Despite it being winter, and almost an election, and house prices in Auckland having backed off a bit this year, there have still been a number of apartments ‘launched to the market’ in the last couple of months.
Interestingly, the eastern suburbs are finally getting some love. The area from Parnell through to Glendowie has been very quiet in terms of new housing since 2012. Ngati Whatua have big plans for their land at Bastion Point (with 30 homes completed last year), and Orakei Bay Village has been planned for many years (but with no homes built yet). On the whole, though, things have been quiet, especially to the huge number of projects around the southern and western fringe of the inner city.
And then, within two months, four apartment projects have been launched: two in Mission Bay, one in Parnell and one in Meadowbank. The Edition, Outlook, Soto and Horizon apartments will give some much-needed new housing in these affluent suburbs.
At the more affordable end of the spectrum, Ockham Residential have also started marketing (and building) their latest project, Tuatahi. These apartments in Mt Albert are pretty much next door to Pak ‘N Save, a 10 minute walk from the Avondale train station, and 90% are being sold for less than $650,000.
All of these developments, and another 800+ others, are outlined on the RCG Development Tracker page.
New Homes (Building Consents)
I’ve also looked at Auckland and Christchurch consents in the past, but this month is the first time I’m looking at the entire country… read on for more…
For reasons which have been lost in the mists of time, no one collects information on how many homes are being built, or completed across New Zealand. Building consents are the best data source we have – and they give a good idea of how much housing is being built.
In Auckland, consenting activity is running at just over 10,000 homes a year, with very little change in the last few months. The graph below shows these figures, broken down into detached “houses” and other higher-density housing types, the kind we cover in the Development Tracker:
The number of houses being consented has actually eased off in the last year – fortunately, higher-density housing has picked up some of the slack. However, with builders around Auckland all flat out, it’s hard to imagine that consenting levels will grow much – and even if they do, it probably won’t translate into a big lift in building activity.
The post-earthquake building boom in Christchurch has been winding down, and some of the builders, machinery etc are starting to help Auckland tackle its housing shortage. As shown in the graph below, Christchurch consents peaked 2.5 years ago:
This graph actually shows the number of homes being consented right across New Zealand – the first time I’ve made this comparison. I’ve split consents into the four fastest-growing cities (including surrounding districts), and the rest of the country (“other NZ”).
The results indicate that Hamilton is building more homes than ever before, and Tauranga is at near-record levels too. Christchurch is down about 30% from its post-earthquake peak, although it’s still above the historical average. The rest of the country is also running strong: the building boom has spread to many regions besides the major cities.
Overall, New Zealand is consenting just over 30,000 homes a year. Auckland is getting 33% of those new homes, even though the city tends to get 50%-60% of nationwide population growth, and even though New Zealand’s growth is currently being driven by immigration and immigrants overwhelmingly prefer to settle in Auckland. That’s pretty clear evidence of Auckland’s housing challenges, and while the city struggles to cope with the demand for new housing, the rest of the country is making hay while the sun shines – managing to deliver more affordable homes, which for many people is a worthwhile compromise if they can’t afford to buy in Auckland.
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There’s also an Ockham apartment development on Koa St, Meadowbank.. featured in this case study here
https://oml.blogs.auckland.ac.nz/files/2017/03/2017_ARCHDES300_4-Koa-Street-Apartments-Richard-Goldie-1gxkx5y.pdf
I worry about a sales slump. I understand “The Grounds” development in Hobsonville Point was due to start construction in August – however the start is on hold due to insufficient sales (and therefore no finance)
Also Bernoulli Gardens on the tracker is one block to the West (corner Nugget and HP Road)
+1, we are just starting to wrestle control of the housing crisis, a sales slump would kill a lot of developers and set us up for continued housing shortage over the next decade. If we see a sales slump then the government needs to step in and develop apartments and terraces at low or negative profit.
The banks are the problem right now. Lending is restricted I know of requests to extend sunset clauses on developments underway as a requirement to secure ongoing finance to further reduce risk (to the banks)
My argument has always been that prices are too high but any uncertainty in the market will see financing dry up and we’ll enter another lull followed by a boom ala 2009 onwards. Either hold prices to small gains and eat up the difference with inflation over ~20 years or the govt steps in to finance and smooths out the cycle.
Another option is to relax lending restrictions on new builds, i.e. allow banks to lend owner occupiers up to 90% on all new builds. This gets people into ownership and gets buildings built.
Seems unlikely to make a difference – banks won’t make riskier lending decisions in a flat/wobbly/falling market. If prices do come down then that percentage is going to go down more (ie more equity required) so it’s just pushing ownership further away again.
Is that the current case, new builds the LVR’s don’t apply (so normally 10% deposit required?).
That’s a bit of a worry if these developments are only viable if they get ‘top of the market’ prices. We’ll never get anything built if that is the case.
Not just the cost of land at the moment, but the cost of development – consent and construction costs are very high.
Run down site in Onehunga near me sold of 700k. 420 sqm section in terrace zone. Ignoring that the site is too small to develop. Assuming you build a 3 story terrace building providing 300 sqm of living space, the cost to develop would be say 1 million at best. Add margin and finance it would be getting close to 2 million including the land.
So 3x two bedroom apartments for 650k each at best.
Even if land values dropped back to 2008 levels at 400k for the site, it would only put the apartments at best to 550k.
One of the real problems at the moment now is that we need NEW housing. Whereas we see only property prices which included a depreciated house value. ie. that example above is on an old villa with a meth problem that hasn’t really been done up.
The house crisis we have at the moment is also about the construction labour bottlenecks and cost of construction.
There’s a few weird things which in that example (although I suspect the zoning code will enforce them anyway).
