BNZ's Tony Alexander argues building 422,000 houses in Auckland over 25 years requires a volume of building that previously took 161 years to achieve

BNZ's Tony Alexander argues building 422,000 houses in Auckland over 25 years requires a volume of building that previously took 161 years to achieve

The plan set out in Auckland's proposed Unitary Plan to build 422,000 houses will require a rate of building over 25 years that it previously took 161 years to achieve in the City of Sails, BNZ chief economist Tony Alexander says.

In his Weekly Overview report Alexander notes the Unitary Plan's aim for 422,000 extra houses to be built over the next 25 years requires an annual construction rate 2.5 times higher than the average achieved over the past 25 years. Canterbury achieved 1.5 times post-earthquake.  

"Look at this another way. As at the 2013 census there were 509,000 dwellings in Auckland. In 2001 there were about 420,000. The plan is another 422,000 in the next 25 years, in other words doing in 25 years what it took 161 years to do following the designation of Auckland as the country’s capital by the first Governor William Hobson in 1840," Alexander says.

"That target looks highly unachievable unless we invite a few of the tens of thousands now unemployed migrant construction workers in Middle Eastern countries to help out, for more than the US$324 a month they earn in the likes of Saudi Arabia. That is not going to happen. Expect more efforts next year from the Reserve Bank to ration mortgage lending to those with the biggest deposits and the highest incomes."

"Nevertheless, house building is going to get stronger and this is reflected in the most recent ANZ Business Outlook Survey where a net 52.2% of respondents said they expect to see higher levels of residential construction in the coming year. This was near double June’s net 28.6% positive, and above the ten year average of 25%," Alexander says.

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36 Comments

Does that account for the corresponding investment and planning (and cost) in transport, services, education, health, etc???

Yet we have a media disinterested in the interrogation of our politicians, but in frenzy over a rugby team..

Not sure I like this idea either:

"Expect more efforts next year from the Reserve Bank to ration mortgage lending to those with the biggest deposits and the highest incomes."

Well stated Caleb. Our Media are so pathetic and disengaged from the realities and challenges that NZ is facing that your average kiwi thinks everything is all roses and John Key is a top bloke because he says so.
We have the likes of Mike Hosking on TV1 saying that this country needs a population of 16 million people and Paul Henry on TV2 arse licking the National party and ridiculing the opposition parties at every opportunity.

Tony, I'm not sure I'm liking your lack of optimism.

I mean, just because it has never been done before, doesn't mean we can't do it now.

Have we asked any builders whether they think we can do it?

Maybe we could ask, I don't know, how about we ask Bob the builder?

Yeah, lets 'aks' Bob the builder!

Thats right Tony, so really we should slow our rate of growth to a more manageable and sustainable level.

Of course its not achievable, simply because increasing the number of homes by almost around 50% means Auckland needs to stretch all the way to Huntly

Even if you assume the least optimal land use single detached dwellings a quick glance at a map will show you that's far from the case.

Which is why Auckland needs much higher density by building upwards more & stop the major urban sprawl spread similar to Los Angeles.

Auckland needs much more apartments & skyscrapers.

Or just maybe, we don't need more people.

So the supply is unachievable.
It all comes back to DEMAND and the most moveable factor in immigration that could be turned off next week.
Surely even Chairman Key can understand that. It's doable matey!

The new plan does not quite fix the mistakes of the old plan. It still oversupplies land to the exurbs and crucially short supplies land to Auckland, this short supply means that land costs in Auckland are much higher than Brisbane or Melbourne. And with the other big difference in Auckland being our apartment values being much lower than Melbourne, you can't make any money at Australasian wages building in Auckland.

If we actually opened up land supply to Auckland City (instead of the exurbs) we would be able to import Australian workers at Australian wages, because the cost reductions in land would allow for massive cost increases in labour.

And we would have less sprawl and your rates would be lower.

Might not be achievable, so what ? Aim high, shoot for the stars and reach the moon. It sure beats doing nothing or just complaining. Go ahead with the Unitary Plan

Doh! why are we waiting for someone int a position of power/influence to state the obvious before the media picks it up and run with it? Quite a number of commenters on this website including myself stated this, but who questioned the Government or Council? No One! Thus they need to implement some of the other suggestions that a number of commenters on this site have put forward, such as reining in immigration, pushing investors out of the second hand house market, taxing capital gains on all investors, capping rents etc.

1. NZ Government can't stop 1 million expat Kiwis living overseas from returning back home to New Zealand.

2. NZ Government has deals with several Pacific Island nations so they can't stop that.

3. NZ Government has obligations to take in refugees.

4. Too much of the NZ population lives in Auckland which more should be done to encourage more Aucklanders & migrants need to spread out into the regions where "Ghost towns" are appearing.

5. NZ has a fast ageing population & low birth rates below replacement level.

Why would politicians or even council members give a sh1t on the viability of this plan. They won't be around in 25 years, or even 15 years to be accountable.

Does Auckland really need 400k + houses over the next 25 years? Until there is some way of separating demand from speculators v demand from actual accommodation requirements, all these figures being thrown about are nothing but pie in the sky.

With 70,000 immigrants coming into the country; yes that is only 17 years supply for them alone then there is natural population growth. (OK admittedly Auckland is not the whole of NZ) Further proof can be seen in the homeless and difficulty of FHB to find an affordable home.

