Removing Auckland's urban boundary could put lifestyle block values under downward pressure

Auckland’s lifestyle block market may be facing a particularly difficult summer.

An indication of potential trouble lies within the Real Estate Institute’s latest commentary on the rural property market.

“Advice provided indicates a high level of listings in areas on the fringe of Auckland City, with the anticipation of increasing sales to come,” its commentary on the lifestyle block market said.

That increase in listings is coming at an interesting time.

The REINZ data shows the number of lifestyle properties sold in the three months to October this year was down 21% compared to the same period of last year.

In the Auckland market, the sales trend for lifestyle blocks has been declining since March last year, and prices are now also falling.

The median price of lifestyle blocks sold in Auckland in the three months to October was $1.15 million, down from $1.2 million in the three months to September and down from $1.17 million in the three months to October last year.

Which suggests capital gains on lifestyle blocks in Auckland have come to an end and the market has passed its peak.

That may not matter if the main inhabitants of lifestyle blocks were sandal clad pot smokers, but these days they are more likely to be SUV driving land bankers, who of course may also enjoy the odd toke.

One of the biggest problems facing land bankers, or speculators in general, is knowing when to cash up and take your profit.

Do it too soon and you may miss out on a bigger profit.

Too late and you risk selling into a declining market.

What is probably playing on the minds of many lifestyle block owners around Auckland is the government’s recent confirmation that it intends to carry out its election policy of forcing the removal of Auckland’s urban growth boundary.

When it released the policy there was no doubt about its intentions, they were spelled out in black and white for all to read, and the message couldn’t have been clearer.

“This will give Auckland more options to grow, as well as stopping land bankers profiteering and holding up new development,” Labour’s policy document said.

With speculative investments, timing is everything, and faced with the prospect of cheaper land just beyond their boundary that is capable of further development coming on to a market which is already softening, many lifestyle block owners may have decided that the time to sell is now.

But if the rush of new listings is not matched by an equal rush of new buyers, they may already be too late.

 

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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38 Comments

This could be a double whammy for any recent to buy land bankers, who can't sell for s profit, and face the possibility of rate rises where land values have shot up.
Will be interesting to see this graph in a years time..

If rates were higher and levied against land only, people might actually start using their land productively. Kind of important considering land is fixed in supply.

“Selling out at peak for profit “
Some of the spruikers here missed out on that lesson in school
Can’t see those with land right on the green belt losing though
A friend has 11 acres on lonely track rd Albany and it’s bordered by massive new development
So many will still do just fine
Just that the neighbourhood now speaks a different language and has its own shopping centre
Thanks NatNil govt

Agreed. And not we are not the same user ;)

PS Unless there is speculative gain, a lot of lifestyle blocks are actually death sentence blocks. Crap loads of work with no efficiency for scale. Kiss your weekends and evenings goodbye.

My neighbour (on a 400 squares cross-lease) refers to her previous lifestyle block as the 'life sentence' block.

As the US saying has it - too big to Mow, too small to Plow.....

Fly out of Hamilton and look at the unmitigated disaster of planning rules. Hectare after hectare with a mcmansion, tennis court, acres of manicured lawn and swimming pool. Most lying idle.

Waste of land, resources and non productive. But most are 1% ers...waiting for their council mates to allow subdivision and big cap gains....at the expense of our kids once again.

'Most are the 1% ers', that's funny.

Hectare after hectare. Hmm.. 10,000 hectares isn't gonna cut it. Let's try acres sites! But hold on what about water, power, sewage, storm water! Are all of these arce sites on septic tank? collecting rain water? solar powered?
Im sure Auckland council will build you a personal sewage pipe for your new house 20km from existing infrastructure! Surely they'll do it for free? I mean first time buyers are missing out. All because of greddy land bankers. Definitely not because there's no infrastructure to Tim buck Too!!..

Advice

I hear the sound of an avalanche beginning to fall. Let the exodus of panic sales begin!

Happy to buy one for my retirement in 20 years time ^^

Well, its god news for people who want to buy a lifestyle block , for like, a lifestyle.

