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A record $1.84 billion of housing alterations was consented in June year as big numbers of homeowners do up their houses

Property
A record $1.84 billion of housing alterations was consented in June year as big numbers of homeowners do up their houses

By Greg Ninness

More New Zealanders are doing up their homes more than ever before with the number of building consents issued for alterations to dwellings hitting a record high in the second quarter of this year.

According to Statistics NZ, 6522 consents were issued by local councils throughout the country for alterations to dwellings in the second quarter of this year, the highest number in any quarter since Statistics NZ started publishing the figures in 1990.

However the average value per consent dropped sharply to $71,144 in the second quarter, from $84,941 in the first quarter of the year, although it was still up by 3.9% compared to the average of $68,335 per consent in the second quarter of last year.

But it is too early to say if the drop in average value in the second quarter of this year is part of a trend or just a one-off.

A building consent is usually only required for structural alterations to dwellings, such as adding a room or removing a structural support, but not for non-structural work such as repainting.

So the consent figures usually reflect major alterations to homes rather than simple redecorating jobs.

While the total value of dwelling alteration consents was at an all time high $1.841 billion in the 12 months to June, there were important differences between the main centres.

Auckland

In the Auckland region, consents were issued for 1437 dwelling alterations worth $192.3 million in the second quarter of this year.

Although that was the highest number of consents issued since the third quarter of 2016, the number of consents issued for alterations in Auckland has been relatively stable for the last five years and remains below levels achieved in 1996 and 2004.

For the last two years the average value of alterations in Auckland has also been relatively stable, ranging from $142,357 to $156,897.

But in the second quarter of this year the average value dropped to $133,810, its lowest point since the third quarter of 2016.

However it is too early to say whether the fall in average value is the start of a trend or a one off aberration.

Wellington

Alteration work plays a major role in the Wellington building market, accounting for 20% by value of all residential building work in the region compared to the national average of 13%.

In the second quarter of this year consents were issued for 846 dwelling alterations in Wellington, which was the highest it has been since 2003/2004, while the total value of those consents hit a record $61.6 million.

Canterbury

On an annual basis, the number of alteration consents issued in Canterbury is at a four year high, with 4318 issued in the 12 months to June, well up on the previous three years which ranged from 3299 to 3805.

However in the first two quarters of this year there has been a drop off in activity, with the number of consents in the second quarter down 26% compared to the second quarter of last year, while the value of alteration work consented in the second quarter of this year was the lowest it has been in any quarter since the beginning of 2013.

That suggests alteration work in Canterbury could be easing.

Otago

Alteration work is at a record high in Otago with 594 consents issued in the second quarter of this year, the highest number in any quarter since Statistics NZ's records began in 1990.

That work was worth $27.2 million, also a record for any quarter.

However while alteration work has been rising in Otago, it makes up just 9% of total residential building work by value in the region, compared to the national average of 13%.

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23 Comments

"..the number of building consents issued.."
The ongoing problem is for those alterations that continue to be done WITHOUT consent! Old homes that have had relatively major works done to them (an unconsented garage made out of the old carport; extra bathrooms added etc) that are then passed off via auction, or otherwise, to people who haven't done their due diligence (cost) and assume that someone else has. Those who undertake such deceptive work should be held liable beyond the accepted norm here of caveat emptor.

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But OTOH, if yez intend to be carried out of the shack in a box, or if the building is reasonably old and of low intrinsic value, little of the above applies - no need to bovver the TLA and its endless inquisitors. I predicted this way back when: do-ups that are invisible to the street and to drones, but yielding a great increase in amenity for the inhabitants. The classic Stewart Brand (the Whole Earth Catalogue guy from way back when most of the common taters here were twinkles in eyes) quote applies: folks just keep on fiddling with their space....

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Too risky now to upgrade by selling your existing home.
You have to sell into an uncertain market, possibly need to look for a decent rental which is difficult to find where you want ( no dogs allowed), then you need to buy into a still rising market.
Why bother? Stay where you are & upgrade. And save $30 - $40k of RE fees & $1800 solicitors fees, & $1500 removal fees.

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It is very difficult to upgrade to another house and has been for some time. As I have noted before this has probably resulted in the creation of a lot of accidental landlords who found it easier to retain the old house as a rental and buy the new house.

I thought an uptick in developing houses would happen with the current market. With, increased equity, low interest rates and revolving credit it is relatively easy to get the money to do some major renovations and many houses do need upgrading.

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I think that you are both right to a degree, but I would also see it as a sign that households are very nervous about the prospects of losing large swathes of equity on a big leveraged trade into the upper end of the market. No one wants to borrow lots of money to lose it in a price crash and with the demographics of the country pointing towards more boomer sellers downsizing over the next decade it is at the top end where the risks of a heavy top down correction are most prolific. Barfoots top Auction price last week was weak at $1,815,000 as a highest price and Bloomberg don't appear to be too enthusiastic about our house price future along with a few other notable markets where household debt to GDP ratios have risen too high!

https://www.bloomberg.com/news/articles/2018-09-13/australia-one-of-the…

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Another uncertainty is your bank.
Selling your house, & resetting your finances to rebuy is likely to trigger the bank to more rigorously check your borrowing capacity.

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Indeed and they are already doing that and tightening up. I haven't had a need to borrow for a good number of years, but I always like to know and keep abreast of how much I could borrow should a suitable opportunity present itself. Without any change to my circumstances my borrowing capacity in September 2018 is about 82% of what I would have been able to get my hands on in November 2017.