And you have the stats for how many ppl are leaving auckland to live in 'Olde NZ' cities where people speak their language ? It's a massive unmeasured number would be my guess.

Chris M, you are assuming continuation of net migration at current levels. It is well known that NZ immigration is cyclical and depending on when Australia resumes attracting NZers again, net migration is expected to fall to point where a surplus of Auckland housing could develop. The issue for Auckland is having to deal with the twin cyclical extremities of property and immigration. Unless policy changes, the figures and projections are murky at best.

Hi Mike. You are right at some stage it will subside. But I have to point out that the so called gain from returning New Zealanders is a load of rubbish. The figures are returning NZrs 30,000 leaving NZrs 33,000. A 3,000 net loss. We still need a good long term plan whatever happens and for a free and open market to operate, we still need a supply of land and dwellings that are not artificially constrained by anything. The 400,000 buildings or sites will only be used when they are required. This is the only way that the market will deliver the required number of houses in the most efficient manner and at the lowest possible price. It will also ensure price stability and rid us of the boom bust cycles.
A free and unfettered market is one of the fundamental foundations on which successful western economies are based. Look at every other thing we buy and use. Largely the the markets are free and open, with the result that competition and increasing productivity is continuing to make goods and services increasingly cheaper. This crazy rigging of the market surrounding residential land and house construction is inconsistent with everything that is proven to work in the rest of the economy.

Floating houses, or better said, boat houses, with their output straight into the harbour!
The Dutch done it! Why can we?

What! 422k houses! That's more houses than got built from the age of the dinosaurs till the birth of Jesus. If the dinosaurs didn't do it it's clearly unpossible!

Now why didn't the best and brightest celebrity economist / mortgage spruiker of New Zealand state that 422k dwellings is actually only around a 5% annual increase over 25 years (Year 1 = 9000). Unachievable really? The facts just sound so different depending which way you spin them don't they?

Why contrast with a backward looking average over 25 years? How ridiculous is that in the face of compound growth?

TL;DR'- Buy BNZ more mortgages! All aboard the spruik train. Spruik! Spruik!

And don't forget to read the weekly condescension report!

Hey Jesus was a carpenter remember. Although I bet even he'd struggle to find a piece of land that the current council would let him build on.

All those immigrants will need houses, and cars, and health care... The best part will be, they will consume and pay tax. Win-Win... or what?

There is no win win. The more people that live in NZ, the more people that have to be supported by our primary industries.
Borrowing money to build infrastructure for all these people creates jobs, but not wealth.
A country is a business. To be wealthy it has to produce more than it consumes. Borrowing money to build infrastructure is pure consumption. there is no win win.

Totally agree. National have turned NZ into a nation of property flippers.

Yes. The lure of easy money buys votes.
It's like a drug.

Tony works for a bank.... strange he isn't encouraging that nz follows Canada stamp duty tax route

It's a shame he isn't indedependent as he is a smart guy

Over the years he has provided a lot of reasons why houses prices will go up with little in terms of solutions to the problems such as the 15% stamp duty tax. He is also another person that excludes students and temp visa workers from the foreign buyer definition.

Not sure why this definition is different
Australia, Singapore, Canada ... foreigners are people who are not citizens or permanent citizens
NZ- foreigners are only non-residents

Funny thing is that according to the media any kiwis living overseas would be classified as Foreigners as they are not resident. Nz citizens as foreigners doesn't sit right with me.

Tony has a point but one always feels he has house price spruiking motives at play.
But the other side of the coin is that whilst Auckland might struggle to build that many houses it may also not grow as much as anticipated.

This is more of JK tactic to divert attention to avoid have tax on non resident buyers which he does not realise is inevetiable. Unitary Euphoria will soon die down and come election year and he will be forced to act on non resident buyer like Australia and more recently Canada where recent data shows that within one month of implitation house sale has fallen drasticly.

Sold Soul To Chinese so are not able to see the damage done and doing to New Zealand as society is not forex markets so with ecenomy one also has to think of community and social fabric of the just equtable society

At this rate it should be interesting by the time of the next election.

Even if only part of the newly residential zoned land actually gets built on, having much more land to choose from that a house *could* be built on (as well as higher permitted density which has a similar effect) will lower the market price of land through competition. Once the price of land falls, it will then become economically viable again for developers to build a basic houses rather than having to build exclusively McMansions.

TA nails it.
We can no longer pay offshore fishing boats slave labour/ below min wage rates.. so cant expect the building industry to do so under our noses
What he doesn't talk about is where will all the imported labour live?

Curious.. the big build of the early 70s.. the affordable group housing push around Auckland...basic homes, no paths, garage, fences, floor coverings, ensuites, curtains etc... what was the rate these where built at?

The going rate for the current affordable home built on a 200 sq meter section in Sth Auckland is around the $800K ...are there enough people who can afford deposits/ mortgage repayments to buy them ALL Then maintain those mortgages long term, after interest rates start to climb again somewhere in the next 10 yrs?

Trouble with this business of importing cheap labour and using what amounts to slavery in industries like fishing, is that it does not take long for the economy, in its race for the bottom, makes it so that we cannot do without those conditions. Bloody shame on us.
I wish our system were being run by people who had the ability to see past the ends of their noses.