The Minister of Housing wants to see the $650,000 Auckland price cap for KiwiBuild houses fall, as building costs drop – he ‘expects’ this to reduce overall average house prices

The Auckland suburb of Northcote can look forward to a sizeable new housing development, with Minister of Housing Phil Twyford announcing a 1200 home development in the area.

Of those, 400 will be classed as affordable homes, meaning their price won’t exceed $650,000.

Twyford says this is the maximum price anyone will pay for a KiwiBuild home in Auckland and is expecting that price to fall as the Government gets further into ins 10-year KiwiBuild plan.

Outside Auckland, the cap is $500,000.

“These are caps, not targets; we’re going to do as much as we can to drive down those prices,” he told journalists at a briefing on Thursday.

He is expecting the caps to drop as building costs fall, with the help of prefabricated homes, which are cheaper to produce.

He is also expecting the injection of KiwiBuild homes will eventually help lower average house prices in Auckland.

“The whole idea of the scheme is for the Government to use its ability, our balance sheet, to finance the building of these homes and then selling them at cost to first home buyers.

“We want to drive down prices.”

He says this is good news for developers and construction companies.

“We have had a lot of discussions over the years with Fletchers and lots of other members of the construction industry and development community. They want to expand the industry and build more.”

He says KiwiBuild gives them more chance to meet demand.

“At the moment, the construction sector is so volatile. It goes up and down in such an extreme way that firms are very reluctant to build internal capability and take on more staff because they know the cycle is going to come and they will have to lay people off.”

KiwiBuild’s eve

The Government’s KiwiBuild programme officially kicks off on July 1. Twyford expects over the next year, 1000 homes will be built.

In the 2019/20 year, that number jumps to 5000 before doubling to 10,000 in 2021/22.

Every year from then until 2028, 12,000 KiwiBuild homes will be built a year.

Twyford expects the first Northcote KiwiBuild home will be finished sometime next year – he could not give specifics as to what month.

On Monday, Twyford is taking an eligibility criteria to Cabinet to get the sign-off. He says a website, where people can register interest, will be set up early next month.

The Government does not want to push people out of their own communities with KiwiBuild and is looking at giving local residents at the “front of the queue” for the homes, he says.

“[It’s about] making sure the people who live in those communities aren’t driven out by the process of redevelopment and we want to give them the best of the opportunities to stay there.”

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84 Comments

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Maybe he could try deleting those pesky building regulations that result in people spending $100,000s more for Fletchers products and council consents. Maybe he could rip up the RMA to open up more land. Maybe even add some kind of tax for hoarding land.
Maybe he and Winnie could turn off the immigration tap seeing as all the cream is boiling over into Australia.

Nah... let's just do more corporate welfare and bring in more Jimmy Grants. Oh and let's not forget the important topics... did you know Taxinda had a baby?! I forget the name, but it was at least half the length of a single tweet.

I've translated Phil's words for more clarity:

“We have had a lot of [free dinners] over the years with Fletchers [at Ric Kayne's golf resort] and lots of other [foxes] of the [henhouse] industry and development community. They want to [capture billions in govt gibs-me-thats] for the industry and build more [low spec junk houses].”

Agreed I like the move to prefab but more need to be done to improve housing affordability. And the Kiwibuild houses are nice but they won't by themselves put a dent in our average house price,

If there are 1.8m Private homes (Stats NZ Est.) with an average house price of roughly 680k (QV estimate) the building 100k kiwibuild houses at the cost of $500k (20% cheaper than the Auckland Cap) the average house price will drop about 9k or 1.5%.

1.5% that's hardly an improvement in affordability. The COL are doing a better job reducing house prices just tanking business confidence.

If they were free it would only result in a 5% decrease in average house price and the doesn't actually solve the cost of construction problem for anyone else.

We have had a lot of discussions over the years with Fletchers and lots of other members of the construction industry and development community. They want to expand the industry and build more.

"We have had a lot of discussions over the years with Fletchers and the other Opolists who control the construction industry and development community. They want to expand their profits and build more at Gubmint expense."

There, fixed now.

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I've finally worked out where all these skilled Chefs were going. They're all working for Fletcher's making free dinners for politicians.

