It’s been a little while since I wrote a “Development Update” post, and a lot has happened since then:

  • The final batch of Special Housing Areas was approved.
  • Downtown Shopping Centre has closed, and is about to be demolished. Tunnels for the City Rail Link will be built underneath, and the site will be redeveloped as Commercial Bay, an office tower and shopping centre.
  • Speaking of the City Rail Link, it’s is now officially under construction.
  • My count of homes which are currently “under construction” keeps edging up – it’s now up to 6,000, and that’s just for Auckland apartments and terraces.
  • Several major buildings have been completed, including Urba Residences (144 apartments just off K Road), Unilodge on Whitaker (300 student apartments) and VXV Three (offices in Wynyard Quarter). Vinegar Lane keeps ticking away, with Countdown also open as of today.
  • A number of new homes are now being marketed, such as NXN Apartments, Nugent Rise, The Eight, Eden Green and The International.

So, quite a bit then, and it’s all in the RCG Development Tracker, along with a host of other information on 700-odd projects.

It all adds up to a pretty big ‘pipeline’ of homes which are recently completed, under construction or being sold off the plans.

Pipeline to June 2016

The tricky part is that, as I’ve written previously, the construction sector is getting really stretched. That’s worth a post of its own, which will happen in the next week. In the meantime, the government keeps finding it politically convenient to blame the Council for all of Auckland’s problems. Convenient it may be, but it’s not particularly helpful for Aucklanders.

Unfortunately, based on “building consent” numbers, Auckland has actually gone backwards in the last couple of months, in terms of the number of homes approved for building.

Dwelling consents to Apr 2016

9,353 homes were consented in the year to April 2016, down from 9,534 in the year to February. The main reason is that apartment consents are volatile, and have had a couple of bad months. It’s a different picture than the top graph shows – that’s more of a “leading” indicator in a sense, so consents should come back up again.

None of it is enough, though, and if you want a bit more evidence:

  • The Auckland Plan target is for the city to build 13,000 homes a year over the next 30 years.
  • That includes an average of 10,000 homes a year in the first decade, which started in 2012 so we’re already playing catchup on that. Plus, as per the graph above, Auckland has only ever achieved 10,000 homes a year a few times, and that was when we were building far more apartments than we are currently.
  • I’ve recently done some calculations that Auckland needs to build 14,000 homes a year to meet current demand (with immigration at its current high levels).
  • We’d need at least 16,000 homes a year if not for the fact that Aucklanders have also been moving to other parts of New Zealand, which partly balances out the immigration from overseas.
  • Most economic commentators think Auckland already has a shortage of 20,000 to 50,000 homes, which will take many years to address.

This is a huge challenge, although it probably looks pretty good if you’re a builder!

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26 comments

  1. Has anyone presented an explanation for why we are still unable to achieve the same rate of construction as we did in the ’02-’06 peak? Particularly in apartments; given current market conditions I would have thought we’d be building more than ever before.

    Is it just a consequence of the long lag time between attractive market conditions and actually being able to construct a finished dwelling?

    1. Really good question Ben – I’m working on another post looking at the construction sector and how busy it is at the moment (at a nationwide level, it’s busier than it has ever been).
      The issue is that apartments are a small part of the sector, and if you look at the orange trend in the graph we’ve gone from building practically none over 2008-2013 to starting to build more again. And a lot of skills were lost over the years of not doing any, and builders are busy elsewhere, and many of the actual construction companies which were building apartments in the previous boom are no longer around – Brookfield Multiplex, Mainzeal etc. Other companies have had to enter to fill the gaps.
      I’m an economist, not a builder, so I’m sure there would be readers who could fill in some other factors as well!

      1. Ben and John, the primary answer is Council regulations (deliberately) stymied development of apartments from 200/06 onwards. We’ve written posts on this before: http://greaterakl.wpengine.com/2016/01/06/apartments-and-affordability/

        “The Auckland City Council is continuing its attack on sub-standard apartments with the introduction of new design controls that spell the end for “shoe-box” sized dwellings. The new controls stipulate a minimum studio apartment size as well measures to improve poor ventilation and sound-proofing. Cheek-by-jowl apartments and ugly concrete towers also will be banned. The moves are the second council initiative aimed at improving the standard of Auckland apartments, following its earlier decision to score all new buildings on their design merits and to reject developments that do not come up to standard and fast track those that do. Deputy Mayor Dr Bruce Hucker said the latest moves “sounded the death knell of the pokey apartment, ugly building era”.

