The expected increase in new home construction won't be enough to dent Auckland's housing shortage if migration remains at current levels

The expected increase in new home construction won't be enough to dent Auckland's housing shortage if migration remains at current levels

The significant increase in new home building that is expected to occur in Auckland over the next five years is unlikely to put a dent in the region’s current housing shortage if net migration flows remain at current levels.

If current projections of new housing construction over the next five years prove accurate and population growth from migration continues at its current rate, then the best that can be hoped for is that Auckland’s housing shortage will stop getting worse.

The accompanying graph shows how explosive the growth in net migration to this country has been over the last two years, higher than at any time since Statistics NZ began collating the data in 1922.

Source: Statistics NZ. Figures are annual.

New Zealand’s population growth from migration has more than quadrupled over the last two years, rising from 15,174 in the year to September 2013, to 61,234 in the year to September 2015, easily eclipsing the previous record of 40,437 set in 2003.

The accompanying table shows the effect this has had on Auckland’s population and on the demand for new housing this has created over the last five years.

It shows that Auckland’s population growth was reasonably stable between 2010 and 2013, with both the natural increase (the excess of births over deaths) and the net gain from migration being fairly steady.

Then in 2014 the region’s growth from migration started rocketing up, increasing from 7000 in the year to June 2013 to 29,100 in the year to June 2015, pushing annual population growth from 21,700 to 43,500 over the same period.

The sudden spurt in population growth put has put growing pressure of the region’s housing supply.

According to the 2013 census the average household occupancy in Auckland is three people per dwelling, putting the city in first equal place with Porirua for having the most crowded housing in the country (within Auckland average household occupancy ranges from two people per dwelling on Great Barrier Island to four in Mangere/Otahuhu).

So just to maintain household occupancy levels at the 2013 census levels and stop them getting any worse, one new home needs to be built in Auckland for every three additional people living there.

The table shows how poorly Auckland has risen to that challenge by comparing the number of new homes required each year with how many new dwelling consents were issued in the same period.

Even in 2010 when migration levels were much lower, 7767  new dwellings would have been required to house the growth in population, but only 3656 new dwellings were consented, leaving a shortfall of 4111 homes.

And although the number of new consents issued has risen strongly over the last four years, from 3394 in the year to June 2011 to 8300 the same period this year, it has not been nearly enough to keep pace with demand for housing caused by the surge in migration over the last two years.

In the year to June 2014, the strong growth in migration meant 11,333 new dwellings were required, but only 6873 were consented, leaving a shortfall of 4460 homes for the year.

And in the year to June 2015 the number of new dwellings required had grown to 14,500, and although the number of consents had risen to 8300 it was still not nearly enough, leaving a shortfall of 6200 homes for the year.

The thing with housing shortfalls (or surpluses) is that they are cumulative.

If you don’t build enough homes in one year it adds to the number you need to build in the following year to satisfy demand.

And if you don’t build enough homes for several years in a row, the cumulative shortfall snowballs.

As the table shows, over the last five years the cumulative shortfall between the number of new homes required to house Auckland’s growing population and the number actually consented has ballooned to 24,303.

Although the number of new dwelling consents being issued in Auckland is expected to grow significantly over the next three years, it is unlikely to put a dent in the housing shortage, although it should slow the rate at which the shortage has been increasing.

The Ministry of Business Innovation and Employment’s latest National Construction Pipeline Report, which was issued in July, gives forward projections of the number of new dwelling consents to be issued in Auckland for the next five years.

It is forecasting 13,557 new consents will be issued in 2016; 14,648 in 2017; 14701 in 2018; 14,264 in 2019 and 12,925 in 2020.

If you take the 14,500 new dwellings that were required to accommodate Auckland’s population growth in the 12 months to June this year as the number that will be required each year from now on, consents will start catching up with demand and overtaking it by the finest of margins in 2017, when the report is predicting that 14,640 new consents will be issued.

While the increased level of dwelling consents will be a welcome development, it is unlikely to relieve the pressure that has already built up in Auckland’s housing market, for three reasons:

Firstly, net migration has continued to grow.

In the year to June 2015, when Statistics NZ last updated its estimates of Auckland’s population, this country’s total net gain from migration was 58,259 people, but for the year to October that had increased to a net gain of 61,234.

That makes it likely that more than 14,500 new dwellings a year will be required to keep place with Auckland’s population growth, so it’s possible that even with the increased level of consents forecast in the MBIE report, they could still be falling short of migration-fuelled demand.

