population is growing faster than the supply of homes, the shortfall will keep getting bigger.
The accompanying table compares the number of Auckland dwelling consents that have been issued in each quarter since the beginning of 2013 and the size of the shortfall from what is required to meet the target of 13,000 new homes a year.
It shows there was an accumulated shortfall of 14,525 homes over that 18 month period alone.
That is on top of the 20,000 to 30,000 shortfall that already existed when Auckland Council made its forecasts back in December 2012, so the total shortfall would have ballooned out to between 34,545 and 44,525 homes by the end of June.
The number of new dwelling consents being issued will need to increase by 43% from the 2257 issued in the June quarter if it is to hit the Council's estimate of 13,000 additional homes that are needed just to keep up with population growth, without putting any sort of dent in the growing shortfall.
Whether the Auckland Council and the government's efforts to increase the supply of new homes in Auckland will get them up to 13,000 a year is uncertain, although they've come close in the past.
From 2002 to 2004, 35,604 new dwelling consents were issued in Auckland which was an average of 11,868 a year, although that was during the last apartment building boom and over the same three years almost 10,000 of the consents issued were for apartments and many of those would have been the tiny shoebox apartments designed as student accommodation rather than long term housing.
Getting the number of new homes being built in Auckland back up to those levels and more, will be no small task.
When demand for a product exceeds supply the price usually goes up and Auckland housing is no exception.
Between June 2012 and June 2015 The REINZ Auckland median price jumped from $500,000 to $755,000, an increase of 51% in just three years.
Although other factors would have helped push up prices, such as the enthusiasm of Chinese investors for Auckland properties, I believe the primary driver has been the failure of supply to meet demand and the resulting shortage of homes.
By most of the commonly used measures, such as comparing house prices to household incomes and the rental yields being achieved on residential investment properties, Auckland housing is expensive and probably overpriced.
The longer that situation persists and the higher and more quickly price rise, the greater the likelihood that they will fall back to earth at some stage.
But as long as a housing shortage persists, it will likely mitigate the extent of any market correction.
This article was first published in The Property Line Quarterly Report which is published by interest.co.nz and sent to subscribers of our regular Property Newsletter. Both the newsletter and the Quarterly Report are free, we do not share subscribers' details with third parties and you can unsubscribe at any time. To subscribe to The Property Newsletter and receive the Quarterly Report and all of interest.co.nz's other property-related stories delivered free to you inbox, enter your details in the subscription box below:
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