There was a sharp decline in the number of new dwelling consents issued across NZ in April, Auckland's housing supply crisis worsening

There was a sharp decline in the number of new dwelling consents issued across NZ in April, Auckland's housing supply crisis worsening

The number of new dwelling consents issued throughout the country dropped sharply to 2106 in April. That's down 673 from 2779 in March, and down 255, or 11%, from 2361 in April last year, according to Statistics NZ.

That puts the number of new consents back to where it was two years ago, when 2112 consents were issued in April 2015.

Statistics NZ attributed the drop to the fact that the Easter break occurred in April this year.

"Councils don't usually issue building consents on public holidays, so the timing of Easter drove a fall in April's building consents," Statistics NZ business indicators manager Neil Kelly said.

However the figures held little in the way of Easter cheer for the Auckland market, where there is an estimated shortage of at least 30,000 homes, and 1250 additional homes need to be provided each month just to keep pace with the region's migration-fuelled population growth.

Just 726 new dwellings were consented in Auckland in April, which was just 58% of the number that need to be built each month to keep pace with rising demand.

That means Auckland's housing crisis is continuing to worsen each month, with migration running at record levels, but new housing supply continuing to fall well short of what is required.

Within the Auckland region the highest number of new consents issued was in the upmarket central Auckland suburbs (166), followed by Albany on the North Shore (125).

But only 73 were issued in Manurewa-Papakura and 60 in Franklin, suggesting that most of the new consents were for more expensive homes in the more upmarket suburbs, with a lesser level of activity in the more affordable parts of the region., which would worsen the housing crisis for people on low incomes struggling to get a home. 

There was an even bigger fall in Christchurch with just 159 new dwelling consents issued in the city in April, compared to 278 in March and 399 in April last year.

And Wellington City continues to languish in new housing activity, with consents for just 49 new dwellings issued in the capital in April, but that was up on the 45 issued in March, and the 28 issued in April last year.

In Lower Hutt just 11 new consents were issued in April, and in Upper Hutt there were just 12.

In a First Impressions note on the figures Westpac senior economist Satish Ranchhod said when the effects of the Easter break were removed, it appeared that the number of new consents being issued had levelled off rather than declined.

"After picking up through 2015 and early 2016, monthly consent issuance appears to have reached a plateau," he said.

"In Auckland, overall consent issuance has levelled off since 2016 after a steady rise from 2011."

There has also been a big decline in the amount of new non-residential new building work consented.

In April consents were issued for 204,000 square meters of non-residential buidlings, including schools, hospitals, offices, shops, warehouses, factories, hotels and civic buildings, compared ro 325,000 square meters in March and 286,000 square meters in April last year.

In the 12 months to April consents were issued for 2,643,000 square meters of new non-residential buildings, the lowest it has been since the same period of 2013.

Building consents - residential

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Greg Ninness is correct: this will do nothing to weaken Auckland house prices.

Underlying demand for housing in both Wellington and Auckland is huge. That basic issue has not been addressed properly by the private sector or the public sector.

The horse has bolted and the state we find ourselves in now is lamentable. Planning should have started years (decades!) ago.

National can't be held solely responsible for the mess we are in, albeit I anticipate that some contributors here will seize upon the opportunity to do just that.

Until realisation that the economy is not that great after all.. Construction is one of the main factors that the economy has been given a tick by the rating agencies..
Already Auckland has slipped to 13th spot in the regional performance index...

17
up

National can't be held solely responsible for the mess we are in

Maybe not solely but I'd lay at least 90% responsibilty at their door. You do know they've been in Government for the last nine years? Here's just a few reasons for you:

1. Record levels of immigration
2. Constant denial there's a crisis
3. No change in taxation policy to reign in the speculative ponzi in residential housing.
4. Lack of any subtantive regional development policy
5. No attempt to find out and regulate the amount of overseas capital flowing into the residential property ponzi.

Hows that for a start? I'm sure others can think of a few more.