Secondly, the increased level of consents won’t be enough to put a dent on the existing housing shortfall of nearly 25,000 homes that is still increasing by the day and will likely continue to do so at least until 2017.

As long as migration flows remain at or above current levels, then at best, the increased level of consents will stop Auckland’s housing shortage getting any worse. But it won’t make it any better.

Finally, a consent is not a house, or an apartment, or even a garage.

It generally takes more than a year from the time a consent is issued for a dwelling to be built and ready for occupation.

And it’s not until they are available to be purchased, rented and lived in that they start to have an effect on market pressure indicators such property prices, rents, vacancy rates and occupancy levels.

That suggests that the actual supply of new homes won’t start to match population growth until 2019, at which point the housing shortage will start to plateau rather than decline.

Unless there is a significant fall in net migration.

So far the government has treated immigration as a sacred cow and concentrated its efforts on increasing the supply side of the equation rather than reducing demand.

So if there is a decrease in net migration, it would have to come from a significant deterioration in our economy relative to other countries.

That could increase the number of existing residents leaving New Zealand for countries such as Australia and the UK, and/or a decrease the attractiveness of this country to incoming migrants, whether they be expatriate New Zealanders or citizens of other countries such as China and India.

If that doesn’t happen, it appears that Auckland’s housing market will continue to be underpinned by strong demand-side pressure for at least the next five years.

New Residential Building Consents by Region - Quarterly
  Q3 2014

Q4 2014

Q1 2015 Q2 2015 Q3 2015
Northland Region 176 208 171 163 263
Auckland Region 2,079 2,188 1,766 2,267 2,500
Waikato Region 571 567 594 681 849
Bay of Plenty Region 380 356 374 408 511
Gisborne Region 16 16 15 9 24
Hawke's Bay Region 91 90 85 82 85
Taranaki Region 110 146 105 123 117
Manawatu-Wanganui Region 132 111 117 101 145
Wellington Region 430 383 423 358 380
West Coast Region 24 30 34 29 26
Canterbury Region 1,728 2,144 1,572 1,520 1,771
Otago Region 347 321 258 373 371
Southland Region 64 54 58 39 99
Tasman Region 70 78 78 79 97
Nelson Region 59 36 36 39 54
Marlborough Region 49 43 45 54 64
New Zealand 6,326 6,771 5,732 6,325 7,357
Source:Statistics NZ          

The above article was first published in Interest.co.nz's Property Line Q3 Quarterly Report. To read the full report click on the image below:

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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54 Comments

How accurate is the internal migration figures? Seems a lot of people "cashing up" in Auckland and moving to the regions...

Auckland shortage could continue forever too...

The official plan is for the shortage to last until 2042 at the earliest.

Sorry about being a broken record but Auckland Council's plan for housing - that got incorporated into the Special Housing Accord and sanctioned by the government - was to address the housing shortfall steadily over 30 years.

I agree with BNZ's Tony Alexander that AC underestimated the shortfall to start with and we also should remember that that plan was dreamt up while the increase in net migration was still kicking in. So the official target of 13,000 dwellings p.a. is well short of the number needed just to meet the needs of population growth. The shortfall is now increasing so I would agree the shortage is now being designed by AC/government to last forever.

That's why there is no downward pressure on prices.

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Isn't it high time that we had a referendum to ask the population of NZ if they want this high, prolonged level of immigration. When has this ever been an election issue that we can vote on? Where is their mandate? It seems to me that once again the politicians are doing what they want in defiance of public wishes. At least if we had a referendum and the politicians decided to ignore it (once again), it would once again expose their tyrannical tenancies. Unfortunately apart from NZ First I suspect that all the other parties would be no different on this issue. Maybe I need to reconsider where my vote will go.

There is one in two years. Maybe enough kiwis will wake up to what National have done to them by that time.

That kiwibuild thing doesn't seem like such a terrible idea in hindsight.

and six months before the election expect national to change there stance if the polls show that kiwis want a change and NZ first is growing support due to it.
be too late by then of course

Nothing to stop you getting a petition together for a referendum. Would soon give you a good indication of the level of support for your idea. Get enough signatures, you don't have to wait for 'politicians', you can force the issue.

Or are you someone who thinks someone else should make the effort ... ?

That is an impossible undertaking for one individual unless they have the support or backing of a nation wide organisation such as a political party, church or union.

If one person could achieve that, they could achieve anything... so perhaps that person should be our next prime minister...

There are plenty of sites where you can start an online petition, and if you're on social media it won't take too long to spread the news.
Once you have a few tens of thousand sigs, get the news involved.
.
The problem with referenda, is that they are not binding in New Zealand.
And JK happily ignores all of them.