        1. Absolutely. the introduction of PM2 minimum sizes and outlooks destroyed the ability to provide apartments at the affordable end. We are still dealing with consequences of this, particularly the mix rule which requires 30% of units to be 70sqm (which at $12,000 a sqm = $840,000). It’s worse in Newmarket with 20% of units required to be 90sqm plus deck 3 beds = $1,000,000 plus (to appeal to families said the ACC planner at the PM196 hearings who then moved to Australia). Realising the problems this has caused Council will sometimes grant Resource Consent to not comply on these issues to help affordability, but only sometimes.

          What they didn’t get is that size doesn’t mean quality – some of the ugliest buildings on Hobson Street have huge units and some great looking buildings have tiny apartments (visit Melbourne). They just needed to control the quality of the public interface.

    2. Several causes:
      1. Loss of skilled workers overseas during the GFC

      2. Post-quake rebuild demand for these workers in Christchurch and surrounds. many construction projects in Christchurch are rebuilding office and retail hi rises, not apartments.

      3. Totally inefficient building techniques [poor productivity is just one] used here in NZ compared to other markets making all kinds of dwellings more expensive per m2 than overseas

      4. Building product prices outstripping inflation by some degree meaning dwellings cost more to build like-for-like now than then

      1. Good point. Those buildings have probably hurt the perception of apartment living in this country a fair amount. Thankfully, the developments going up now are much better – mostly, at least.

          1. +1 to Matthew w. There is nothing wrong with the apartments at the top of Nelson Street. The problem is with Nelson and Hobson streets themselves.

            You could argue that the problem is that they are perceived to be the only possibility with apartments as that is pretty much all that was built in the 00s. But the apartments are great and I wish the had been more as they were still very expensive when I went to uni.

      2. The two things you commonly hear are:

        Too small → preferences vary. For people without children there’s nothing wrong with an apartment being less than 40m². And unlike leakiness, size is easy to assess when buying or renting.
        Ugly → You don’t usually see people looking up while walking around in cities. On street level, the main problem is buildings with blank walls, and cramming parking lots in every corner. Apartment buildings are hardly the worst offender in that regard. (that would be Sky city, which happens to be building another big building over there)

        Then there is:

        The street → living on what’s over here sometimes called a traffic sewer was never going to be pleasant. A pretty apartment building is not going to change that.

        So if we talk about that corridor I wonder how much of that negative imago is due to the environment on the street rather than the apartments themselves.

      1. There is also a (partial) overlap in the motorway building spree vs the general building construction industry. While it may not seem like very related, some pools that they draw from (in terms of managers, general staff, resources and equipment) is the same. And our pools aren’t that deep.

  2. Presumably these numbers now include the removal of the Orakei Bay Development from the pre-sales group?

    I know a replacement (cut down) project is being talked about now, but its not consented and will be a fraction of the size of what OBV could have been if it hadn’t been pulled by the developer.

    Way back just before SHA’s were first introduced, we were supposedly some 39,000 dwellings [3 years supply] behind the demand curve.

    Radio NZ has done a lot of documentary episodes on the Housing costs in its Insight series.
    They did an Insight documentary on the “housing [affordability] crisis” in December 2011 – which fingered new supply as a major culprit

    Since then we’ve continued to under-supply Auckland housing by at least 4,000+ dwellings a year [some years post GFC the shortfall massively more than double that], so the top end of your estimate figure is more likely the true picture than the lower end.

    Considering the bulk of all this happened on the current Governments watch they shouldn’t try and deflect blame to Labour or the SuperCity.

    Remember the only time a Government anywhere in the world has successfully managed to make housing more affordable through market direction, was the massive State Housing initiative many decades ago.

