As explained in my last post, Australia is currently in the middle of a major apartment boom. Of course, the picture changes depending on which city you look at. The following graph shows the share of attached dwellings for the “large Australian cities” – the ones which are bigger than Auckland, at 1.9 to 4.7 million people:
Sydney has been building mainly attached dwellings for the last 12 years – 60% to 70% of all dwelling approvals. There’s a lot less of this activity in Perth, where the share of attached dwellings is around 25%, without much change in the trend in the last twelve years. However, Melbourne and Brisbane have seen a real lift over that time, from around 30% of approvals in 2002 to 55% now.
Here’s the share of attached dwellings for what I’ve called the “small Australian cities” – state capitals which are smaller than Auckland, at 132,000 to 1.3 million people (and note Australia has many other cities in this size range which I haven’t looked at):
These percentages fluctuate quite widely, but note the high share of attached dwellings in Canberra (the size of Christchurch or Wellington) and Darwin (the size of Tauranga).
The figures above are for “Greater Capital City Statistical Areas”, which are defined very broadly, and include a large amount of rural land and smaller settlements as well as the main urban area. This tends to bring down the share of attached dwellings, since you’re more likely to get apartments in central Sydney than Campbelltown. In terms of land area, the GCCSAs range from 170,000 to 326,000 hectares for the “small cities” and 642,000 to 1.6 million hectares for the “large cities”.
It’s a little tricky to compare these areas to any New Zealand measurement – they’re probably in between the typical size of a territorial authority and a region – but the Auckland Region, stretching from Wellsford to Pukekohe, is 1.6 million hectares. The graph below compares the attached dwellings share for the Auckland region (in dark blue) to those for the large Australian cities:
So, we’re building a smaller share of attached dwellings than Brisbane, Melbourne or Sydney (which, to be fair, are all larger cities than Auckland), although it’s interesting that we outpaced Brisbane and Melbourne for much of the 2000s. The share of attached dwellings is also tracking up strongly, and I’d expect it to keep heading upwards in the short term at least.
In “absolute” terms, we’re approaching 3,000 building consents a year for attached dwellings – less than we managed during the 2000s boom, but still significant, and continuing to grow strongly.
The upshot of all this is that John Key was absolutely right when he said “If you’re a young person buying your first place in Sydney or Melbourne or Brisbane, in most instances you’ll be going into an apartment.” If you’re wanting to buy in a big city – especially if you’re a first home buyer with less of a deposit or a lower income – an apartment, terrace or flat can be a great option, and they’re a big proportion of what is being built.
Processing...
I am surprising to see Sydney builds more apartment than Melbourne.
Also Auckland apartment builds sharply drops at 2009. That demonstrate how our leaky, poorly designed, low quality, doggy leasehold apartments has made a lot of investors lost their pants.
It will take a long time for people to gain back confidence on Auckland apartments.
These stats aren’t just apartments – they include all attached dwellings, so from flats/ units all the way up to apartment towers. For Auckland, at least, the terraced-style dwellings are a big part of the total (I don’t have the breakdowns for Australia).
I’m sure the “leaky homes” issue is part of it, but the GFC and the inability for developers to secure funding is probably a bigger influence. Not to mention investors getting spooked, given that they’re often the purchasers rather than owner-occupiers.
I think people are now again quite confident in Auckland apartments, based on value increases in the last couple of years, and the prices that are being charged for new ones. It’s now a market which is more mature, better understood, and hopefully more stable.
It’s quite fascinating, though, how big that 2009 drop was, especially given that at the same time Melbourne and Sydney were trending upwards. Australia’s economy didn’t go into the same dip as ours, which probably had a bit to do with it.
It has 25 years for people to come back into the stock market, and we are still building multi storied buildings that leak.
Neil where’s your evidence that recent dwellings leak? I’m not aware that we’re still building like that…
I was contracting for a company in June that had a number of leaks in their new offices. NZ architects need to design to the limited skills of our building contractors.
That last chart- Auckland is the big mover. Heading back to the levels of 2002-2005. And possibly more if the market were allowed to decide, but the government proscribed sprawl empires at the ends of the motorways [SHAs] and the Council’s watering down of the Unitary Plan regulation changes may put paid to that.
Wow – the Auckland graph really tells a story about how the GFC impacted the housing market in NZ. This reinforces something I’ve believed for a long time. The roots of the latest housing shortage in Auckland date back to the aftermath of the banking crisis. Fundamentally Auckland needs higher density to grow but bank lending practices are a barrier. If you are a builder or small developer with half a million of equity in your home and you want to spend a million bucks subdividing a couple of sections and building free standing homes the banks will be more than happy to accommodate. But if you want to build a set of 10, 20 or 40 townhouses or apartments (the kind of development projects Auckland desperately needs lots of) you need to rock up to the bank with a detailed business plan and a request to borrow millions unsecured. In 2009 the banks would have shut the door in your face, regardless of the merits of your proposal, because they were only interested in low risk secured lending. The losers in all this are Generation Rent who graduated in the 90’s and 00’s, looking to purchase their first homes now and are living through a decade of catch up as the horribly out of whack housing supply creeps back up to equilibrium…
It was the basically collapse of the “Finance company” sector that gutted the small apartment developers in NZ,
These second/third tier lenders were prepared to lend on much lower security than the high street banks, – and when the GFC rolled round, they that risk killed them
The gutting of this sector, will hurt small developers for a long time, and they may never recover- OTOH the larger developers who can get access to capital will fill the niche,
The term Finance company is now poison to most retail investors, and it will probably take a generation to recover ( Much like the stock market was cosidered a no-go by retail investors for 20 years after 1987)
Yes, but this may turn out to be a good thing for the city, as those developers were building crap. There are signs that this current return to apartment building is leaving much better buildings as only good developers with solid track records are still standing- here’s hoping. That of course doesn’t mean that they’re all to everyone’s architectural taste, but is always true of all building.
Attached dwellings as noted does not have to be apartments. There seems to be a perception that increasing density means building a Zest on every lot, when in actual fact it could be as simple as building 3 townhouses of say 140 sqm on 2 sections where previously there were 2 houses, which is a 50% increase in density. The other issue perception-wise is that we seem to build really small or really big apartments, with not a lot in the middle, which perhaps is a function of the market (as is the average home size) and the need to make a profit.
The thing to remember with apartments especially inner city ones is that banks are wary on lending on them so are more likely to enforce the 20% deposit, thus you end up with a choice in some cases for your $60k deposit of a $300k apartment or a $600k house and for many the latter is preferable.
As with all issues of housing in big cities, another illustration of complexity and that there is no silver bullet!
http://youtu.be/Wix4zwMqbkg
Be brave, Kiwis. The time will come. Sydney is being transformed