Dwelling consents flat in May - Auckland's housing shortage worsens

Property

The number of new homes being consented continues to fall well short of what is needed

30th Jun 16, 11:23am by Greg Ninness

The number of new homes being consented is running ahead of last year but there has been little growth over the last few months, according to Statistics NZ.

There were 2520 new dwellings consented in May, up 14.7% compared to May last year, but up just 6.7% compared to April.

In the year to May 28,387 new dwellings were consented, up 13% compared to the previous 12 months.

"The trend for new stand alone houses is increasing, but for all dwellings is flat," Statistics NZ business indicators senior manager Neil Kelly said.

"Fluctuations in apartments, townhouses and other dwelling types offset steady growth in stand alone houses."

That is bad news for anyone hoping to see an increase in the supply of affordable housing, which is more likely to be in multi-unit developments.

It reinforces a market perception that most of the new housing stock that is being built is aimed at the middle to upper end of the market.

The news was also not good in Auckland where a serious shortage of housing is developing.

It is estimated that at least 1200 new homes need to be built in Auckland each month just to keep pace with population growth.

But according to the latest figures only 732 new dwellings were consented in May, up from the 699 consented in April but down from the 788 consented in March and the 787 consented in February.

That means that, at the most, just 61% of the number of new homes Auckland needs each month were consented in May.

With net migration numbers yet to peak, the Auckland's region's housing shortage continues to worsen by the month, which will maintain upward pressure on house prices and rents.

In a First Impressions newsletter on the figures Westpac economist David Norman blamed uncertainty over Auckland's pending new Unitary Plan for the disappointing Auckland numbers.

"The slowdown in Auckland is bad news given the shortfall of housing in that city, but it appears to be the result of developers waiting for the Auckland Unitary Plan to be finalised before proceeding with development," he said.

"This hesitancy highlights the need for a speedy finalisation of the Plan and clear direction to be provided with regard to development, if the upward trajectory in residential building is to resume soon in the city."

However there was strong growth in consents the regions surrounding Auckland in May, with the number of new consents issued in Northland, Waikato and Bay of Plenty all up strongly on both a monthly and annual basis (refer chart below).

New dwelling consents also remained reasonably strong in Canterbury but relatively lacklustre in Wellington where just 138 were issued in May.

The total value of new dwelling consents issued in May was $899 million, plus another $178 million of structural dwelling alteration work was consented, taking the total value of residential building work consented in May $1.078 billion, up 24.1% compared to May last year.

In the 12 months to May $11.439 billion of residential building work was consented, up 17.5%% compared to the previous 12 months.

There was also another $492 million of non-residential building work consented in May, up 1.1% compared to May last year.

The biggest chunk of that was $115 million of educational buildings, followed by retail premises at $100 million and office buildings at $66 million.

Building consents - residential

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Source: Statistics NZ

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13 Comments

by sharetrader | 30th Jun 16, 11:33am 1467243203

its ok we will import more people to build more houses,
thats the logic of this present government

by unaha-closp | 30th Jun 16, 12:23pm 1467246194

Its because land costs and labour costs are rising faster than the saleable dwelling value.

Use apartment pricing to approximate for value of dwelling and bare section cost for land cost. If apartment pricing rises faster than land cost then it becomes more profitable to build and more stuff gets built. If not then less stuff gets built.

Auckland Council has the policy of strangling land supply to Auckland City, so Auckland City gets a very slow acceleration of housing supply. Auckland City apartment build rate is barely 1/3 as fast as a normal city.

Waikato, BOP and Northland do not strangle land supply, so their response to price increases is much faster.

by Carlos67 | 30th Jun 16, 4:52pm 1467262344

Yep and on the TV the other day 30% of the new builds are failing inspections so we are still building rubbish built by doggy builders and structural engineers with fake papers not to mention building materials that don't comply. New Zealand is a joke, seriously have we not learned anything from the leaky buildings that were built for a decade ?

by PocketAces | 30th Jun 16, 5:06pm 1467263213

In a few years time, leaky homes are going to look like not much more than a bad paint job

by two otherguys | 30th Jun 16, 6:01pm 1467266482

Non-compliant building materials

Council inspectors found (cheap) substitute materials being used at variance to the consent

by notaneconomist | 1st Jul 16, 11:02am 1467327761

That 30% failure rate needs to be broken down in order to fully understand what is happening.