Fair enough. But the claim that 'politicians' are 'ignoring the concerns of most people' sounds like cheap hyperbole. There is no conspiracy ignoring the issue, and certainly not on interest.co.nz.

But making the claims doesn't prove anything, certainly not popular support. (And not even 'conspiracy by the media'.)

There is a mechanism in our public life to bring major issues up around and in spite of the government of the day. All you need is 10% of voters to petition. That is not a high bar to force the issue.

Maybe the polling of the major parties just shows this is not the cause célèbre you think it is and why it only gets traction on the fringe.

How about you do an interest.co.nz poll on whether immigration rates are too high?

I suspect well over 10% will believe that they are...

Good idea.

Btw, how do these signatures need to be given? Is somehow "online" enough? Then it can be done. 300,000 signatures on paper are another matter.

In any way, I'll sign. And David can ponder on putting a poll online. It cannot hurt to know your readers' views, right?

Chris is right, not withstanding the fireworks ladies heroic effort. The Labour/Greens state assets sale petition was not a small undertaking. To do as you suggest we would have to mobilise a nation wide organisation with feet on the ground. The only one that comes to mind is NZ First and the more cynical side of me thinks that while they like to play the immigration card when it suites them, would they actually put their neck out this far? It could be a big benefit for them or a liability. I think in their shoes I would want to do some market research on how the issue is generally perceived. Then there is the question of the petition statement. Clearly we are not out to halt all immigration, so how do we word it.
It all needs some thought.

Chris-M you are not alone, being the typical 'internet warrior'.

The problem is that the left tend to be pro migration and national being centre left is liable to be as well. What we need is some solid right wing leadership.

National centre left!! Baaaahahahahahaaaaaaaa....

Thanks man, I needed a laugh!

Oh they are centre left alright........what the hell has National done for SME's? ......not a bloody thing!!!.......NZ is a fools paradise!!

National's policies sit firmly at the right end of the spectrum. Not extreme far right, but quite right wing.
.
What used to be considered centrist policies are now considered left.
What used to be considered leftist policies, are now considered far left.
The centre, the definition and perception of it, has shifted considerable to the right.
.
If you consider National to be a centre left party, then I'm afraid your own views are probably extreme right wing.
Which is odd, for a person your age.

It is the totalitarianism of the Key regime that makes it appear in the same league as the Soviets or other extreme left ideologies...

...that is a serious opinion, not sarcasm, by the way...

Chris, whatever your views of the Key government comparing it to the Soviet regimes - that spawned Stalin among others - is clearly preposterous. Please let's keep some sanity to the debate/conversation. Thanks.

Someone once asked a European politician what is the difference between the left and right - they replied "about ten years"

Gareth, insanity is repeating the same mistake over and over which is what NZ seems profoundly good at...

In comparison with the Soviets: IF we exclude the state sanctioned murder and the various wars, then the definition of totalitarianism (ie total control by the state) is actually being met in several aspects of NZ government, in particular the Christchurch fiasco and the Crown's actions and response.

Hijacking democratic processes such as the Auckland and ChCh plan reviews by empowering an "independent hearings panel" which has clearly outlined objectives is another example.

Overall we may not be a Starlinist state, but there are clear leanings towards central control emerging in many aspects of what should be democratic freedoms.

Cordoning people's property and destroying and confiscating them makes it feel very Starlinist...

So I will hold my opinion. Thank you.

Chris_J you are getting more obsessive about your pet topics by the day.

No, Chris is just presenting facts - the reality of how this government governs. If you disagree, then present your arguments for why it has been necessary to repeatedly suspend democratic elections in Canterbury; why the participatory and decision-making rules regarding planning in Christchurch City have been amended such that the only challenges to the decisions can be on points of law (not substance); why NZ Police are interrogating citizens known to be active in their opposition to the TPPA; why the OBR rule was not subject to Parliamentary policy-development processes?

Totalitarianism is the correct frame of reference on which to view these actions by our governing authorities.

your "serious opinion" is an insult to the 30Million dead under the hands of Stalins Soviet terror. Tell me, how many slaves has John Key worked to the death?

None ....... yet. The left and right both have the SAME ideological goal - create "heaven on earth" - a utopic vision - only problem is it can never be achieved - and the goal posts will always shift. The right believe is is based on the individual , the left on the masses.

Both are a result of "Christian" ethic or moral philosophy.

Dtcarter, how many lives has Key brought to the edge of despair by his actions over the ChCh earthquake??

I can tell you many hundreds or thousands, and many of those people are no longer living to tell their stories.

