Falling construction costs rather than a reduction in size is the likely reason for a drop in the average value of new apartments consented in Auckland

Cheaper apartments could be on the way for Aucklanders as construction costs start to decline.

According to the latest building consent figures from Statistics NZ, the average value of building consents issued for new Auckland apartments has been in an almost steady decline for the last 12 months.

In the second quarter of last year the average value of new building consents issued for new Auckland apartments was $451,050, and it then declined in three of the four following quarters.

By the second quarter of this year, the average value per consent had dropped to $278,222, the lowest it has been since the third quarter of 2015.

The decline in average value appears to have been driven by a fall in construction costs rather than a reduction in the average size of apartments being consented.

For the last two years, the average size of apartments consented in Auckland has been largely stable at around 100 square metres, and in the second quarter of this year it was 110 square metres.

But over the last 12 months, the average value per square metre has declined form $5334 per square metre in the second quarter of last year to $2529 in the second quarter of this year, which was also the lowest it has been since the third quarter of 2015.

So over the past year there has been a reasonably clear trend of a drop in the average cost per square metre, bringing down the average total building costs of apartments (building consent values exclude the cost of land and other non-construction costs such as finance, legal and marketing expenses).

That reverses the trend of the previous 12 months, where rising costs per square metre had been pushing up the average total value of new apartment consents.

That suggests there has been shift towards the more affordable end of the market in new projects being brought to market by developers over the last year or so, as buyers became more price conscious.

Looking at the numbers on an annual basis, which removes most of the quarterly volatility, the average cost per square metre declined from $3627 in the 12 months to June 2017, to $3364 in the 12 months to June this year, a decline of 7.3%, pushing the total average value of new apartment consents down from $364,082 to $334,463.

However apartments remain an expensive building option compared to stand alone houses or low rise multi unit housing such as townhouses and home units.

In the March quarter the average cost of new apartments consented in Auckland was $2529 per square metre, compared to $2116 for stand alone houses, and $2188 for townhouses and home units.

And although the average size of stand alone houses consented in Auckland has been declining, at 213 square metres the average new house is nearly twice as big as the average new apartment and remains the most expensive building option, with an average total consent value of $450,380.

New Apartment Consents Issued in Auckland Q3 2016 - Q2 2018

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22 Comments

These stats are fishy. There's no way you can get a square metre build cost for apartments less than 4-5K.

Japanese construction costs are at a 20-year high and the cost per square meter is closer to 2.5K (as of 2017).

http://japanpropertycentral.com/2017/05/okinawas-construction-costs-exce...

Office conversions back in fashion?

Office conversions back in fashion?

Hi Fritz

Sure you can, but it is fishy why no-one has questioned it until now

But... It's just what was sold to the masses in NZ (via stuff, NZ herald and the 10% at the top) essentially everyone was rorting the credit boom. It's stopped now, hence the contruction firms going belly up.

I was building in the UK up until 2016 at £130 per square foot in double block and brick with UK labour and we spec'd stuff properly.

100 square metre build (stand alone in my case not apartments) = 1076 square feet = £139,880 (fully fitted) or at current NZ exchange rate (after overnight devaluation to $1.94:£1) = $271,367.

Yep - there has been a lot of wool pulled over the eyes of the masses.. If I'd ever employed immigrant labour I could probably have got my costs down to £100 per square foot... but I couldn't deal with the hassle... NZ has been ridden like a seaside pony or cashcow...

I'm really surprised by the drop in cost per square metre for apartments. I would've guessed that construction costs were going up and apartments were getting "fancier".

"That suggests there has been shift towards the more affordable end of the market" - Hope this doesn't mean a shift back to shoeboxes.

Please no more of this god-awful stuff like the 'Stanford' and 'Harvard' buildings on upper Hobson Street.

Usually quality construction and "value for money" occur post-bubble.

How much do you think it will cost to build this Auckland's ‘Queen Victoria’: Mansion has grandeur on rare scale https://www.oneroof.co.nz/news/35251/?ref=nzhhome

building costs are hitting the 4K per square meter for high quality houses, and about 2k-2,5K for very basic construction and finish.