If a house fails its inspection then the builder has to rectify that problem so the building can pass that leg of the process......this is something that the media and building inspectors fail to explain.

There is often a list of things that have to be done before the final sign off can take place in fact I looked at one recently and the spoutings needed to be cleaned out, no sealant had been applied along the bench units, there was a minor issue around the garage door, water line pressure tests (but these were actually in the property file), toilet floor hadn't been finished...........none of these were big issues they are the finishing jobs that have to be undertaken before a building gets signed off .......builders have to book in the inspections and sometimes the work plan can be disrupted......another one a week or two back when one engineer wouldn't pass another engineers compaction tests and the first failing engineer (newish grad) applied the wrong test for the job..........a building can fail its final inspection from something like the owner changed their minds on the type of e.g. fire they wanted installed....the installation can be at manufacturers instructions but someone forgot to provide the specifications for the changed fire.

Failing an inspection doesn't mean that the house stays in the failed state.......

by MortgageBelt | 30th Jun 16, 6:18pm 1467267508

Anyone commissioning a new build house will be worried about dodgy building materials, building techniques, unskilled workers, and failed inspections.
The leaky homes of the 1990s will be nothing compared to recent new houses.
And the PM is planning to bring in large Foreign companies to further exacerbate the problem.

Villas and old bungalows are going to rocket in value, since they were built with quality materials, eaves and built by honest tradesmen.

by Uninterested | 30th Jun 16, 7:50pm 1467273047

"The news was also not good in Auckland where a serious shortage of housing is developing."
I doubt that the above comment is correct.
There are many rentals around where I live that just aren't getting any takers! Sure people snap up houses, but they will then get a hell of a shock when they can't rent them out. Plus their input costs are going up like crazy: rates, insurance, insulation etc.

by ex socialist | 1st Jul 16, 8:50am 1467319833

I am not convinced that building standards are all that poor. In reality, partially as a result of the chch earthquake, building requirements have risen significantly. The specification of buildings is higher than during the 1970's with more specification around window flashings, insulation, and cavity systems on cladding. What I do think is that we have lost the art of building cheaply. With house prices souring people became less worried about the cost of construction, and many of the modern processes (such as the need for scaffolding) has increased construction costs significantly. What I am surprised to see is the static trend with apartments, which are most likely to meet the needs of much of the population growth, many of whom are students or the young.

by Robt. | 1st Jul 16, 9:37am 1467322668

We've gotta stop building houses in Auckland. The roads can't handle the population we've got.

by Brendon | 1st Jul 16, 10:37am 1467326262

Surely the surprising result is the continued strength of house building in Canterbury -five years post earthquakes -25% of the nation's building consents were issued to this region -yet it has only something like 15% of the nation's population.

Auckland didn't quite achieve 30% of the nation's building consents which is less than its population percentage.

by notaneconomist | 1st Jul 16, 11:17am 1467328651

Much of what happens in Canterbury makes no sense. If there is going to ever be any type of correction expect it to start here as supply gets over cooked.

The empty rate of livable houses is still very high and not something any RE agent wants to discuss.

by John_Howard | 30th Dec 16, 8:31pm 1483083103

It is true, we should not expect to have a number of affordable houses these days. With the increased population, these things has been like unreal to us. Though, a number of buildings, apartments and other commercial buildings are under construction but it is certainly foolish to expect an affordable one from them. The sky touching buildings that we can see are not just stand on a weak foundation or a roughly maintained construction techniques rather a strong engineered plan lies behind it. The traditional construction has been advanced so much that it can hold on house up to an worst condition of natural disasters and try to keep us safe. It's the foundation that need to be the strongest. Visit foundation contractors Los Angeles, CA to know more about the building foundation details and more. It was nice reading your post Mr. Greg. Thanks.