But wait, there's more. The first 50 companies to call will also receive a steady stream of foreign workers for construction companies to underpay and exploit. Contact your local INZ branch today for accreditation and sponsor as many work visas as you want, no questions asked!
Why bear the cost towards training and development of Kiwis when vulnerable Asian migrants are willing to do it at a fraction of the cost under deplorable working conditions?

And that's not all.. don't want to spend money on high spec features such as lawn, carpet and power points ..no problem - we've got you covered. Should your south facing hovel fail to sell we'll pay you $650k guaranteed!

So who is going to pay top dollar to live next door to one of these cheap homes? And who will buy the non-Kiwibuild house if the one next door is $200k cheaper?

If you want to provide low cost housing - build a decent house and put it on leasehold land.

@KW .......... Thank you , thank you , thank you ........ finally someone who sees the sense in leasehold , which works in Singapore , and even in London

Leasehold works in London because you pay 1 quid per year on 999 year leases.

We are all on leasehold land anyway - see what happens when you don't pay the current lessor - aka Rates
Think you own it - guess again

Is the development for Northcote new or is this a re-announcement/re-packaging of the HNZ one that is currently going on?

The Northcote development is certainly not new from Labour, it was well underway under the previous Government so to call it Kiwibuild is just a plain lie by PT. If the COL can get more young people into their first house then I think everyone red or blue would be happy. The belief that these small cheap builds could have any effect on the market is naive. The most likely outcome is to put greater value into existing houses, particularly suburbs that are away from these developments, given a choice most people don't want to live in a Government subsided development so they will likely be on sold as quickly as possible and the capital gain pocketed.

You had me right through the whole comment but when you write COL I don't know whether to believe you or you have an agenda. Shame as your comment makes sense.

Not sure where you get the idea that increasing supply will increase prices. The reality is that the KiwiBuild houses are small - but still bigger, warmer, better light than a little working man's cottage in Mt Victoria, Wellington that is twice the price. It is not a different product to the rest of the housing stock - and the programme will bring all house prices down.

I think there is a political risk for Twyford in helping bring down the price of a young couple's town house in Hobsonville from $720k to $650k - but that was going to happen anyway with the current housing market.

It's their lack of knowledge and selfishness that's in play

Is that "The Reservation" you refer to? Tonar & Cadness St. I haven't been there for a while, but if so then it was a failure once and will be again.

Very very roughly, assuming all kiwibuild in Auckland, and no other developers in the market, & no change to immigration rate.

Immigration of 60,000 per year, with 40% into Auckland = 24,000 people per year

2018/2019 = 1000 homes at 2.75 people per household = 2,750 people housed
2019/2020 = 5000 homes at 2.75 people per household = 13750 people housed
2020/2021 = 10,000 homes at 2.75 people per household = 27,500 people housed
From 2023: 12,000 houses at 2.75 people per household = 33,000 people housed

Would take until 2020/2021 until house prices stabilize (houses roughly match immigration) but with a backlog of demand still to be met from 2018/19 to 2020/21.

From 2023 the house supply would exceed new demand.

Interesting, that assumes zero population growth as well.

Could assume all other developers cater for domestic pop growth.

No criticism on your calculation, I think it just highlight how much of an up hill battle housing affordability is going to be.

One can but hope

24,000 people per year,... per year, (plus the overflow from the past few years), that backlog will never clear until well over 9,000 can be built every year to the extent all previous years are covered along with the already resident population & citizen demand. That is a black hole that will not be filled for generations. They could build and build and build, at certain points pausing for a photo op and then they get handed a larger development to build more. Soon the only thing they will notice is the photo ops and already most people in NZ have given up on it ever eventuating in the desired result. Average wages are not going to increase to enable a decent level of home affordability. Move on, move away. BTW real estate ad advertising a First Home Buyers Bargain at the cool price of $939,000. Yeah Nothing to See In Auckland. Move on, mustn't dwell.

I would strongly argue that credit availability is a stronger driver of house prices than population.

I have yet to see this queue of people waiting to live somewhere. I dont believe it exists unless you are talking social housing.
I also strongly believe we are heading towards much lower, maybe negative immigration, oh and a recession.
What we have is unsustainable in every way.

We certainly don’t have camps of people displaced due to lack of accomodation.