Hi Tom,

You write: "Maybe not solely but I'd lay at least 90% responsibilty at their door. You do know they've been in Government for the last nine years?"

Respectfully, nine years is not a long time period in the context of developing and implementing a country's housing policy. What did Labour do in the preceding nine years? Clearly, that question is just as pertinent.

Your figure of "at least 90%" is arbitrary, to say the least......

1, 2, 3 and 5 could be dealt with overnight if National had the will to fix it.

Huh?

1, 3 and 5 are things that increase demand.

"Fixing" 1 or 3 or 5 would reduce demand and cause even less houses to be built.

They also campaigned on the need to take urgent action to address the house crisis, then denied any crisis existed for the next nine years - right up to the present day. It's all a sign of our success.

So while the previous government was guilty of incompetence, this National government seems guilty of a cynical betrayal of young and renting Kiwis. Looks like outright dishonesty.

So we cant change history, so the blame game is irrelavent. Looking forward, is National going to even attempt to fix anything ?
Are they going to deal with Immigration ? No
Are they going to look at closing down tax advantages around property investing ? No
Are they going to deny demand is an issue in this mess ? Yes
Are they prepared to stump up and look at changing rules around foreign ownership of property ? No

Hopefully they aren't re elected and whoever does end up in power gets of their arse and does something for the good of the country in the long term.

Labour may have turned the ignition switch on, got the car warmed up, but National have pushed the throttle to the metal, ripped of the rear view mirror and thrown away the handbrake.

Both are to blame, but just because Nationals not the only culprit it does not make sense to keep the same people in who call our young people druggies and say supply is the issue.

70,000 a year, thats nearly the size of CHCH in 5 years.

Good point -give National another 9 years and that is another 630,000 people that needs to be housed, transported on congested roads and inadequate public transport, policed and given education and healthcare in systems that already are at capacity.

Give Labour a shot then that population growth will be reduced by hundreds of thousands over 9 years (tens of thousand a year) and an extra 100,000 houses (giving housing to 270,000 people) will be built. All the other public systems will also be under less pressure.

Nationals plan going forward is consistent with their previous denials that the housing crisis exists. Their plan is consistent with their belief that the housing crisis is a sign of success -so all the need to do is make a few minor adjustments to quieten down the 'whingers and complainers' -then it is full throttle forward......

You're right tothepoint, let's give them another 9 years, no need to be hasty, I'm sure that private enterprise is just about to come to the rescue, free market and all right? despite all the market uncertainty, funding issues, and increasing building and compliance costs. In fact I am going to start a property development business right now. What could possibly go wrong?

Even property developers seem to interested in Labour's housing plans.
https://youtu.be/A-zfPw890p8?t=4m17s

...

10
up

What's worse is that it's a long way from a consent to a new dwelling - there are heaps that have been consented but not built.

11
up

The tide is turning on the property 'bubble' globally, Auckland is next to to follow..
Thanks to the current government allowing speculators to push up prices so much that the average kiwi now cant afford to build a new home

There are numerous causes as to why Auckland housing has increased so dramatically. A primary one in my mind is shown in the building consent count for much of the past decade. Isn't this primarily an issue with the council rather than the government? So many people seem to focus on national rather than local governing causation.

From what I have read, in recent times the rate of increase in population for Canterbury is similar to Auckland. But, house prices there have been rather stagnant for a bit. Look at the consent chart above for a hint as to why this is.

There was a lot less foreign money flowing into Christchurch.

Until recently you could make lots of money in Auckland by buying land and waiting. Easiest investment ever with council guaranteed returns, as the council blocks land release to Auckland. Investment money went to the high profit areas.

Hi Houses Overpriced,

You write: "The tide is turning on the property 'bubble' globally, Auckland is next to follow."

Respectfully, if something happens overseas, it doesn't mean it has to happen in Auckland.

People need to understand that American-fried Kentucky theory need not necessarily work in NZ.

I would hate for it to happen, as I know that people will be affected.. don't think that its my hope for it to occur..
im just stating the inevitable!!!

