New houses are getting smaller in Auckland, bringing building costs down

Property

There's been a drop in the average size of new houses and townhouses being built in Auckland, which may help bring prices down

5th Jun 18, 2:21pm by Greg Ninness

There are tentative signs that Auckland's residential building industry may be starting to build more homes at the affordable end of the market.

The latest Statistics NZ figures show that the average value of new dwelling consents issued in Auckland dropped to $349,101 in April compared to $389,101 in March.

That was the lowest it has been since November 2011 and it appears especially significant because in 10 of the last 18 months the average value of new dwelling consents issued in Auckland has been above $400,000 (this includes construction costs but not the cost of the land or additional costs such as marketing and legal expenses).

A closer look at the figures reveals that the fall in the average value of new dwellings was mainly driven by a reduction in the average size of stand alone houses, townhouses and home units being consented.

In April, the average size of townhouses/home units that were consented dropped from 142 square metres in each of the previous two months to 112 square metres.

That saw the average value of those consents fall from $349,517 in March to $256,898 in April.

A similar trend was evident for stand alone houses, with the average size of houses consented in April dropping to 215 square metres, which was the lowest it has been since January 2011.

That saw the average value of new houses consented drop to $444,183 in April from $500,409 in March.

Significantly there was little change in the average cost per square metre of new houses consented in April, suggesting houses are still being built to the same high standards, but costs are being saved by building smaller.

This suggests that developers may be paying more attention to the more affordable end of the market and not as much as they were on the top end.

The other factor which will be helping to make housing more affordable in Auckland is the changing mix of what is being built.

The number of new homes consented in Auckland has risen steadily in each of the last six years, rising from 3282 in the 12 months to April 2011 to 11,629 in the 12 months to April this year.

But the mix of homes being built is changing.

In 2011 stand alone houses accounted for 82% of new dwelling consents, while apartments were 5%, townhouses and home units 8% and retirements village units 5%.

But in the 12 months to April this year stand alone houses accounted for just 48% of new dwellings consented, apartments 22%, townhouses and units 22% and retirement village units 8%.

In April the average value of new consents issued for stand alone houses was $444,183 compared to $$339,985 for apartments and $256,898 for townhouses/home units.

You can receive all of our property articles automatically by subscribing to our free email Property Newsletter. This will deliver all of our property-related articles, including auction results and interest rate updates, directly to your in-box 3-5 times a week. We don't share your details with third parties and you can unsubscribe at any time. To subscribe just click on this link, scroll down to "Property email newsletter" and enter your email address.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

34 Comments

by richard1965 | 5th Jun 18, 2:33pm 1528166027

That is the solution that new government will rely on : from 120 mts to 90 mts to bring down to 60 mts and will be affordable and than to 40mts.......

by taimaiakka0 | 5th Jun 18, 2:56pm 1528167415

In third world countries families stay even in 20mts apartment. Kiwi Future

by frazz | 5th Jun 18, 3:00pm 1528167607

For all the couples now not having children (too expensive or left it to late and now cannot) - this good news. Does everyone really need a McMansion and full it full of stuff?

by JimboJones | 5th Jun 18, 3:29pm 1528169392

Yes according to most commentators everyone must live in a 200m2+ house regardless of their circumstances, otherwise they are living in a slum.

by Eco Bird | 5th Jun 18, 5:29pm 1528176569

Not quite, Not everyone has stopped having kids, in fact there are some who keep having them although they have no place to stay and no money to feed them ... families with 6 kids and on the DOL living in a motel or shared accomodation is becoming common stuff and news items...these guys are not stopping anytime soon ..lol

So, smaller unit will suit FHB couples who can also afford to rent but will not suit a small or young family at all ... Not the kiwi way of life !

Social engineering is On again ...

by frazz | 6th Jun 18, 8:52am 1528231968

Eco bird are you eating steak with peppercorn dressing tonight with your buddy Mike Hosking?

by dtcarter | 3rd Jul 18, 9:49pm 1530611384

50% of auckland house holds have only one or two occupants. Yes that means half the households of have more, but we need to stop exclusively building 250sqm 5 bedroom houses.

by pacifica | 6th Jun 18, 1:02am 1528203739

I think you mean "according to most covenants..." there fixed that for you.

by Yvil | 5th Jun 18, 2:35pm 1528166135

"The value of new dwelling consents issued... (this includes construction costs but not the cost of the land or additional costs such as marketing and legal expenses)"
Does generally also not include :
- Architect fees and engineers and surveyor if neeed
- the consent fees, including any resource consents if required
- can exclude finishing items like carpet and curtains
- landscaping including paving, driveway, retaining walls if any, plants, lawns
Finally the value of consents is generally undervalued compared to the actual cost because of 1) budget overruns 2) variations 3) to minimize the cost of the consent itself

by JimboJones | 5th Jun 18, 3:22pm 1528168975

Yep its just an arbitrary number you write on the consent form when you send it in. Our building work cost almost double what we wrote - because of all of the factors you mention.

