The residential building boom shows no sign of abating with the number of new dwelling consents issued throughout the country up 24.3% in July compared to July last year, according to Statistics NZ.
The increase was across all dwellings types led by apartments which were up 47.8% compared to July last year, followed by townhouses and home units +21.9%, standalone houses +21.4%, and retirement units +10.8% (see interactive chart below).
On an annual basis consents for 35,472 new dwellings were issued in the 12 months to the end of July, up 8% compared to the previous 12 months.
In Auckland, where strong, migration-driven population growth has put the greatest pressure on housing supply, 14,236 new homes were consented in the 12 months to July, up 10.8% compared to the previous 12 months.
That means the number of new homes being consented in Auckland has doubled over the last five years, with just 7166 homes consented in the 12 months to July 2014.
And the growth in Auckland consents is not slowing, with 1454 new homes consented in the month of July, up`16.3% compared to July last year.
Other regions to show healthy annual growth in the number of new dwellings consented in the 12 months to July compared to a year earlier were Waikato +19.5%, Hawke's Bay +5.5%, Taranaki +5.8%, Manawatu/Whanganui +5.7%, Nelson +58.2%, West Coast +8.8%, Canterbury +7.5% and Southland +13.5% (see interactive chart below).
However the number of consents declined over the same period in Northland -1.7%, Bay of Plenty -1.3%, Wellington -0.4%, Marlborough -21.1%, and was almost unchanged in Otago +0.2%.
The ongoing growth in the number of consents being issued highlights the importance of the construction sector to the economy, with the value of the new dwellings consented in July hitting $1.185 billion (excluding the cost of land) up 16.8% compared to July last year.
On top of that another $189 million of dwelling alteration work was consented in July, taking the total value of residential construction to $1.373 billion for the month, up 14.9% compared to a year ago.
In the 12 months to July, the total value of all residential building work consented was $15.195 billion, up 6.9% compared to the previous 12 months.
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107 Comments
And so the supply is catching up. An agent told me that there are many new houses in Hobsonville that are not even listed for sale for fear of driving down prices in the area. Could be interesting times ahead.
Yes, it's going to be very interesting to see how many of these new places sell reasonably quickly, especially the apartments. Presumably if there's a shortage (which I doubt there is), rather than a speculative bubble situation, they'll be rushing off the shelves, right?
They would be purchased off the plans before the builds were compleated, surely...
Reducing house prices and adding more houses..... The great Kiwi boom bust economy, first in, first out, sell when the masses jump in.
By the look of all the For Sale signs around Auckland on partially built and completed places right now, no, not all purchased off the plan.
More of a sarcastic dig mate.
If there was a shortage of houses we would be seeing a price rise and everything being snapped up straightaway. That's not happening at all. If I was sitting in Alk wanting to buy, I would be playing the long game waiting till these new builds came on the market in a lump and how the global market is going to react on Monday once the US returns from the holiday period.
Probably they are mostly bought off plans yes. The shortage is real, the solution to that shortage is high prices as high prices will tend to bring in more supply. Prices cant rise much though as you cant pay more than you can afford, so a shortage cant just send prices up forever. Affordability tapped out in 2017, so real surprise prices have been largely flat in Auckland. Denying the shortage is like denying the moon landing. The only surprise is how stubbornly prices have held up. But we have a reserve that is ahead of the curve and that probably is the biggest surprise of all.
Prices could have held up well because the bulk of transactions are likely existing home owners swapping houses. Market price is the market price.
The issue still appears to be effective supply to demand. Still too many houses over 1m being built in these greenfields area, when what we really need is more affordable housing. My theory is probably supported by the drop in the higher end of the market while the lower end is holding relatively firm. I still expect prices to be relatively flat near term. No obvious catalyst for wild fluctuations.
There's a huge pent-up demand for residential housing across Auckland.
Notably, there's intense competition for houses in the $500,000 - $900,000 spectrum by first-home-buyers.
There's every likelihood that Auckland house prices (average & median) will increase significantly over the next 12 months.
TTP
Intense competition...As demonstrated by the slow overall sales rates?