Easter is not to blame nor is it because of the lack of land or the fault of Council, it is simply that people cannot afford the ridiculous costs of actually building. The crisis will not end until immigration is dealt with and maybe some sort of tax relief for the average person trying to build a home.

Huh?

So you want to cut immigration to force labour costs upwards and are totally happy with paying 50% overprice for the land.

And you think NZ owes you a tax break so you can build your non-profitable private asset.

What nonsense Building consents are up 13 percent year on year in Auckland for the March/April period. What nonsense to misuse Easter statistically, in an effort to promote the housing shortage myth. Nationally for the same period ALL regions with the exception of Hawkes Bay ( 5 less ) and Canterbury have seen a rise in building consents. Canterbury building consents are down 30 percent year on year- should that come as a surprise.

Hi Cowpat,

You write: "What nonsense to misuse Easter statistically, in an effort to promote the housing shortage myth."

Respectfully, any systematic social/economic analysis suggests that the housing shortage in regions such as Wellington and Auckland is no myth.

If the shortage is so real, then why were the rent increase rates of the past decade so far below the house price increases of the past decade?

My point exactly. We only had a shortage of properties to speculate with, not to live in. A lot of this new immigrant wave found a way to deal with house prices by renting 2-3 families per house, so the old statistic of 2-3 per house is long outdated.

This sounds correct. Look at all the cars parked on your street these days.

We've gone a step further in Wellington by having 5-6 people per bedroom. Wellington isn't going to let itself be outdone by recent immigrants.

Tothepoint

Do you have any links with data to support the assertion that Wellington has any housing shortage?

Tothepoint

Do you have any links with data to support the assertion that Wellington has any housing shortage?

Economist Shamubeel Eaqub foretold that a construction bust will hit Auckland sometime in 2017 and will spread on to the regions, shortly after which an economic recession will follow considering how every other sector is latched on to construction in one way or the other.
Despite booming prices in Wellington, I barely see any residential construction activity in most parts of the city. The supply will fall well short of demand in the city and we may see Wellington house prices match up with Auckland soon.

hard to understand NZ is so keen to the advice from an "economist" with only a bachelor degree

Celebrity power!
Alas I am not a celebrity so nobody listens to what I say including my dog.....

Hi Uninterested,

You write: "Alas I am not a celebrity so nobody listens to what I say including my dog....."

Well spoken! I like a modest person!

Pity there aren't more people like you contributing here.....

it doesn't take a rocket scientist to state the basic facts :)

It's symptomatic of the mediocrity of public discourse across many areas in this country.
Eaqub is ok but he doesn't provide much in the way of novel insights. For me he comes across as a cross between a competent high school economics teacher and a politician

So a lot more credible than the average politician then?

Eaqub is more credible than that National-obsessed radio jockey, "Horse-king", who gives macroeconomics analysis on his early morning show.
A few days ago, I heard him challenge Goldman Sachs economists on technicalities of the NZ housing prediction.
He also once said there is an overly simple solution to our housing crisis - "build more houses". Genius!

Well, we let a radioman with minimal understanding of music copyright ("pretty legal") be our finance minister...

So there's that.

Who does pay the salaries of NZIER?

With respect , but anything Mr. Shamubeel Eaqub says has to be taken with a ton of salt he has been so wrong thus far and his views are quite eccentric ... that is why he is renting until now and advocates people not to own a house because it is a bad investment ...Go figure!!

Does anyone want to blame the Auckland council for the housing mess at all ??- it's the council who issues permits and regulates most of land release and building Zones and charges arms and legs for it own incompetence - ask anyone developing a bit of land and you will hear horror stories ... it is the ACC who added almost 80 - 100K to the price of every house in Auckland through development contributions, permit costs, etc ...

It is easy to blame the Gov for everything but there are some real unelected bureaucratic culprits behind the scene and we need to point these people out and hold them accountable too -- No one can deny that they were the main reason for delaying Auckland development plan and the UNi plan for the last 5 years until the Gov put the hard word on them - and they are still mucking around.

