Patrick’s great post on Hamilton the other day prompted me to take a closer look at Hamilton for this Development Update. Like its “Golden Triangle” buddies Auckland and Tauranga, Hamilton is growing at a rate of knots. Let’s hope we can get even better connections between the three with Regional Rapid Rail.

Even though it’s New Zealand’s fourth largest city, Hamilton can sometimes fly under the radar as far as Aucklanders are concerned. But while we’ve been sipping lattes and buying designer dogs, Hamilton has been quietly getting on with the business of getting new homes built – at affordable price points.

This graph, from last month’s Development Update, probably isn’t the best graph to show it. But Hamilton City itself is consenting about 1,200 homes a year. Hamilton is one-tenth the size of Auckland, so it’s the equivalent of Auckland consenting 12,000 homes a year, whereas we’re actually struggling to get above 10,000 and the costs are a fair whack higher. Hamilton is punching above its weight.

Hamilton Gets More Urban

The other surprise is that many of the new homes in Hamilton are terraces. It’s intensification on a small scale, and not as big or flashy as Auckland’s emerging apartment scene. But these small-scale developments, replacing a house with 6 terraces here, or 12 terraces there, add up. Half of all new homes in Hamilton are “attached” – terraces, apartments or retirement village units. That’s on par with Auckland:

This low-level intensification is happening in a range of places around Hamilton. Some of it is on the CBD fringe; some is just a little further, in central suburbs like Frankton, Hamilton Lake and Hamilton East. Hotspots include the area around the hospital, and around Waikato University in the southeast. There’s also a fair bit happening around Five Crossroads.

These are long-established suburbs, getting a new lease of life. More housing means more residents, supporting the CBD, and more urban opportunities in Hamilton. I’ve mapped quite a few, but certainly not all, of these terrace developments in the RCG Development Tracker.

The “Village Quarter” development was something different for Hamilton: low-rise apartments rather than terraces, and a large site giving 43 homes plus retail and office space.

Coming back to those “affordable price points”. Hamilton’s strong mix of terraces mean that it’s building new homes far more cheaply than the New Zealand average, or than Auckland for that matter.

In the last year, the average building consent value for a new Hamilton home was $255,000, vs $364,000 across NZ or $393,000 in Auckland. Those “values” are just construction costs, really, and you’ve got to add on land/ other costs for new homes – but it means that homes in Hamilton can work out pretty cheaply.

Even allowing for all the terraces being built, homes in Hamilton are still coming out cheaper, in large part because they’re more modest. The average new house in Hamilton is 185 square metres, vs 207 for New Zealand or 230 for Auckland. Terraces also tend to be a bit smaller (107 sqm for Hamilton, 117 sqm for Auckland). And ‘costs per square metre’ of home are also 10-15% cheaper, which might mean a more basic spec or lower labour costs.

New housing coming onstream, at a good rate, helps to keep a lid on house price inflation. Although house prices have jumped in Hamilton, with the median now above $500,000, there are still quite a lot of options for cheaper, including new homes. It’s almost impossible to find any homes in Auckland below that half million mark.

What can Auckland learn from this? Maybe not a great deal. With the Unitary Plan now in place, there are a lot of places around the city where we could do more small-scale terraces. The main issue is just a shortage of builders, and there’s no quick fix there.

One thing we can take from Hamilton, though, and it’s not rocket science. If we build smaller homes, they’ll be cheaper to deliver. And if we build them in central locations, people won’t have to drive too far (hey, maybe they’ll even be able to use public or active transport), so their travel costs are lower. That means cheaper living costs overall.

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  1. The fact that Hamilton is building attached dwellings at the same proportional rate as Auckland is quite amazing. Good on them.

    John P i have a related question: is the tapering of construction activity in Christchurch flowing through to increased capacity and/or lower inflation in construction yet? I was hoping that it would free up resources for Auckland. Do you know if there’s any evidence of it happening yet or too soon to say?

    1. Hi Stu, no, not much sign of a tapering off in construction costs yet. Based on the Capital Goods Price Index, they’re still rising at 5%-6% a year, which is pretty damn high.

      In general terms, yes there should be a bit of a shift of resources from Christchurch north; it’s already be happening to some extent, and will keep happening. As to how much of those resources go to Auckland vs to other cities (Hamilton, Tauranga), who knows.

  2. Thanks John. The difference in the average building consent value of $255,000 for Hamilton and $393,000 for Auckland is telling. I wonder if there are figures for how many people are turning modest homes into mansions, too? I’d say Auckland has more than its fair share of this type of (lost opportunity) development too.

    1. I believe the consent value is just a figure the architect makes up when they lodge the consent. I’m not sure it is in any way meaningful.

      1. Yes, but there’s substance to the difference – the smaller average home size in Hamilton. The strong Auckland need for more affordable homes has failed to create incentives to build smaller homes. I think this comes down to looking at how much more money developers can get by providing bigger homes. Bigger homes also tie up builders for longer, reducing the number of homes that can be built. There must be some regulation or incentive Council can provide to offset the incentives to builders to build larger homes.