There are at least three FHBs fighting among each other for that 1 out of 30 non-leaky 3br house under $1 million.
Love the continual optimism TTP . Could we have an explicit projection from you on the price movements in the next twelve months? You always seem to claim every market shift as something you predicted.
"There's a huge pent-up demand for residential housing across Auckland.
Notably, there's intense competition for houses in the $500,000 - $900,000 spectrum by first-home-buyers."
FYI, these residential apartments are priced in the $500,000 to $900,000 price range.
Despite being located in an attractive high socioeconomic neighborhood in Auckland, there doesn't seem to be any intense competition from buyers for these apartments at these price levels from any buyers let alone first home buyers due to pent up demand.
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…
Note that this is despite the reported underlying shortage of housing in Auckland of 40,000 dwellings.
If the apartments were priced at $10,000 each then there would likely be huge demand from buyers and they would likely be sold very quickly. Selling price matters.
Man, it's quite hard to take you seriously when you keep swinging all over the place. You have been consistently saying flatness now you are saying it's likely prices will increase significantly over the next 12 months. I have noted this down as your prediction as of today's date.
"Presumably if there's a shortage (which I doubt there is),"
1) There is an underlying housing shortage in Auckland as calculated by Auckland Council
2) At current price levels in Auckland, there is an excess of effective supply vs effective demand as evidenced by a buyers market conditions, lower number of transactions, longer days to sell, property developers unable to sell projects and receivers being appointed.
Property developers have undertaken projects in Auckland due to the reported underlying housing shortage and when the property market in Auckland was a sellers market. Now market conditions have changed to a buyers market.
Not sure if you noticed there were two mortgagee sales of vacant sections in Hobsonville auctioned last week. Not sure of the results yet - will be interesting to see how much the land price has fallen.
They went for $458k and $468k against RV's of $505k and $510k. Not giveaway, but a 9% discount on RV.
Thanks for the info ex socialist.
Perhaps someone could correct me if I'm wrong but I have seen builders rent out the new home or even have family members living in it rent free for 2 years to avoid paying the GST.
Well if you've seen it, we cannot correct you, you must be right
If it is your own home and you live in it for two years you do not pay a 30% tax on the profit.
If you buy / build and sell in a house before five years and there is a price increase you pay 30% tax.
Yes you can rent it out for five years and then you will not need to pay the tax. There is fine print that if you are in the business of property as an earning you will pay the tax as well.
"An agent told me that there are many new houses in Hobsonville that are not even listed for sale for fear of driving down prices in the area"
Are the houses being built by:
1) one or few developers / builder (and are they well capitalised or have access to finance?) or
2) by many different builders?
Wondering if any of these house builders are likely to come under financial stress (and their ability to hold on during an economic downturn)
If the data you have shows it, it would be great to know how much of this is driven by govt initiatives (Kiwibuild, HLC etc) and social housing providers, and how much is free market activity.
We'll see later today if Jacinda comments on it or not.
Auckland Council has that data, but their September report with July data is not out yet.
Here is their August report (which covers June data):
http://www.knowledgeauckland.org.nz/publication/?mid=2927&
Good. Let's double it again in the next 5 years.
70,000 new dwellings a year? Would you like a massive oversupply like they had in Ireland before the crash?
Better oversupply than undersupply.
Over supply leads to reduced prices and people with high LVR's are in a tight spot which would place pressure on them and they will cease spending, dropping the available dollars in the local money go arround and in turn dropping prices even more.
On the upside, home ownership will be far more affordable for far more Kiwis, as occurred in the past when governments worked to boost supply too.
A lot of people get burnt in that process.
A 20% reduction will see a lot of people at 0% LVR, 30% and the banks will get nervous. 40% and they will be sending letters out asking for a top up or a sale to limit their exposure.
From there we see a free fall dragging everyone down.
Fro
A 20% reduction will see a lot of people at 0% LVR,
If Auckland house prices fell by 20%, the economy would go into a serious tailspin. Doesn't really matter about private debt. The implications for the consumer economy would be dire. I get the feeling that people don't really understand this. Can I quantify or model these impacts? No I can't. Can anyone else? Actually, I believe that they possibly could, but it would still require some understanding of behavior. However, we know that generally h'holds are living paycheck to paycheck now. Plenty of capacity to cut spending and / or trade down on current consumption.