You mean the Auckland Super City council set up by National to solve all these problems?

I put Eaqub in the same box as Gareth Morgan. Genuine concerns and wise commentary about the shambles created by dopey policies.

Shamubeel Eaqub is a good economist - and he's well respected within the economics profession.

But for many years, he's been saying houses are a poor investment and that people would be better off renting than owning...... I'm not sure, in hindsight, that if you'd followed his advice you'd be very happy about it.

Nonetheless, Shamubeel does write a lot of good stuff and I think his analysis and commentaries are always well worth reading.

Well if he's indeed been saying that "houses are a poor investment and that people would be better off renting than owning" then he's been dead wrong and as a consequence a bad economist

It is very location dependent. I can state with a very high level of certainty that I have been far better off via renting from 2006 to 2016. I sold up in California in 2006, and rented for more than a year, then moved to Christchurch in late 2007. The year spent renting in CA was, well let us just say, fruitful from a fiscal aspect. This was just at the beginning of the GFC, and people we willing to rent out very flash homes for a fraction of the carrying cost. Arriving in NZ, it was an easy decision to rent instead of buy as I could pay the rent for about half of the home value when invested in term deposits. A couple of years in the outskirts of Christchurch, then moved to Hawkes Bay and continued to rent. Just missed the earthquakes in CHC fortunately. The earthquakes made for some interesting opportunities for astute property investors, but that is another topic... Rented for another eight years in Hawkes Bay, where my landlord was making about 4% return while I was making 7-8% return via my conservative term deposits. About a year and a half ago, it finally became cheaper to own rather than rent here (I am factoring in capital gains in my assessment) so I am once again a homeowner.

I am a practical example of the refutation of your assessment about the wrongness of housing being a poor investment.

The huge decline of prices that everyone is waiting for will not happen for some time yet. Supply and demand is so far out of kilter that pressure will remain on the market, until increased consents are actually converted to liveable dwellings and demand tapers off. Election year has always been slow on the price front and with winter looming it doesn't paint a good picture. With the LVR changes end of last year and the approaching election many seem to be pulling away with a wait and see approach. Are there huge volumes selling of houses at low prices?? I'm not so sure. Volumes selling are low, so there are only a few houses being sold at slightly lower points in Auckland. This time next year there will be either the same idiots or another bunch of idiots in charge and still the back log increases! There would need to be a perfect storm from all angles globally and domestic to see prices reduce to the 20-25% levels some are hoping for in the short term. Possibly with time over a 2-5 year period but certainly not immediately given current supply and demand.

ditto - realistic analogy , well put

Umm... my reading comprehension must be rather poor. What is the realistic analogy that you are referring to in your comment?

Agree, Upside - you're right on the money. Good commentary.

A major epidemic (such as the 1918 influenza epidemic) could pull back prices. But, as you say, a "perfect storm" sums up what would be needed - and, realistically, that's not very likely.

Not surprised at all. Sales slumped over 30%, so why should that not impact consents? Its simple supply and demand at work here. Developers cannot sell their home and land packages anymore, just look at how many sections are for sale, especially out north and west. Watch for more smaller developers falling over shortly due to a lack of cashflow

I am noticing this, also lots of houses now advertised by building companies on Trademe and at reduced prices. I hope half of them do go bust for raising the prices so high, their profit margins are huge. Half of the developers that look as if they are in trouble appear to be Chinese with Chinese REA advertising them.

Exactly!

easy to understand. investor can't get the loan, so do the developers

Yet Bill English and Steven Joyce keep telling us, Auckland and NZ in general is undergoing its "...biggest construction boom in its history."
Why don't the media (including this site) call them out on this?

Either they are all imbeciles or liars, I am not sure which is more worrying. I don't believe in religion but am now starting to wish there is a hell that they will all go to for eternity. How they can sleep at night is beyond me.