      2. You’re right to some extent, but as Heidi says the floor areas will be correct. And construction costs do tend to be higher in Auckland than elsewhere in NZ – that’s a long-running trend, the only thing which got in the way recently was cost pressure in Christchurch after the quakes.

        I think 10%-15% cheaper per square metre sounds reasonable – half of that might be from actual cheaper costs, and the rest might be from the homes being more basic.

    2. Depends how you define “modest homes” vs “mansions”!

      Based on Stats NZ figures, about 15% of residential consents by value are for ‘alterations’. But that includes a bunch of things. People adding a bedroom, or maybe an attached minor dwelling, or a leaky building being reclad – those are pretty expensive, and there’s a lot of them being done at the moment.

      Then of course there are things which don’t need a building consent, e.g. internal do-ups and changes.

      Renovations etc are definitely a factor, especially with people feeling ‘cashed up’ as prices rose over the last few years. But probably not a huge factor vs the amount of money going into construction around Auckland.

      1. I wonder if you could track the homes that were extended on sites where intensification was possible? Of course this will include all sorts of extensions, without putting in a value marker of whether they are “reasonable” extensions or not. You’d also need some sort of a measure of how many homes are on sites where intensification is possible, which could be quite different for the two cities.

        I just feel that the amount of MacMansioning going on is tying up builders’ time as well as being a poor use of land in quite accessible suburbs.

        1. Great post John.

          The different “products” being built will be driven by who is interested in a particular market. Auckland tends more towards selling larger volumes of large homes because a) it’s the pre-eminent commercial centre in NZ with an attendant local spend budget, b) it’s recognised as a global city with great amenity attracting a higher budget offshore and emigration spend and c) has established neighbourhood dynamics with an established stock of larger homes that reinforces the appeal for high-value buyers.

          Hamilton is, erm, a different offer.

          It’s also possible (likely?) that developers in the Tron see an opportunity to cater for those fleeing AKL specifically for affordability reasons, contributing to the increased focus on the opposite end of the “product” spectrum.

          The question is therefore how to incentivise a bigger volume of the smaller, more affordable housing product in AKL. Clearly the market based self-interest of developers isn’t driving change particularly quickly, despite an apparently booming demand for more affordable, compact options which Hammo is probably cashing in on instead. Perhaps developer land investment choices now will pay off in the next cycle, but as the real estate wonks say, the fundamentals are likely to continue to favour the higher value purchaser….unless there’s some intervention or active incentivisation.

  3. Does anyone have stats on the population expansion of Hamilton? I am interested to know how much is internal immigration and how much is Births vs. Deaths

  4. Thank for post John
    TimR Interesting comment about different product. Looking at the Attached % graph we see a step fall from 1991, this is the year the 70 page District Scheme was replaced with 315 page Town Plan.
    Here is a bit of history on the Hamilton “a different offer” District Scheme days.

    A social survey of Hamilton: Stack: 307.76099
    1965 Housing = 7.5% Flats (p24)

    Astride the River. A history of Hamilton. By P.J..Gibbons
    Page 273
    1960s flat-building proceeded at a great rate, for there were few older houses available and suitable for rental accommodation. In 1963 less than twenty per cent of new dwellings in the city were flats; by 1970 they made up forty per cent of new dwellings. In the 1970s the choice between houses and flats was widened to include intermediate-sized dwellings, often called ‘units’, two of which were detached on a single site instead of formed block. In the first half of 1972 fifty-one per cent of all new dwellings were houses with three bedrooms, and another eight per cent were houses with two or four bedrooms. Fourteen per cent were flats with a single bedroom, and the remainder, a little more than a quarter, were ‘flat’ or ‘units’ or ‘town houses’ or dwellings otherwise described which contained two bedrooms. By 1973 there were more than 3500 flats in the city. Twenty years before there had been a few dozen.

  5. Looking again at the Attached % graph we see increase around the year 2001, which is the date District plan became lead planning tool. The sharp increase in attached consents would indicate there was demand being suppressed and council rules clearly play a lead role in type of homes being built.

  6. “The average new house in Hamilton is 185 square metres, vs 207 for New Zealand or 230 for Auckland. Terraces also tend to be a bit smaller (107 sqm for Hamilton, 117 sqm for Auckland).”

    John, the 230 sq metres as an average new house in Auckland is disgustingly high. That’s a big house by itself, let alone as an average. Can you clarify: does that include only standalone houses? I’m hoping this average doesn’t include the terrace houses.

    1. Yup, that’s standalone houses only. The average drops quite a bit if you include apartments, terraces, retirement village units etc. 230 sqm seems pretty large to me – note that it would include any garaging if attached to the main house – that’s probably 5 or 6 bedrooms, multiple living spaces etc.
      I don’t have a problem with large houses as such – hey, if people want to live in one it’s up to them – but they’re not a good match for demographic trends (e.g. most future household growth will be in 1/ 2 person households) and to some extent they’ll be ‘crowding out’ resources which could be used to build more smaller homes. Roughly speaking, Hamilton can build five houses with the material it takes Auckland to build four. That’s a challenge when we’ve got a large (and still growing) housing shortage.

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