by Averageman | 5th Jun 18, 3:15pm 1528168511

Is our future really to live like this http://www.scmp.com/news/hong-kong/economy/article/2142000/hong-kongs-s…

by JimboJones | 5th Jun 18, 3:25pm 1528169153

If you want to be in the thick of the action then why not? Ideally all types of housing should be provided, from tiny apartments in the city to 5 bedroom houses in the outer suburbs. People can then choose how they want to live.

by pin3cone | 5th Jun 18, 3:50pm 1528170657

I don't know why it's such a taboo for any official to call out that perhaps the world is overpopulated. We are all responsible for the future we create.

by Chairman Moa | 5th Jun 18, 4:02pm 1528171379

I looked at new house recently in Melbourne and the building cost per sq meter there is between $1000 - $1600 ($1600 will be with double glazing and top brand appliances). In Auckland a friend told me his cost was roughly $3200 per sq meter! Even though labour cost is higher in Australia, someone is making a killing!

by JimboJones | 5th Jun 18, 4:13pm 1528172031

I think everyone is making a killing. Building supplies are expensive, then the tradies add a big markup on that, the regulation is expensive, there is an under supply of good tradies so they can basically charge whatever they want especially for small jobs, council is going expensive, connections ar expensive, everything.

by RickStrauss | 5th Jun 18, 4:57pm 1528174628

Thanks, Fletchers!

by Voiceofreason | 5th Jun 18, 5:11pm 1528175499

Yes, we've been looking into it. With architect, costs are definitely no lower than $3000-$3500 per metre, excluding council fees etc. One option is certainly to make it as small as possible, but to say that is the only answer is pretending there is not a serious issue with construction costs in NZ at the moment. I have a feeling if the market tanks, construction costs will also go down. Funny that.

by Chessmaster | 5th Jun 18, 5:22pm 1528176177

Market tanks, why would anyone build then. I seriously think people need to stop building as we continually accepting these ffd up prices. Now the bloody govt building these apartments at these ridiculous prices. The ferry's wheel for builders and material suppliers will keep going. Seriously no end in sight

by Voiceofreason | 6th Jun 18, 11:38am 1528241886

In the market tanks and construction costs go down, people with land and no house, or land and tear-down (like me) will def rebuild.

by JimboJones | 5th Jun 18, 7:50pm 1528185042

Making the “average” 215 square metre house around $700k to build! Yikes. Plus architects and landscaping etc. there’s a new 600m2 house down the road from us where guy was happy he got it done for “just” 3k per m2 - that’s 1.8 million just in build cost!
With small sections generally slopeing, dodgy clay or volcanic rock underneath, and all the height to boundary and other unitary plan rules, almost everything needs to be architecturally designed these days. Not many places where you can slap on a signature home these days.

by JimboJones | 5th Jun 18, 7:47pm 1528184866

My impression of Melbourne is that it’s generally flat and biggish sections out in sprawlville where you can slap up an off the shelf signature home type thing. These tend to cost a lot less.

by cjmain | 6th Jun 18, 8:53am 1528232006

ouch that is getting ripped off, just finished my build 222m2 brick and tile, $1700 per m2 that included everything except land. 3k per m2 when land and financing cost included.

by Fritz | 5th Jun 18, 5:05pm 1528175122

Great caution needs to be exercised on building consent numbers and values. They don't equate to dwellings being built.
Many consented schemes are not advancing, or have been delayed, especially apartments for example:

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…

There is real market failure at play, and Kiwibuild needs to be successful to address this.

by Uninterested | 5th Jun 18, 7:38pm 1528184285

Oink………………………………..oink………………………….oink…………………..oink……………oink………oink….oink..oink, oink, oink, oink-wooosh,oink-woosh, oink-wooosh,oink-woosh, oink-wooosh,oink-woosh, oink-wooosh,oink-woosh...

by lalaland | 5th Jun 18, 8:44pm 1528188244

Good article thanks for that

by Eco Bird | 5th Jun 18, 8:37pm 1528187854

Will be Good if this CoLs focuses on getting its priorities right ... they should work on solving immediate housing problems and needs of the homeless and folks in desperate need first and worry about KB numbers in other projects ( which so far do not exist !!).

Immediate need is for 3,4,5 bedroom homes of 90+ m2 with a bit of room to move and park cars etc. These are the $800K+ houses in Auckland

Pushing for smaller units and cutting corners because of a price target ( line in the sand) is a hallmark of the shortsightedness and incompetent management of the crisis. Not only it will not address most of the needs, but it will also engage and distract the available building manpower in building smaller and smaller Boxes.

These Units are already available for sale today at the same "affordable" prices (650K).