Yes, i can see that central government is just one step away from mass convictions of christchurch residents for crimes against the revolution and sending them all to be worked to death in prison camps building monumental shrines to honour of the supplanting of local democracy with central.

The right wing is generally for those who want to get ahead, while the left wing is for those who want to be dragged ahead by those trying to get ahead. I strongly suspect that being right wing is a property of most of those who get ahead in life.

Ideally the right would create conditions that allow people to work/ generate wealth for themselves. (unlike the left who take from those who generate wealth and give it to those who don't)

Or,
right wing is all about 'me' and left wing cares for others as well as 'me'.

Ironically the further right you go the higher the average amount donated to charitable causes appears to get. Possibly something to do with choosing which causes deserve support rather than having the state remove your choice. Classic example is Bill Gates, whose entire fortune is based on private ownership of copyright / patents (as opposed to social or public ownership), I reckon you couldn't name a left wing individual who donates more annually to charitable causes.

The left is not about caring for others so much as caring about what others can do for me. The right is for freedom to choose which causes deserve support.

At a cursory glance research seems to suggest otherwise:

Conservatives and liberals are equally charitable:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2148033

Also, Bill Gates predominantly donates money to the Democratic Party. It's falsity to claim he is an example of a right-winger. Perhaps you should speak about other famous wealthy right-wingers such as the Koch Brothers, I hear they like to donate their money for various causes.

He donates to both parties as suits his agenda from what I've heard. I stated that his fortune is based on privatisation (right) as opposed to socialisation (left). He is also an advocate for stronger digital copyright laws (right) and appears to favour lower corporate tax (right), based on Microsoft's hiring of legions accountants to minimise tax.

The article you linked shows that both sides are equally charitable but only when adjusted for income and religiosity. In raw numbers the right gives more $ than the left ( this is the large bivariate difference referred to in that article you linked ). When you adjust for arbitrary variables you can make actual numbers tell any story you want.

what about warren buffet, he donates a huge amount of his fortune to help mankind disease research or mark Zuckerberg donating 992 million to the same cause.
there are plenty of billionaires that donate a lot of money to help mankind I don't think its a right or left thing I think its about what type of person you are either I will spend my fruits on something I can enjoy i.e. super yacht or I will spend it on something that's makes me feel good inside

That is money again.
How do you value donating time for and caring about others? Or maybe look at money donated as a % of available 'spare' money rather than a total amount.
You description would saying Gates is more caring than Ghandi or Mother Theresa as he had more money to give away. I know this is an extreme example.

donating more doesn't equate to being more charitable it does however equate to being smarter about being charitable and as such increasing the total value to society of the charity. Which benefits society more: Mr Left who gives 90% of his $100,000 away to charity in a day or Mr Right who invests it in a fund ( for example the Medallion fund ) with 34% (minimum) compounding returns for 10 years and then gives 1.5 million (about 80% of his net worth) to charity?

The problem is that the left don't just want to give lots now without managing it properly, they want to force others to do so as well via taxation. Why should others get to decide that about a third of the 33% tax that I pay should go towards ensuring that those on the dole in NZ have enough to afford smokes and booze? That same amount could probably feed and educate a dozen children in India who will become productive members of society after a few years with almost 0 rates of "welfare dependency".

By managing money properly you effectively donate your time and skill. physically going on an aid mission trip to help build houses (for example) is a remarkably inefficient use of resources for most kiwis who could do more good by working in NZ, cashing in the leave they would have used to go overseas to build houses adding that to the airfare & travel expenses and using that money to pay builders from closer regions to do the building (this method has the added benefit of having the house built by professionals & stimulating economic activity in the affected regions). Physically being present to donate "time" is generally for the attention seekers and/or warm fuzzy feelings it gives the person doing the "good deed".

Part of the problem is that the left want to effectively tax their way into equality & wealth (which doesn't work), we need the right for at least a little while after having had the left in power for so long in order to bring in stimulatory legislative policies that allow the economy as a whole to grow bringing the absolute level of wealth possessed by the "poor" up as a side effect of raising the total amount of wealth in the economy.

I think you will find your cashed up leave money would just go into some warlord's Swiss bank account or fund another Mercedes purchase. If people cannot build their own house now they will never be able to. It's not rocket science. Some of these countries we help actually build their own rockets you know, or shoot rockets at each other.

The right in this context are the beneficiaries of immigration. The left are those who seek to create a post ethnic world. Neither side acknowledges the unfavorable trade between source countries and destination countries for the averave citizen. They sell us needed skills, diversity, economic benefits of a larger population none of which stand up to scrutiny.