Major Aus cities fell by about 15%, didn't seem to damage their economcy too badly.
True.
Moreover, I think people are pretty aware that bubbles popping can have adverse effects and that's why you shouldn't encourage them to inflate.
Major Aus cities fell by about 15%, didn't seem to damage their economcy too badly.
Australia has the highest proportion of discount / promotions to sales on FMCG in the developed world; h'hold savings rates are negative; and car sales have fallen off a cliff.
Fully hear what you are saying J.C.
I see it as well, parents not feeding kids, people struggling the list goes on and on. We'll roll out lunches in schools, that'll fix it... Yep, park that ambulance at the bottom of the hill.
a 40% price drop? Not going to happen. We can't build fast enough to do that. 20% maybe, and yeah, some that overleveraged will get burnt, thats tough luck for them, and no doubt the govt of the day would roll out some sort of assistance package for owner-occupiers in that position, unless they really don't want to get re-elected.
No jobs, no money no matter what the interest rates are. We can't continue to take major hits in our main export earns and keep employment and the dollars flowing through the economy. If tourisium drops by 20% were screwed. Lucky the Chinese are coined up, doh, all good the Germans are doing fine doh! She'll be right the UK is trucking along nicely DOH!
Major hits?
Log prices are down a bit.
Milk Powder prices are still pretty good.
What are the major export earners that are taking a battering?
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…
https://tradingeconomics.com/new-zealand/exports (hit the 10y button)
20% decrease in the log prices in a month. Wool down. Milk prices level but farmers not getting their Fontura payout when a lot are struggling is an issue. All good though the economy is in great shape, let the good times roll and keep investing.......
If you are bull on this market, fire away.
From what is coming out on business confidence reports it's not good but the real issue is they are seeing their returns diminish on real time.
Lots of bears out there that smell blood, it'll take a hell of a turn arround before they dip their toes into anything.
Great, all those tradies coming are helping..
Is some organisation going to keep tabs on how many of these new places sell, and how quickly? This will be important for flagging if there's overshoot looming, or whether there really is a dire shortage.
The issue with these new builds, that means they not be a great bellweather for the state of demand/supply, is that every man and his dog is of the opinion they are all hugely defective.
I work in an office with a bunch of Millenials who are vaguely looking at buying their first homes, who are by their own admission hardly up to the play with local/financial/world news, and know even less about property markets. However they are all strongly of the opinion that new builds are best steered clear of.
I'm not familiar with the quality of new builds, but as a future FHB (likely 2 years from now), I would like to know more. What's wrong with these new builds?
I wonder how much of that is just general grumbling they've picked up from their parents/older co-workers.. "they don't build em like they used to" etc.
What do a bunch of office working millennials know about good/bad house construction? Not that i'm saying they are wrong, but i'd rather hear it from somebody that has swung a hammer and been in the industry for more than a handful of years.
I'd wait till you are ready to buy, and have a word to an independant house inspection company.
50 year old chippy.
Houses are a better construction now days. Proven in the Chch earthquake and the standards increased on that as well. BUT who built it is the big question... There is a fair bit of room between what is required and what a good chippy is happy with. Do your research, the longer the lead in time for that tradesman, the better they usually are. Housing construction firms, do your research... Do they do bare minimum two by three studs to cut corners for example.
The quick flick Reno's are the real issue. Shocking work, with a slap of paint. I.e. Property Tutors / gurus and the such quick flicks stay well away from.
A graph, by house type, showing consents, sales volumes and sales price, median multiple would be nice.
This does surprise me. I expected it would have started dropping by now, at least in terms of the private sector, and have stated that for some months.
Will be interesting to see if the numbers are being lifted by Housing NZ dwellings, which do seem to be cranking up.
I might have to eat humble pie if the numbers are still predominantly private sector dwellings. It would be a good thing if I was wrong :)
If private sector dwellings are still cranking, it seems to be a bit of a mismatch with the business confidence survey.
