Fletcher Building is the biggest construction company in New Zealand, and a major home builder, so it’s worth keeping an eye on what they say about their residential business and the market. They recently gave a presentation on this.
Fletchers are now established in the “high density” market, having built several apartment buildings at Stonefields in a joint venture with Todd Property. There’s still more to come, both at Stonefields and Three Kings – where the first building, on Mt Eden Rd, is already going up.
As for their “low/ medium density” offerings, Fletcher’s “product range [is] increasing in density and will include light-weight apartments”.
Slide 18 of their presentation is interesting, showing the journey from raw land worth $80-$200/sqm, to subdivided sections at $600-$800/sqm, to completed houses, with a “build margin” of $50,000-$100,000 or more.
This is obviously based on detached houses, with the model a bit different for higher density homes. But the gap between raw land and sections is a big one – it has to accommodate infrastructure (including local roads), development contributions and GST, among other things.
Slides 20 to 22 show how Fletchers want to scale up the number of homes they build, from 200-400 a year over the last decade to 1,500 in the future – although it will take them a while to get there, beyond their 2018 forecast horizon.
This would make Fletchers the biggest home builder in New Zealand, although of course other companies will also be aiming for growth.
These slides indicate that Fletchers are moving back into being a developer, not just a house builder, and that they’ll be building more ‘attached’ homes – those are a major focus of most of their Auckland and Christchurch projects.
Lastly, Fletchers have an interesting slide looking at the market overview, saying “There is a structural shortage of housing in Auckland”, and “on current estimates this will take 10-30 years to reverse”.
I agree with them, although I note that this doesn’t mean we’ll have rapidly increasing house prices for 10-30 years. We simply need to get to the point where people have confidence that housing supply is increasing, and that we’ll be starting to chip away at that shortage, and that should help to reintroduce some sanity to the market.
The Herald have covered the presentation here, mainly in relation to Three Kings locals opposing Fletcher’s plans for the old quarry. I’ll just quote one comment here:
Garry Bryant, Three Kings United president, said… “Why does Three Kings, which is the smallest in land size [than plans for three other sites] have the most residential density which is 50 per cent more than Whenuapai which has a land size of 31ha? The very area that needs the most open space has next to nothing compared to the other three sites where land is abundant”.
It’s pretty obvious to me why Three Kings (brownfields, 8 km from the CBD along Mt Eden Rd) will have much higher density than Whenuapai (greenfields, 24 km from the CBD). The density planned there will also enable better quality, better utilised public open spaces. Putting my economist hat on, why is the community group trying to regulate what other people do with their land? What’s the externality they’re trying to solve? Surely the density of the site is a question for the developer and the eventual residents?