Maybe Auckland would get more market gardeners (and relate rural businesses) on those small rural properties adjacent to Auckland once the land bankers have been dealt to?

It looks like Auckland's market gardeners are being displaced by the regions now. Auckland is selling off it's land, so expect a hike in fruit and vegetable prices because transport costs are increasing too. Good for provincial NZ, bad for Auckland.

There is a fight back on that TainuiBabe as people realise the huge cost to this country of building houses on elite soils as there are in Pukekohe for example. People are waking up to the option of imported food or fresh local grown produce. National did a handshake agreement with China to import Organic food. Seriously! There are the McMansions that probably can afford the gardener, cleaner etc but that is not what most Lifestyle Blocks are used for. Many are producing products for local markets etc. and as said above - for the lifestyle their family enjoys. My grown children would not have missed that for the world.

I detect a tapering off on new listing numbers since Monday?

All seasonal mate.. ppl dont want to list their properties this close to christmas. Happens every year.. last week was the last week for a big surge in new listings. Watch it fire back up early Feb

Here is the full 'speech from the throne' read by the Governor General on intent of her government wrt housing matters.

"This government will take steps to improve our resource management system, with better spatial planning and better enforcement. An urban development agency will be introduced, and more emphasis placed on public transport and light rail.
This government will remove the Auckland urban growth boundary and free up density controls. New developments, both in Auckland and the rest of New Zealand, will be able to be funded through innovative new financing methods like infrastructure bonds. This government will also give Auckland Council the ability to implement a regional fuel tax.
To help ease pressures on our housing, infrastructure and public services, this government will make sure we get our immigration settings right. It will cut down on low quality international education courses and will ensure work visas issued reflect genuine skill shortages.
Housing is a top priority for this government. Action will be taken to address homelessness. State house sell offs will stop. And the State will take the lead in building affordable houses. Through its Kiwibuild programme, this government pledges to build 100,000 high quality, affordable homes over the next 10 years; half of them in Auckland.
A Housing Commission will work with the private sector, councils and iwi to cut through red tape, undertake major projects and ensure new, affordable homes are built rapidly.
This work will begin immediately, as part of this government’s 100 Day Plan. To boost the workforce, employers will be financially supported to train 4000 young people as apprentices, including on-the-job construction training.
High demand for housing will be dealt with by cracking down on speculators who are pushing prices out of reach of first home buyers. Foreign speculators will be banned from buying existing New Zealand homes. A comprehensive register of foreign-owned land and housing will be created, and the Overseas Investment Act will be strengthened.
The ‘bright line test’ will be extended, so income tax is paid on any gains from the sale of residential property bought and sold within five years. Speculators will also no longer be able to use tax losses on rental properties to offset tax on other income.
This government will make life better for renters. A ‘Rent to Own’ scheme will be developed. All rental properties will be required to meet standards for insulation, heating and drainage. Funding for home insulation in general will be boosted and a Winter Energy payment will be introduced for superannuitants and those receiving main benefits. This government aims to ensure that every New Zealander has access to a warm, dry, safe home."

I could not have said this better, seriously. I can't find a single thing I will change from the above speech. Its as if they read my mind. It covers all the bludger segments
- immigration
- education
- speculation
- taxation
- investation (spelling intended)

I agree too -it is a comprehensive approach to fixing the housing crisis. I think it would be stupid to speculate against the political will of this coalition government wrt its intent on removing the impediments for New Zealanders being able to access adequate housing (affordable, good quality, safe, warm, dry...). There has been signal after signal that the government is genuinely going to implement its housing campaign promises.

They have no chance of achieving what they have boasted they will. The resources to build the additional numbers that are said to be needed, simply don't exist and cannot be conjured up in the timeframes required.

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That's fine. If the implement everything else, we won't need 100,000 new houses.

Why would lifestyle block owners rush to sell before the council re-zones the area they are in?
I would think that if they were in it for the money they would wait until the zoning is changed to allow more intensive development and then either develop or sell.
In most cases the govt can't buy land without a willing seller. Normally reserved for cases where a specific infrastructure project is planned. So the govt can't buy up all the land now and then change the zoning and keep the profit for itself. It wouldn't have the money nor the moral authority.
However, the worst case scenario of a lifestyle block owner would be if on their fenceline an intensive development were to occur, so they would not have the rural lifestyle any more.

