I’ve just updated the RCG Development Tracker for November – it’s now got almost 800 developments listed, across all property sectors but with a focus on higher density residential.
The ones which didn’t make it
In the last month, we’ve had a bit of media coverage about developments being cancelled. It’s always sad when a project doesn’t proceed, especially for first home buyers who put down deposits, and were looking forward to owning their own home. They’ll get their deposit back, but in the meantime property prices have kept going up, and their plans for moving home are disrupted.
Unfortunately, developments being cancelled (or put on hold, or reworked) is not new. No development is a sure thing, and some won’t go ahead, despite the glitzy marketing and the flowery statements from real estate agents. It’s part of a healthy market where some things work and some things don’t.
CBRE summed this up well when they said that cancellations boil down to “developers launching the wrong project, at the wrong place, at the wrong price”. I’d add “wrong time” to that list – some projects might have worked if they’d been a bit earlier or a bit later – but it underscores that projects can fall over if they don’t have all the right ingredients.
CBRE counted 31 apartment projects which have been shelved since 2013, making about 15% of the total launched since then. Many of these were well covered in the Herald. As a few examples:
- Flo Avondale. The cancellation of this one sparked the media look at other stalled developments;
- Springpark, which had a troubled history over the last few years. The property was sold and has now emerged as Richmond, with a different developer and with a different plan for the later stages;
- Mt Richmond Mews, cancelled earlier this year;
- Soto Apartments, marketed for a while in 2013-2014;
- The Grove in Albany. This project was marketed from 2013 onwards, and didn’t actually have resource consent. It was eventually consented for 50 homes, rather than the 65 proposed. The property was sold in 2015 and has re-emerged as Verdant Lane;
- We’ve also had the case of the Rose Garden Apartments, which are well under construction, although they’re taking much longer to build than initially expected. Here, the original off-the-plan purchasers have been asked to agree to higher prices than what they signed up for, or have their contracts cancelled. It’s a sad turn of events, and can’t be good for buyer confidence. It’s even more surprising in this case, given that Rose Garden is stage one of a multi-stage development;
- Going back to 2014, there was “Xanadu”, which adopted the unusual marketing technique of being an over-50s complex. A new developer took over, and put together new plans for the site, now known as Union Green.
There are also cases where the developer has had to take a more cautious approach – scaling back their plans, or pulling a project off the market to wait for a better time. Some examples are 88 Broadway and Orakei Bay Village, both by Equinox Group. At 88 Broadway, Equinox was planning to demolish the existing building on Broadway for a large master-planned development. They then decided to retain the building instead, and have refurbished it for offices and retail. At some point, new plans will presumably emerge for the rest of the site.
At Orakei Bay Village, apartment plans have been put on hold for now, and some old buildings are being refurbished for retail tenants. Putting some work into existing buildings is a lower cost, lower risk development option. It’s like a mild form of land banking: the developer gets a bit of a return off the property, but in the long term they’ll expect to demolish the buildings and put something more substantial there. Ponsonby Central and City Works Depot are also examples of this.
But it’s not all doom and gloom, far from it. New housing projects keep getting announced, and there will be many more to come. Like the ones that came before, developers (and buyers) will have to take their chances as to what goes ahead and what doesn’t.
In many cases, the new launches show the Special Housing Area programme finally bearing fruit – projects like Fabric Of Onehunga, The Victor (Browns Bay) and Station 580 (Kingsland) are all SHAs. They join a large number of SHA projects which are already on the market, with some under construction.
We’re seeing the first signs of construction on other projects, too. This often starts small, by demolishing existing buildings or doing some earthworks. There’s also a large number of projects which are well underway, unremarked by the media but well covered in places like Skyscrapercity, where builders just keep plugging away towards the eventual completion.
As another sign of what’s coming up, here are the latest figures for building consents. The middle of the year was quite flat (i.e. no growth in consents vs 2015), but that’s coming back up again now.
In total, 9,960 homes were consented in Auckland in the last 12 months. That annual figure should hit 10,000 for 2016 – a bit of a benchmark, and also one of the targets in the Auckland Plan.
The Auckland Plan aims for Auckland to build 400,000 homes in 30 years, or about 13,000 per year. However, it recognised that it would take time to reach this level, and assumed that we’d average 10,000 per year in the first decade (2012-2021). We’re finally hitting that, halfway through the decade, so there’s obviously still a lot of scaling up to do. The target for the second decade (2022-2031) is 17,000 homes a year…