FHBs and young families do not need a shoe box which comes with an expensive body corp bill and outgoing costs, and they won't buy one to get stuck in it for the next 5 years !!!! -- Most of these people are very mobile and will settle down in a home with good potential for expansion.

Solutions towards lowering Land prices via releasing more land, accelerating intensification and InfraStructure or any other measure should have been the first mission impossible of this CoLs as they promised !!... Instead, we see nothing but flip flopping, rebadging, and spinning the issue around and diluting promises to make them practically worthless.

The more they wait, the higher the building costs will become and the builders will become rare like hen's teeth ... The more they wait, the smaller the plots or unit sizes will squeezed down to fit the $600K noose PT is hanging himself with.

Don't be surprised if consents and costs would soon be issued and measured by ROOMS .. and don't be shocked if you hear how comfortable and environmentally friendly would it be to live in a 40m2 apartment next year !! .. after all , that will all contribute to becoming carbon neutral by 2050 .... you see ?, you are already feeling better eh !

I wouldn't blame the skilled young ones who will take off to places like Melbourne and Brisbane to start a future and a family with a brand new 3 - 4 beddies for just $450K - $550K @20 min out of town with heaps of Public Transport, Fun, shopping, communities, and motorways. Just need to get used to the crocks, spiders, and the Aussies. :)

by Chris-M | 5th Jun 18, 10:48pm 1528195694

Look at these two different sized A1 homes
http://www.a1homes.co.nz/plans/4/EH148 148 m2 and costs $242,000
and this
http://www.a1homes.co.nz/plans/4/EH80 80 m2 and costs $183,000

In other words it is very much a law of diminishing returns . Almost half the size and only 25% cheaper.

This is a miserable misguided line of thought and we should be addressing the real issues.
A Crooked building material supply sector and
A rigged land supply market that takes farmland and inflates it by something close to two orders of magnitude.
Both these things could be readily addressed by the government if they wanted an open honest market. If they did this then houses would be far more affordable and need for ever higher wages, welfare benefits and a whole bunch of consequences of this corruptly distorted market would be significantly reduced.

by pacifica | 6th Jun 18, 1:07am 1528204044

That and you are looking at the A1 homes site (they are heavily tied into products and suppliers, not for the benefit of the customer). It gets worse if you actually intend to live in your home long term and need to have say an accessible design or even one that can handle the site and perhaps a bit of a storm one year.

by JimboJones | 6th Jun 18, 7:26am 1528226796

The main difference between those houses is a double garage and an extra bedroom. Neither cost much. But most Auckland sections these days would barely fit the bigger house. So you are left with the choice of putting a cheap off the shelf two bedder on your $600k section or an expensive architectural two story.

by Uninterested | 6th Jun 18, 9:58am 1528235918

A two story can be OK price wise if its done by an architectural drafter and it's a simple rectangle in form.

by BuyLowSellHigh | 5th Jun 18, 11:20pm 1528197622

Prices plateau due to smaller floor areas, more appartments/townhouses. No doubt will be interpreted by some as a sure sign that the glorious crash is finally upon us.

by Double-GZ | 6th Jun 18, 8:21am 1528230112

Of course they're getting smaller! AC says 700,000 more people will live here, requiring 313,000 new homes and 263,000 new jobs - according to the new 30-year plan. https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12065030

by mikekirk29 | 6th Jun 18, 10:17am 1528237057

Can of beans used to be priced acc to 440g. They cut it to 400.No price cut.
Red Beach 4 bed townhouses with no garden now $800,000 range. Millwater: $1.15m average.
It is suburb competition.
Areas where most housing is under $800k are increasing sales by about 5% compared to 2017 first quarter (mostly Waitakere and Manakau.) Rest of market, other than section sales, is flat to falling.
Another matter is: do we as a SOCIETY (sorry, not saying economy or country - society refers to how we live and interact - i.e. quality of life) want to continue with less house owning pa, not just in Auckland but all of NZ? Because when census comes out, the is what it will show. 74% of new builds are RENTED out. In Auckland the 2013 census showed 54% home "ownership" (outright or indebted). What do you think it is now when prices have risen 100%? When a FHB does get a mortgage their average period for repayment is 35 years in Auckland, or worse. Twenty years ago it was 25 years. They start paying later also. Possibilities like wanting a wife or partner to have a child (read, less earning power) or someone losing a job, are ignored. The market has topped and all those who bought in last 3 years, from April 2015 onwards, will be in negative equity if they are borrowed to max. This is context in which we are meant to be "rah-rah-ing" about FHB % of purchasing on rise.

by Alter Ego | 6th Jun 18, 10:38am 1528238299

400gm butter...90gm coffee.....drop the size...sell for same price....People may never notice.

Even HP is dropping saucy source costs......

https://www.reuters.com/article/us-hp-layoffs/hp-sees-up-to-5000-job-cu…