Bringing age into the discussion DFTBA......brings years on the planet and hence knowledge of the system.....I started in business in the early 1980"s.....Compliance was annual accounts to the IRD, TB testing, ACC, Register and warrant you vehicles and stuff all else.

Roll forward 2015.....and I am stuck in the office full time doing compliance....bit by bit....year after year.......more and more of this nasty crap and all the costs are worn by the business owners........National is the illusion party.....it looks like it is right but is doing everything that you'd expect of a left party!!!

National want a stable NZ and what stable has turned out to be, is they, as a party will not rock the boat and so are prepared to do anything to keep the left vote.......I have a wide field of business acquaintances (all SME types) across the country and everyone is at the end of their tether.....they have had enough of the never ending compliance obligations, the constant updating to new legislation, incompetent and often rude bureaucrats to deal with.....National know full well this crap is going on.......and like true left leaning participants they only offer legislative change that supports left ideals....and rarely applying legislative change that is beneficial to the right.

I want the freedom to run my business, to make a good living, to take care of my health, education and that of my family etc......without being constantly impeded by some useless bureaucrat who wouldn't even know if tits on a bull were useful or not........hardly extremist stuff is it???

It is a human right and dignity to be independent and free.......so quite why you would see that as an extreme right wing view is beyond me.......odd indeed!!

Hardly extremist indeed, but unfortutnately for you it's got bugger all to do with left/right political views. It's an illusory conflict... you see these things happen and shout at the bloody left wingers. Then the people who identify as left wing think you're yelling at them for some reason, though they don't support just about anything you're angry about in the first place. Do yourself a favour and argue without using the word left and I think you'll have a much better time mate!

SMEs? What, you mean small and medium sized businesses that create jobs and employ people and do useful stuff? No political party cares much about them as far as I can see.

It's all about bigger is better so you can tax and unionise them mate. It's about having more regulation so small business cannot compete with established ones. It's about bankers lending more to push up the price of houses to increase the interest tribute we pay to our overseas masters, all the while thinking we are very clever. National seem to have carefully repeated many of Labour's mistakes.

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Hush now, and get back to thinking about which flag you're going to vote for.

"Hamish Rutherford had an article in the Dominion-Post yesterday in which he quotes the Prime Minister as claiming, on the one hand, that the recent high net migration inflows are a “time of great celebration”...

Michael Reddell's thoughts on immigration are always enlightening: http://croakingcassandra.com/2015/11/25/a-cause-for-great-celebration/

You've got to be dreaming -- the build rate is never going to catch up with current planning rules. Council and Iwi costs will also make it prohibitive to build cheap houses.

Sad reality of National Government continually failing their people by creating an environment of inequality. http://www.stuff.co.nz/business/money/74380950/milliondollar-state-house...

Lets stop kididing/deluding oursleves.....Auckland and environs housing has got beyond insanity.....we produce a bit of milk, some meat, few botts of wine and limited IT and add ons...we aint the rock star earners we think we are. We will look back soon and wonder what the heck were we thinking...managed correction is now a pipe dream...carnage is what we are going to see. Behind the scenes Key and his mighty men must be have every digit crossed. I bet the open dated ticket to Hawaii is taped to his butt!

hahahaha... you're joking right?

I doubt that he is joking. Imagine if half of all that money the banks have fronted up for for the property ponzi was invested in industry.
Problem is of course the bank wont lend you money unless you have security - mostly property... So you cant blame individuals, the whole system is geared for failure.

do you mean.. is it not enough with selling houses to each other?

Great article Greg.

If immigration/migration to Auckland is not quelled, the only other option is to open up land (brown/greenfield) and come up with more inventive ways to encourage housing construction.

Sorry but that is dreaming

Jonkey is just as spineless over (mainly Auckland) immigration as he is over upsetting the Australians.
On that topic at least Little and Goff are doing all they can to tell the Australians how bad their recent actions are, not that they will listen. It will be interesting to see if Goff as mayor will tell the Government that they cannot have uncontrolled immigation without supporting centrally sourced infrastructure including a boost to recover from the current deficit.

New Zealand Herald today (26 November) tells of building firms who say there's a big shortage of workers to build houses.

The housing shortage will persist.

PS: Looks like we need more immigration eh Chris_J, et al.

I completely agree. Increasing coast of construction is really a big issue for this generation. To avoid this issue we have to hire a good and experienced builder who can understand our problems and give best service. Good news for all New Zealand residence that Urban Homes is one who can give us a satisfactory output within a reasonable price. http://urban.co.nz/