    So Labours Kiwibuild idea looks to be more and more the only option out of this mess.

  3. “So Labour’s Kiwibuild idea looks to be more and more the only option out of this mess.”
    Direct government intervention is the only solution but it is anathema to the ideologically driven government we have. Ideology trumps logic every time as doing the logical thing would be to admit that the ideology was wrong. We can’t have that!

    1. Reminds me of the talk prior to the last “crash” of how “a rising tide lifts all boats” [i.e. equally].

      Unlike shares, which tended to be a literal house of cards [well they mostly all were in the 87 crash].
      Olly Newland, being one of the leading culprits here in that happening.

      A property market is made up of many many sub-markets, each with their own peaks and troughs, peculiarities and niches.

      So I’m sure a glut of cheap houses near Drury or points south might well experience a big meltdown in values – taking many investors and owner occupiers with them if the banks lose patience.

      Closer-in properties in traditional suburbs – especially those on good bus, rail or LRT lines will not “crash” the same way – their prices may well stagnate for a period of time. But longer term their fundamentals will show up and prices will reflect that eventually.

      And time will tell, whether these current lot of prognosticators are right, and in what timeframe.
      Anyone can predict a crash or boom, the key is to know when it will happen.

      All the while remembering of course many of these same pundits all said back in 2007 (in a retrospective look back at the 20 years since the 87 crash) that “it could never happen again”) – almost as soon as they had said that, cue the GFC and related share market crashes.

      Prices for good quality shares and housing of all ilk will maintain their value over the longer term. The trick is to know the gold from the tat, even the experts can’t always tell that or get it right with timing.

      The big difference between the property market and the share markets is you can if you have to live in your house – can’t do that with shares or other investments.

  4. We don’t have enough professional builders, instead we have a lot of cowboy builders who cut corners and build low quality building that looks pretty in the surface but broken underneath.

    It is a matter of time before another ‘leaky’ drama happens.

    1. I already think we have one now, with poor quality steel products and low quality plumbing fittings being used instead of the more expensive but certified products.

      Its one thing to have a house that leaks the outside to the inside from poor workmanship.
      its quite another that rusts inside out or falls down in a ‘quake due to poor quality plumbing fittings or low quality structural steel

      Its not just houses that suffer these issues as well, big building do too.
      And if the big guys like Steel and Tube, Fulton Hogan and HEB can’t get it right when dealing with Chinese imports .
      Then What chance has the end user or their low skills builder got of getting it right?

      The whole industry needs to be rethought from top to bottom.

  5. And in the meantime while the building industry is gearing up and while we still aren’t building enough for current demand let alone the shortfall we should be restricting immigration as this is the single biggest factor (well along with China based buyers) on the demand side of things.

    1. Agreed. The social problems will exacerbate if middle NZ can not fulfil the desire to own homes just as their parents, grandparents etc did. This is going to be a real mess.

      1. https://www.tvnz.co.nz/one-news/new-zealand/our-country-economist-calls-debate-nzs-immigration-policy
        Summing it up he is basically saying there is virtually no long term benefit from having such a high level of immigration and it is only to benefit short term political interests (ie making growth look higher than it really is). In the meantime it is causing all sorts of infrastructure problems in NZ but Auckland in particular that this is making a lot worse.

  6. It looks as though a consequence of the governments decision to “build out” happened this week with Watercare announcing increased water charges to pay for more infrastructure. While home owners on the outskirts of Auckland benefit from lower land prices unfortunately the rest of us pay to subsidize their park and rides, transport costs, WINZ offices because there sure ain’t any jobs there; local amenities etc. It’s just an outstanding result -we bear the high cost of living in the city -and part of their cost as well. Little wonder the clever people are saying -build up!

    1. That’s why I say there should be a targeted rate/levy on NIMBY suburbs that block up-zoning.

      Let the NIMBYs pay for all of the costs of sprawl that they cause (the Central Government have made it clear that no money is going to come from the Beehive to accompany their demands for more land – should that be moar land?).

  7. Were’s the bulk of the new dwelling happening, John? Are apartments shouldering the bulk of the new supply?

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