Be careful. This land isn't necessarily being rezoned or rezoned differently to land sitting just outside of the urban boundary.

Arthur Grimes did a paper a few years back that showed a huge premium for land within the urban boundary compared to land sitting outside of it. Obviously you remove the boundary, you increase supply. While land currently outside will appreciate, land currently inside will depreciate.

The model used there is inappropriate to Auckland as our urban planning is currently largely insane.

A lifestyle block next to Orewa is outside the RUB, but it is physically closer to the City than land at Warkworth that is inside the RUB. The current AUP has large areas of lifestyle blocks becoming effectively centrally located suburbs inside a planned sprawl of 2040. This current plan confers high utility value to these blocks.

But if the RUB is eliminated the requirement to sprawl Auckland as far and wide as Phil Goff wants is going to be removed as well.

..there can also be tax consequences -

"There is also lesser known land taxation provisions that can tax the proceeds of selling land for no other reason than the value of the land has increased due to a change in its zoning, a district plan or granting of resource consent.

"This taxation provision applies where land is sold within 10 years of acquiring it, the value of the land has increased due to a zoning change, resource consent or change in a District Plan (or the possibility of one of these things occurring) and 20% of the profit on sale is due to that change or possibility of change. There is no need for the landowner to have initiated that change, it is sufficient for the change to have occurred and contributed to the profit on sale.."

summary see

https://www.crowehorwath.co.nz/insights/zoning-changes-impact-on-propert...

Interesting article in Forbes suggesting a recession under Labour. One major contributor being the policy of banning foreign buyers of our real estate. If that's all that was holding up our house prices - National Party, please explain! . http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11946728

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..expect a full on attack of Labor/coalition, the power brokers behind the scenes, those who own and manipulate msm will make sure of that. Watch 9 years of terrible policy to be blamed on 5 minutes of a new govt.

Its from a former Lehman Bros trader. It rather says it all.

i live on a lifestyle block. There's nothing like it. No near neighbours, no noise, not much traffic, duck shooting, free firewood, a bit of cash from calves and silage, a great view, what more could a man want? i've been here 13 years, and not moving, it's heaven, living in the city sux, been there, done that. The removal of the urban boundary is going to lead to the city being closer to my property, so why would it go down?

Well said Ron. Some people just do not appreciate why some of us prefer going to sleep with stars above and wood pigeons on waking in the morning.

Correct, tuis here right now pigging out on the bottlebrushes.

I hope the IRD tracks down all the land bankers & takes its cut.

Wouldn't that require a land tax?

Some people will drag up any excuse to keep the ponzie scheme going

Not sure how you keep an accurate track of the prices when the block becomes sub divisible. Sure the prices are dropping but so probably is the size of the lifestyle block. Going on history it only takes a stroke of a pen for the status of your block to change and the price doubles overnight.

Could somebody put some numbers into this debate. My guess is that the number of hectares required for housing in Auckland, Hamilton etc is significantly less than the total lifestyle block hectares. for instance 95% are just straight lifestyle blocks and 5% are land banks.

Consequently my guess is that lifestyle block values are dictated by the demand for lifestyle blocks as such, not for their value as land banks.

If the removal of the urban boundary is done properly, then this increases the supply of land available by a hundred fold or more.

Naturally not all living on a lifestyle block will want to sell or redevelop now, but enough will want to so that the supply will be greater than the demand and the price of land will fall.

The lifestyle block owners that can now sell smaller lots whereas before they couldn't will still be streets ahead in gain even though the price they will be able to get will have dropped.

Modern STEP type wastewater systems and other technology make most of the excuses about having to wait for council to run a pipe your way redundant.

Those that presently want to enjoy their lifestyle block ie not develop can still do so, After all their lifestyle only extends to their boundary and what happens on their neighbours side is their neighbours business.