Perhaps the first thing to drop would not be the number of consents granted, but the number that go through to completion. I don't know if there is a partial measure on that, e.g. age of current consents, but that would be interesting to see over time.
A consent remains current for two years and is usually easy to extend. If we see any adverse conditions those concerned will not continue with the build.
Interest has the stats, I think Greg writes an article about it every couple of months. On average if I remember correctly it was >90% of the consented buildings that get completed (receive CCC) in 2 or 3 years.
As I've been saying all those surveys are just BS.. they are playing a mind game..
Even consumer confidence is holding up..
Oh well all those National spruikers
One does start to wonder
New houses miles from the city centre and with no public transport or rapid transit might as well be on the Chathams. People don't have infinite time to work long enough hours to pay a mortgage and commute hours each way to do it.
That's exactly the issue. When I looked around Hobsonville I decided to drive at rush hour into the CBD - utter pain. Sure you could try and take the ferry but that's hardly fast nor convenient if you work anywhere other than a stones throw from the Auckland ferry terminal. But the real kicker is despite all the original space in Hobsonville they decided to build thousands of homes with no decent gardens crammed in like sardines.
Just when we get into full swing .............. along comes a recession ............. typical
What goes up, must come down. That old one again.
Unlike 'Mr Muldoon's prices'. Anyone remember that little 'joke's from the late 70s????
Not having to pay for my kids lunches anymore will allow me to borrow even more for my new build.Yippee kai yay.
Hmmm, the lag of development…it takes such a long time to:
1) have the confidence the market is ready to support more housing 2016?
2) finding a suitable site 2017?
3) obtaining finance for the project 2017?
4) designing the project 2018?
5) going through various resource consents 2018?
6) obtaining a building consent 2019?
7) building and completing the whole complex 2021?
that I strongly worry, that by the time these big projects are being completed, NZ might be in a dire situation where many of these dwellings won't be required anymore
better jump the gun and sell all your rentals now then... get out while the getting is good.
and do what with the money? put it into a term deposit? shares? other stuff I know nothing about like crypto? I don't think so
retire on your massive profits?
But thanks for confirming you are a one trick pony.
So anyone who specialises in one field is a one-trick pony? (at least I have the honesty to admit I know nothing about crypto)
lonewolf can teach you all you need to know about cryptos...
Beware though, it will be a Little like visiting a used car lot
Theglc. Cryptos are more like visiting the nackers yard for your dollars.
np
Yep rentals sold Pragmatist. Tapping my foot read to go.
And prices will double anyway, right? Because of immutable laws of nature.
"by the time these big projects are being completed, NZ might be in a dire situation where many of these dwellings won't be required anymore"
1) If the construction is completed, then these houses will be listed on the market for sale at the developers desired price point.
2) If the developer needs the cash urgently and is time constrained (as the business has cashflow issues), the developer can give a discount for the completed property.
3) If the property is unable to be sold at an acceptable price for the developer (to repay bank loans, other costs), then the bank may appoint receivers to the business. The receivers may ask for bidders and accept the best price offered. The price offered by bidders is likely to be at a lower price than the developer was willing to accept, however the receiver is willing to accept this price - this means that there are potential losses to the shareholders and creditors (banks, suppliers, etc). That is how effective supply meets effective demand with property prices being the variable that adjusts. That is how property prices fall after peaking.
Here is one project in Auckland that is undergoing that process - https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…
23 units of the 92 unit project means that 25% of the project is unsold.
This is how smaller property developers of a multi-year development project with inadequate financial resources to hold on during a downturn come under financial distress. The sale price that the developer expected when they planned their project is very different to the market conditions and actual sale price as many off the plan buyers cancel their purchase.
"by the time these big projects are being completed, NZ might be in a dire situation where many of these dwellings won't be required anymore"
Take an extreme case, if the property sale price was lowered to $10,000 there would be a huge line of buyers, and it is likely that the units would be sold very quickly.
The price is the variable which adjusts to stimulate effective demand to bring it into equilibrium with effective supply - that is how prices work in free markets.