We don't need them, we have cars

The hard part will be convincing those hard working intelligent (non DGM) FHB's to buy a cookie cutter house. Labour and Greens rely on freaks and mental midgets for votes, who normally don't have the money or brains to actually build a house. Most of them are on welfare, free courses or minimum wage jobs.

Now come on, some of us Green supporters are perfectly smart and gainfully employed, we just happen to care more about the environment than people. Humans are the one resource on this planet that doesn't seem to be in danger of running out.

As for your first comment, terraced housing, apartments and similar sell perfectly well in the UK and people are happy with it. A six figure saving should also help to convince people.

MFD - perhaps you can help me.
Okura- Todd. Nimby-ism dressed up as environmental caring, the real thing or a bit of both?

Perhaps they should have focused more on the underlying reason for the housing pressure and voted accordingly.

Same, and I can write a sentence all by myself too, as long as the crayons are sharp enough.

Naturally pale in comparison to the intellect, wage packet and all round manly manness of Skudiv, no doubt he's a looker as well, but we can't all have the looks of Adonis, the wisdom of Athena and the riches of Croesus. I guess we have to make do with what we have, at least when I sleep I can dream that one day I could be Skudiv.

Awesome, that made my day.

Reality is who are the buyers for these KiwiBuild boxes?
If you have saved 130k and you can service a 520k loan then You probably have already purchased a first home in a cheaper suburb already, without waiting to buy a small box in a development of small boxes!

It is going to be very interesting how many actually register and want to buy a KiwiBuild as there is not going to be any capital gain on these homes as they are going to be mass produced and all look the same.

Anyone with intellect will not be buying these but then again not everyone is financially literate.

What rubbish - look at Hobsonville. KiwiBuild are no different than the market is providing anyway - just increasing the supply.

No one smart is going to buy in a mixed development area and pay more for their house than the people next door. Don't let the slick marketing material get in the way of the inevitable reality - just drive through Glen Innes new mixed housing zone - already looking like a slum - limited parking - narrow lane ways - crap in every window - over grown lawns - weeds for everyone - junk outside - yep it is going to be great

Talking about 'literate ' shouldn't you be the last one using that term

I wish Twyford all the luck in the world in 'driving down prices '

Success will ensure Labour is re-elected .

How he will do this is a mystery , when a water meter costing $300 is charged out at $20,000 by local Government

Where the cost is a single subdivision is an eye -watering $250,000 a huge chunk of that is in DC Levies and Council costs

Where gib-fixers are charged out at $75/hr and painters at $65/hr .

Where GIB costs 40% more than it should because GIB successfully got import tariff protection

Where a simple front door handle costs $10 from China and mysteriusoly ends up at $60 at Bunnings

He is the master of Morphine administrators ... keep injecting the BS in those sore veins ....

Have anyone noticed that the word "additional" has disappeared from the KB numbers ??

He is on his way to cone the NZ public by designating already planned projects and developments as KB ... this CoLs will build shit all of any additional housing in the next 3 years. So far, They are just a bunch of liars

whats the point of shoving houses into peoples mouth so they can claim to own them. Whats wrong with renting, nothing. whats wrong with buying, nothing, Just dont force it one way or the other, no matter what pre election promises were made.. They did this in usa and made it possible for people who did not qualify for rental to actually buy them with the help of govt. funding which lead to GFC. In my opinion, his COL is going to mess things up.

Just about everything is wrong with renting in this country, starting with you have no idea when renting when the 90 day notice to vacate will come. It is insecure and you cannot make a home out of a rental. Change that and I might be inclined to change my mind about it.

We were dicked around quite a bit when renting. Despite never missing a rent payment and looking after the properties.

The very last place we rented tried clawing back all our bond for pre existing damage that was noted on the damage report when we moved in. Record keeping from my end prevented that.

The personal thing I like about owning my own home is that when I get to 65 and retire or whatever age I retire at, I have a rent free place and no out goings for my house. If my house is worth enough, I can down grade and bank some cash with my savings and other investments. For me its about retirement, not the here and now.

I thought the GFC was because the banks were committing fraud, selling credit willy nilly and bundling shit houses with good houses in bonds. Forgive my knowledge on this I've only watched the big short.

Same for me. It's all about retirement and right now my family home in DGZ is mortgage free but I do have a few rentals. In saying that my retirement is still 25 years away.