First, an approximately 1:1 ratio between improvement value and land value, although very common, doesn’t make sense. If land is that expensive we should probably build more on it.
Second, does that site have a 15m frontage? If so, if the new building would be 10m deep, then you get a 150m² footprint. Now ideally, on land this expensive, you’d have no silly restrictions like side setbacks and a 2-storey height limit (see first point). If you build 4 storeys then you’d have over 500m² of floorspace.
Finally, building is really, really, really expensive over here. That alone rules out building any form of affordable housing.
Few comments.
Over 3 stories and you need a lift. Probably not worth it on small developments. Also why you see a lot of 3.5 story developments. Actually might be over 2 stories and 2.5 story developments, I forget.
I ignored frontage issues. Really about the ratios. Consider site coverage still restricts to 40%. So 170 footprint might be possible, but you also need to consider other aspects. I figured 100 sqm per floor was the usable space.
In reality you need to have at least a 25m site frontage in order to develop one of these terraced houses. So in reality this is another drag on development –
the need to consolidate nearby sites and also develop big complexes.
Part of this is also a solid point for why the government should be doing this development. They can 1) absorb lower margins from the cost to sale price; 2) access better funding; and 3) bridge the long term economic value vs construction cost gap.
In a sense the CAPEX vs OPEX.
RE: Land values it gets worse if you think about inter-city areas like Grey Lynn. 3k psqm for the land values and you have a single family living on a site.
For apartments, not sure what the limit is without lifts, I guess 4 storeys are still kind of OK without one. Maybe some people will buy an apartment on the 3d floor without lifts, maybe not. We’ll only figure that out when a few of them get built.
Larger lots do come up from time to time, what usually gets built on these lots are groups of townhouses. Building those small low-rise and mid-rise apartments instead must stack up somehow, because there’s a distinctively non-zero amount of them in cities overseas.
OTOH nobody puts lifts in townhouses, even in the 5-storey ones (apart from special cases like wheelchair lifts). For townhouses you also don’t need a large lot. Quite the opposite, you can build a single one of them on a 7×40m lot, and sell the other half to someone else to build his house.
But, zoning.
So, land value is often more than the value of what is being built on top of it. And now the 15% per year increase in land value has stalled. We’re already down to 6,000 dwellings the past year. It’s going to be interesting question if anything at all will still stack up if there’s any risk of drops in land values.
Sorry, bit busy writing up for Wednesday. Here is what an architect friend says:
“Current accessibility requirements are to keep the levels at 3x without a lift. Anything over and above that then Council will demand safe travel within building under the access D1 of the building code.”
CoreLogic have produced a damning fact, that blows out of the water the belief that Auckland is having a building boom -especially in relation to record levels of population growth.
“Our own analysis has shown that whilst there were roughly 10,000 dwelling consents in Auckland in 2016 (and 9,000 in 2015), the net increase in stock was only 6,000. A key contributor to this difference is the necessary reality of urban renewal which requires a property, or properties, to be demolished in order to build more multi-unit properties…” http://www.interest.co.nz/property/89592/auckland%E2%80%99s-property-market-looks-set-stay-weak-some-time-yet-even-housing-shortage
Given Auckland’s average housing occupancy rate of 2.9 people per dwelling, a net increase of 6,000 residential dwellings will only house 17,400 people. Yet Auckland is growing by 45,000 to 50,000 people a year.
It is this fact that is driving homelessness and overcrowding in Auckland, with all its awful social and economic consequences, such as third world poor housing childhood illnesses that the NZ Herald reported on yesterday. http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11913334
Can’t see it on the list, but Panuku have applied for resource consent for a development at 198-222 Dominion Road and 113-117 Valley Road Mount Eden. 102 apartments and 9 retail units.
Council sent notification to residents in the area.
https://blogisthmus.wordpress.com/2017/08/18/dominion-valley-road-apartments/
I have been in many homes in the Panama St, Hillside Rd, Princes St area in south Auckland recently. I count about 6 new developments where on each there are upwards of 300 new units/apartments with 3 or 4 stories.
Many of the older homes I have visited are very run down.
Untidy, no interest in the garden. Clutter. Many with a large front unattractive, unpainted fence. Shaded with no sun. No views. Many with concrete everywhere for used and unused cars. The large back yard for nothing.
I think many people will be happy to move to the new homes.
Another obvious question – does NZ need to train more builders and apprentices in the skills that build homes? Apart from consenting, is the capacity to build homes sufficient?
Years ago visiting some relatives in a Scandinavian country I was intrigued to hear my cousin explain that they could buy very good quality kit homes and do the equivalent of a trade course to learn how to assemble them, including plumbing and electrical (which were done to high standards to survive their winter). The result was very affordable housing, even in a high wage country. We are so used to considering the building industry, that we do not consider alternatives to it.
Interesting idea, was it log cabins in the wilderness though? That is one of the things over time, a lot of people did pretty build their own homes or part thereof with some help perhaps. Higher building codes/technology have prevented a lot of that now..but our houses are nice & warmer…in theory at least.
So anyone secured of these? http://www.victoriaresidences.co.nz/ Closest new apartments to the Aotea Station that I could see.
*one of these?
I’m worried about developments falling over. Saba which was supposed to be going up next to my place has fallen over with the developer’s overseas sourced finance as I understand it, being withdrawn.
One development that is under contruction, and with decent internal sizes for its apartments and relatively affordable is the first stage of Mason Square in Otahuhu. It’s a good example of a development being done near transit and other facilities being basically next to the Otahuhu town centre, sport & recreation centre, and only 5mins bike from the new Otahuhu Station.