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On my military recruit course we had to guard our base overnight. It was amazing how many of us saw multiple bogies at 2am, despite being told in the morning the marauders went to bed at 11pm. Given enough focus the brain will convince you everything is moving at night. Not far removed from your ability to read negativity into any situation!

Yes, Boomers will downsize, die etc however you’d be surprised how many stay in the family mortgage free home until the end. It’s often easier than decluttering after 70 plus years of amassing crap.

The others that renovate have many reasons and not all require consents e.g. we have spent close to $200k on items that don’t require a consent.

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The voice of the boomer who was planning a retirement on what the house was worth in 2017? It doesn't matter if they stay to the end or not - Many won't because they may want to enjoy their retirement with a bit of cash rather than an equity loan, many believe it or not still carry pretty big mortgages approaching retirement and many will just die and then the house will be sold... The demographics point to that all happening over the next decade, why else do you think Uncle John left the front and back doors open? And Labour will struggle to close the door without a housing market catastrophe unfolding!

The boomers generation starts in 1946 - they are now 72 and the number of NZer's reaching that age continues to grow for the next decade and a half, they happen to own a fair amount of the larger mortgage free family homes and many are relying on the 'debt for equity' swap of the next generation for retirement. Who is going to buy them all? Most of the average 40 year olds are already leveraged up to their eyeballs on the 3 bed sheds!

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Keep up. My wife wants to grow old and die in our existing house. It can’t be sold or mortgaged. It will be passed on to our children. I just quote the Core Logic value as the Bank has it attached to the home loan facility.

BTW We went on a walk last night around properties we think have the right price and parameters for an investment. If you own 38, 40 or 42 Speight Road then we may meet some day when you sell. 50% deposit to make sure it washes its face.

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It is an excellent time to be buying rental property in many places in NZ at the moment.
Settled on our last purchase on Friday and after interest, rates etc. we have income surplus of $150 per week.
It doesn’t take much to work out that if you have quite a few positively geared properties, you are pulling in a pretty good income.
Yes sometimes there can be the odd hassle but it sure does beat having a 9 to 5 job that you have to answer to a boss!
If you are seriously worried about not getting ahead financiallly, I suggest you talk to a successful property investor to get good advice.
Yes this government is making things a bit harder to achieve, but that is what many of you voted for isn’t it?

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Great plan TM2 make $7500 on income whilst losing $30K on capital value, which seminar do I go to sign up? Will you be there too?

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What a stupid comment.
Purchased $50 to $60k under true market value and Chch prices are only going to go up in the next few years as it continues to be rebuilt..
You can be as negative as you want to about property as an investment, but what other safer investment is there?
Shares are risky, TD s are pathetic T the moment, business often only returns a living wage.

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'True market value' is what a buyer and seller are prepared to deal at. in essence you have just bought from a seller who was prepared to accept your price in the absence of anyone else.. i.e. you are the market and no-one else was prepared to buy above the price you've paid... So how under market value is it really? You've paid the market price, or are you too stupid to realise that? Add that to the one you allegedly bought two weeks ago and you are stacking debt in a falling market which is likely to fall further. I thought your wife had told you to have a holiday from interest.co.nz and making silly comments? it's not good for your blood pressure!

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“True Market Value” is not what a seller is prepared to sell,something for at all Nic.
The sooner you realise this the better off you will be!
It is comments like yours which is why the successful property investors are successful and many others aren’t!
It is $50to $60k under true market value, but you would not understand how it could be!

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TM2.

A couple of bits for you to watch on holiday so you can widen your horizon beyond Christchurch.

Debt in China at 300% of GDP is the really worrying take from this little news clip. How much of that debt ended up in our housing market?

https://www.youtube.com/watch?v=n3UJ6yMaM4A

Interesting take on impact of Chinese debt on Western housing markets. Someone gave a blank cheque book to a populous who love to gamble.

https://www.youtube.com/watch?v=0lrdxpKPocY

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Nic, don’t. Care what Chinas debt is!
If you own positively geared investment property and manage them yourself professionally then you will be just fine.
We don’t sell our properties so any pricing drops which won’t occur in Chch, doesn’t worry me whatsoever.
The thing is that as we always buy at under true market value, it is so easy for us to borrow more!
If there is not a good margin in it for us, we don’t bother.
I am not talking about the Auckland market either, as it is volatile, although most investors would have done very well over the past 10+ years, just like Chch since the quakes!

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A lot of people are modifying their existing home to fit vs taking on debt to upsize.

Do ups that avoid council delay and taxation are winners as well, especially with no council plans. It was like this when I brought it....honest ;)

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Yes, it's a reno world for the next year or two for sure.
I see the new house premiums are shrinking which will effect everything in the end. All the bottom feeders will we on the good ship Kiwibuild shortly but all I can picture is another leaky home situation as corners are cut to create a margin. If two people are doing KB homes at a gross $50,000 margin then they'll need to do a minimum of two a year. They're either going to have to reinvent ways to build properly, safely & quickly or Mr Twyford could be taking early retirement in 2020. Sadly, the (immediate) future for this industry is low end. Hmmm. Let's hope there's a lot of concrete & steel involved.

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Just had a look at a property on the other side of town. I was staggered. A very basic new build is the same price per m2 as my home in 1071.

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Christchurch consents have dropped because of the extension of the Brightline test - buying as is where is properties, doing them up and flipping them was a booming business but having to hold them for 5 years now or pay tax on the gain has put people off.

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Pesky IRD has made tax evasion that much harder ;-)

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I'm about half a mil of that. It's a good time to be improving your rentals to get out ahead of whatever standards the red team see fit to impose and be at the top of the rental market.

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