Your doing well DGZ and I hope the best for you and everyone here. I really do. I have no axe to grind on this.

The only thing I want is affordability for NZers whoever that is, so they can have a peaceful retirement and life like you. I also want the quality of life I enjoyed as a NZer for my children and other peoples children.

I want affordability for all Kiwis too and I wish everyone a good life. However I don't wish for our housing market to crash and all FHBs want is handouts from the COL.

When I was younger houses in Franklin could be bought for under 200K about 150K. People worked at NZ Steel and had wages over 80K. People are still on relatively on the same wage with a slight increase, and the houses are 500 - 600K. Plus price of shopping has increased astronomically as well.

It was not unheard of at this time to buy a house in Auckland for 300K now same house could be worth 800-900K. I don't think they want handouts, they just want the madness to end, or at least incomes to grow.

My kids will only survive if we help them out or if they are genius business people. I'm going to help my kids out as much as I can. But if I was starting over again, I'm not sure how I would have been able to survive, as I had no one to help me.

DGZ, you can have a 30% fall in real prices to get back to 2013 levels of affordability, or you can have your wish of no crash, but you can’t have both. You chose.

Why 2013? Why not 2004?

Because 2013 reflects the upper limit of affordability in accordance with historic average ratios.

So which do you want? Affordability, right?

As long as I'm not waken up by the chopper between 9pm and 6am lol
..."proliferation of helicopter nuisance mostly from police between 9pm-6am flying over Remuera to get to the 75 per cent of their attendances that are South Auckland located".

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12079522&...

Not sure I get that. Just more news on your zone I suppose.

If you are going to post anything worthwhile you could post something about beer and rugby.

A green 5mw laser pointer will deal with that problem, if you don’t mind an increased presence of police cars in your area of course.

So many old houses in Remuera that need to be insulated , and windows double glazed, so noise levels will lower.
Its an old suburb with lots of very cold houses.

actually. being a landlord is to live off the incomes of others. I choose not to do that.

And the joke is that if thelandlordery weren't in the market, prices would be down already already.

Good situation to be in.

We bought our first home last year in the Wairarapa, mortgage balance is 1.5x our annual household income, both have very secure jobs *touch wood*. Retirement is distant for us at this stage our goal to get mortgage free as soon as possible. Once we're out of our 2 year fix we'll go floating and chuck every spare dollar we have at it, all going to plan the mortgage will be gone in 6 - 9 years.

Do you live in your first home in Wairarapa? Somehow I always thought you're in Auckland. Wish you get rid of your mortgage soon mate 6-9 years is not long ;-)

Yeah live in our first home in the Wairarapa. I was originally from Christchurch but I got tired of renting from THE MAN 2 so work transferred me to the Wellington office.

As long as interest rates stay where they are then the mortgage will be gone pretty fast, but if shit did hit the fan then we're in a good position to weather any storms.

I like Martinborough and Cape Palliser. I was there not that long ago...oh also the Featherston Museum is wicked. Nice part of the country to visit but I can't live there as it is too 'white' for me ;-)

If you're ever in Martinborough I recommend dinner at Tirohana Estate if you haven't already been there!

Nzdan, I stayed with them and had a meal in their restaurant. Brilliant place for a holiday, cycling between vineyards *hic*

DGZ, didnt realise you were a closet tourist.
I recommend the main trunk line and the ChCh-Greymouth line to broaden all our experiences, both one day trips.
See NZ first

I did the TranzAlpine about 1.5 years ago. Picked up my rental car in Greymouth, stayed in Runanga, drove to Punakaiki pancake rocks and blowholes, Westport (I recommend lunch at The Bay House) and up Denniston mining town, then down to Reefton, Awatuna, Hokitika, drove inland to Franz Joseph, Haast, had fish and chips at The Craypot in Jackson Bay, sat by the wharf soaking in everything the rugged West Coast has to offer. Hope to go back soon :-)

The Craypot, I remember when that first arrived in the area, the original owner of it died in a helicopter accident on the Fox River in 2002, along with the pilot. It has recently changed hands again, Meg putting her feet up. I expect you had industrial strength insect repellent with you.