I believe that this comment is too strong. In general politicians are not necessarily very intelligent in terms of analysis of figures. Data manipulation. Creating leading edge analytical spreadsheets.
Even if they were, they wouldn't have time for this.
Politicians have to know politics though. That's all.
So its simple, if you don't like their policies, vote for some other party. That's it.
One problem though: its a binary thing. Voting. You have to average out the policies and make an overall assessment.

Therein lies the problem none of the parties seem to want to stick their neck out and deal with the problem head on, as the immediate consequence will be painful, they just want to kick the can further down the road. Sooner or later the road will end or collapse. Winston seems to be the only one remotely willing to tackle this.

Personally I would like to see a National government with Winston calling the shots on immigration, though I don't know whether that would ever happen.

ie National with the bad bits excised....

Yes, as Labour together with the Greens are not an option in my humble opinion

But there are 6400 houses (houses, apartments, units, townhouses) in the greater Auckland area, and 1398 in Wellington, for sale on Trade Me! Why, when we have this housing shortage?

Even if there are no excess houses, there will be churn as people upsize and downsize. Many of those advertised properties will have people living in them.

I agree, but this "churn" can only keep going as long as it creates enough deposit for the next house. See how many are advertised "owner/vendor on the move", or "Have purchased". This means the next sale is conditional of this one selling at, or near the asking price. The "fuel" that kept prices high is starting to run out, or left Auckland already.

No argument here, things are looking a little precarious in Auckland at the moment. I just find the argument 'there are houses for sale therefore there can't be a house shortage' rather lazy. Even in countries with food shortages there will generally be food on the shelves, that doesn't mean the price is affordable or that everyone is getting enough.

These vendors are asking unrealistic amounts, some of them are asking for $100k or more above what they bought the property for 6 months ago. The REAs are still trying to pump up prices.

People are getting nervous that is for sure

Wait for headline yoy growth in median house prices in Auckland to turn negative. When they panic they do it en mass: https://en.wikipedia.org/wiki/2015%E2%80%9316_Chinese_stock_market_turbu...

For them NZ houses are nothing more than an investment with a return that suddenly turned negative

At the time the gradient of stock market growth was approaching infinity. Once I saw the distribution of the education of the Chinese investors there were about 8%+ of the investors were illiterate. When everybody hops on the bandwagon the bubble grows and bursts rapidly. The only thing controlling that crash was that the PBoC bought 90% of the shares on the stock market.

We're in a curious position right now.

Those Wellington residential consents are very low. People have found it a complete pain in the ass to deal with banks for construction finance. No doubt some have given up or no longer qualify for finance. It also explains where there are only a few residential projects going around locally, and that's apparently because the actual quantity of residential projects is low.

It seems we are in the middle of a credit tightening.

WOW, Christchurch consents down 60% from the same month last year, that is truly abysmal. It confirms the huge oversupply and the reason for dropping rents and house values. Not a good pLace at all to own a house (sorry The Man 2)

Are prices not just dropping back to where they would be if there had not been a temporary earthquake induced shortage?

Nothing 'abysmal' about it at all. It's a natural rebuild-from-disaster cycle running into the end game. Started two years ago: my neighbour is a concrete guy, and switched then from domestic (which was already running outta legs) to his old niche of larger commercial.

It is still possible to buy a plot for around $150K http://harcourts.co.nz/Property/Residential?pageid=-1&search=&formsearch...

and an entire house/plot package for around the $450K mark. http://www.mikegreerhomes.co.nz/home-and-land/search/

The Christchurch (and locality) situation is simply a mild oversupply at present, and the consenting rates are reflecting that.

Buy a plot, put a tiny house on it and live basically mortgage and rent free.

Not too bad an option.

It's a great place to own a house and live in it.

It's not a good place to speculate on investment properties for capital gain.

Has any body considered the impact of availability suitable lines of credit being a factor in consent down turn ?

Why is this such a surprise or panic-inducing? Banks have tightened credit, house sales numbers are down, so naturally consents are going to go down.

Just because we are not building more houses, doesn't mean house prices will suddenly go up again.