Prices did not half in 12 months - most probably sizes have halved or contractors gone to the wall ...

This is not rocket science and there are no breakthroughs in this business ...

Does anyone hear about prefab anymore ?? seems it went out of fashion again !!

You are my prefab Eco Bird.

You feeling alright dude? Doom and gloom comments earlier in the week and now this...

Administrator - this guy's account has been hacked I think.

Cheaper materials = LEAKY BUILDINGS
History repeats

I would not read the statistics the same way.
If you divide the total dollar amount by the number of consents then clearly the impact of apartments is showing up as a drop in value per dwelling. Even doing the sums on an annualized basis (well done Greg) the figures tend to be rather peaky and move around much more than the average cost per dwelling consent in the smaller cities. All this indicates is there are much larger complexes coming onto the market.

I would not read the statistics the same way.
If you divide the total dollar amount by the number of consents then clearly the impact of apartments is showing up as a drop in value per dwelling. Even doing the sums on an annualized basis (well done Greg) the figures tend to be rather peaky and move around much more than the average cost per dwelling consent in the smaller cities. All this indicates is there are much larger complexes coming onto the market.

I would not read the statistics the same way.
If you divide the total dollar amount by the number of consents then clearly the impact of apartments is showing up as a drop in value per dwelling. Even doing the sums on an annualized basis (well done Greg) the figures tend to be rather peaky and move around much more than the average cost per dwelling consent in the smaller cities. All this indicates is there are much larger complexes coming onto the market.

Good comments but has everyone missed the point in the quote below.. Construction costs have in essence more than halved in 12 months... Which would suggest to me that there is no labour shortage, no housing shortage, or a housing problem - just previous overleverage and stupidity. This would suggest to me that the steam has evaporated from Auckland and everything that was being hyped up before as justification for why everyone had to pay so much for a house in Auckland was not true it was just a way of selling more debt on the hype.. Where is Uncle John maybe he can help answer this? Oh he's Chairman of the biggest mortgage lender....
Re-read the quote again and think on it.

'over the last 12 months, the average value per square metre has declined form $5334 per square metre in the second quarter of last year to $2529 in the second quarter of this year, which was also the lowest it has been since the third quarter of 2015.'

Pump and dump... John sold in November of 2017 and his son may have recently sold too if Double GZ cares to confirm that.. What a ride that was!

Constructions costs don't just halve in 12 months. To me it looks like incomplete data, ie we are not comparing apples to apples.

And if there was a saving in building costs, it always get capitalized into the land price with the end result, houses do not get anymore affordable.

Data downloaded from Statistics NZ Infoshare for Auckland apartment consents shows very large fluctuations in the monthly rate per square metre. It’s possible to get a slightly better picture using annualised data, but even that is not showing much of a trend, maybe slightly downward accounted by the rise in Construction of cheaper suburban walk up apartments, while more costly high rise is not part of the data as it’s no longer feasible.

Here are the annual numbers for the past few years ending June. Same data but more smoothed out and less sensational.

Year Rate/m2
2012 2333
2013 1432
2014 1835
2015 2079
2016 3215
2017 3627
2018 3364

So as the NZ$ strengthened (making imports cheaper) between 2014 and 2017 it is reasonable to accept a doubling in build cost? Or was it just that everyone was feeding off the endless stream of credit? I feel a big reset coming.

You “feel”? Facts don’t care about your feelings, Nic.

Apartments are a total ripoff. Looked at one bedroom, south facing single bedroom with no parking for $550K in Albany. Who want something with no parking ? it should be illegal to build an apartment complex without parking when the streets in the adjacent area are already choked with cars.

We still have no idea how to build in Auckland. Have given up and moved up North out into the country.

Considering the likes of Fletcher's and Ebert construction lost so much money was due to them under pricing the work, this FALL in construction costs as recorded on the consent and the FAIL of these companies could be linked.

And if this fall in construction costs is wide spread over a number of different developer projects, it might give us a heads up that there are other fails in the pipeline, and who they are.