“ChCh-Greymouth line”
Did that as an 18 year old back packing student during the August school holidays 50 thousand years ago – still drone on to my poor suffering wife as to how absurdly gorgeous it was – I’ve never forgotten .
Being from Auckland – I couldn’t believe I was still in NZ and that we had all this “stuff” – now I’m older – and just so very aware of how lucky we are.

That is pretty comprehensive, the place we enjoy most is Hokitika at sunset, the locals walk on the beach
spiritual...

We had dinner at the Ocean View Restaurant with our cousin and his g/f (both from France) watching the sunset. I remember the beach was full of driftwood and the sky was so blue...I wish I could post my photos here lol.

Thats it,
We stay at the block overlooking the beach....the food festival is outrageous...

We appreciated you renting from us Nzdan, although you did leave it pretty dirty when you left, but all the best!

What! – slipped through your comprehensive pre-rental check list…..

It was left in a much cleaner state than it was when we moved in, unfortunately the previous tenant's dog shit was baked pretty hard into the carpet.

We were almost certain the place would be knocked down when we left, but after several months of sitting empty we were surprised to see you finally managed to get some tenants. Odyssey House must have been stoked that they could find additional accommodation for their clients and somewhere to park the Drug Arm van.

Yeah it was condemned after you moved out and the insurance company paid us out millions in loss of rents NZdan.

If it weren’t for the great location and extremely cheap rent I would have reported the property to Tenancy Services and it would have been condemned before I moved in.

I didn’t know you could get insurance on as is red zone properties, but I guess getting paid out in Nigerian Naira is better than nothing so kudos.

NZdan, to be fair we were warned about you before we took you on, and true to what we were told you were not the best of tenants.

We can see now why you were a tenant!!!!

sorry, not sure if you're trying to prove a point here..

if you knew he was a bad tenant..and still took him on

- either you had your brains located somewhere else
- you're a desperate/pathetic landlord
- you're not meant to be a landlord. good landlords don't stoop to the lowest and try to get applauded for that .....

The Wolf of Wall Street is another good movie for you. These financial blockbusters are becoming quite successful as a new genre. With the recent fraud at BNZ NZ's film industry could make a film called The Badgers of BNZ" or even The Dragons of Devonport. It might be difficult to find a skilled student actor to replace Leonardo though.

What is wrong: Retirement and this country not being able to cover rental costs across a nation via the pension. Only so many council and state homes available. We could go full 'Logan's Run' or 'Make Room, Make Room', but I prefer 'Fallout' with the deadly psychological experiments you could have a random chance to be placed in (called I believe retirement homes, several family died before their time due to negligence in those).

“We want to drive down prices.”

FAR OUT! The housing minister making comments such as this, true or not is going to completely undermine sales to fhb hahaha what a total eediot. He would be better off to say that the prices are discounted which is the whole point isn't it and sell that line and create more urgency to buy. If at the end of the day sales of homes are sluggish then who will want to risk building them. Even if our all-inclusive govt picks up the tab eventually the whole idea will grind to a halt. Mr Twyford you have just earned the award for biggest twat.

So it was great when mr key used to rave about house prices increasing?

Did you not realise that last statement was reserved for you spruikers

Sorry but " if our all-inclusive govt picks up the tab" that is b*llocks franky. It will be the PAYE ie tax payer and/or rate payer who picks up the tab, not Govn nor Govn employee will pay .

They need to sit down and admit that this problem cannot be solved without severe pain for someone(s). Its known as being mature...

The only option is simply force buy land around Auckland enmass at a 'rural land" price and re-zone it residential and sell it at the rural price, enmass. Of course that then will cause any existing new FHBers into negative equity as the 200k section they are sitting on becomes worth 20k.

the term "blood on the floor" comes to mind.

Buying and developing rural land on the outskirts of Auckland will only exacerbate the public transport and gridlock woes don't you think? How about buy and develop closer to the centre in the central suburbs and have the quarter acre land re-zoned medium density. "Bloody" nimbys will use their contacts to hinder it

This is a joke, 500k isnt affordable even on a reasonable salary let alone $650k.

Until this or the next Govn sorts out the land bankers and the price of sections get down to 40k (or something), it never will be.

You'll get my vote at the next election

Fletchers are part of the problem, not the solution.

Twyford always "wants" something to happen, wanting something is not the same as making it happen. I want a bigger super yacht and a private jet...

Statement from someone usually with an iq below 30