Congratulations Yvil, you are starting to appreciate the scope of the issue in Auckland.
Now since you don't live here let me explain that new construction is going up everywhere from bulldoze one house and replace with two / three new units to these insane 300 unit blocks in the CBD. Tha sheer quantity of new building in places like Hobsonville has to be seen to be believed.
Once all that supply hits the already slow market that's when the real price drops will start.
Again, I feel there will need to be an external catalyst for a major drop. As it stands, steady migration and normal population growth should keep things steady. All in all, this will be close to the bottom of the market if we are 10 years into the future looking back. (my opinion)
Iceman, I can understand your viewpoint that most severe housing corrections in the past have required an external catalyst. I think what has made NZ perhaps unique is the quantity of external capital that followed Chinese immigration here and then the subsequent non resident buyer ban. This has provided a huge skew towards away from fair value and then a deliberate popping of the bubble. What seems to have happened so far is a fairly orderly slow reduction in asset values but because of the 3 year building cycle we are seeing a flood of new construction coming into a weak market. It's likely that this in itself will be enough to push the market over the edge but there is always a chance the market may take the next decade to slowly get back to fair values.
Some key events so far:
1) Responsible Lending Code in NZ
2) Haynes Commission in Australia led Australian banks and their NZ subsidiaries to tighten up
3) Revised APG223 in Australia by APRA and impact on NZ subsidiaries of Australian banks
4) Overseas buyer ban
5) Anti-money laundering
6) Healthy Homes Guarantee Act - tightening and improving living standards for tenants
Good points. But the increases in the early 2000s, I’m pretty sure percentage wise they were the same. Everyone at the time thought that prices had gone beyond sanity. It just seems to be a usual ten year cycle . Early spring property interest seems quite high signalling BAU. But let’s see.
Yeah but remember how much buffer there was in terms of ability to cut the Ocr in the 2000s. We are rapidly running out of that ammo
The catalyst could be NZ exports returns which are going through the floor. That's already well underway. Brixit. Trade wars. Global debt exposure, aging population and more. Take your pick.
Glitzy you're mistaken, I do live in Auckland, what gave you the impression I didn't?
A complete lack of awareness of the building boom of shoebox unaffordable homes and apartments that nobody wants.
Oh, so you think you know better?
Everyone has areas that they choose to focus on. If the area is outside of their selected attention or considered irrelevant, they are less likely to notice.
Refer
1) https://youtu.be/vJG698U2Mvo
2) https://youtu.be/_bnnmWYI0lM
Your comments seemed more from a villager than a city dweller
Oh another attempt at an underarm insult, does it make you feel better when try to bring others down?
You asked a question... don't ask if you only want answers that suit you
This is the sort of comment, i.e. a thinly veiled personal attack, that moderators should just delete.
Are you... are you turning into a DGM?
You sound more like an amateur rather than an astute business man
...and another attempt to belittle others, petty
It was an honest assessment, not sure why you feel belittled.. insecure?
Tell me again about that drop in business confidence....
Hardly any in reality
The problems internationally are looking more serious all the time. Domestically we'd be fine, but the rest of the world could trip us up.
Small-time anecdote;
In-laws bought their first home in Massey in the mid'70's and have held on to it through subsequent purchases (used it as appreciating collateral, in effect). 3 years ago they bought the house next door, also 1970's, and combined the back gardens to build 3 more units onto the land. All the properties ( units and 2 renos') have just been completed now with the intention of puting all 5 properties on the market this spring.
I will watch what happens with interest.....
Just did the same. Hard yacka as we had close to no dollars and popped out three kids along the way... but well worth sucking it up, no holidays, burning the candle at both ends for 10 years. Bloody near bankrupted us along the way a couple of times. By far more than I could have earnt on the tools for someone else.
Now I'm regarded by Jacinda as one of those pricks that had it all handed to them sitting on my ass drinking imported beer.
Good luck with your project, the country needs more of the average Joe doing this than the big boys taking the candy.
I'm all for you making money, actually I love people making money. Good on you for doing what you have done. I have done something different, I am trying to start of a company, and it has near bankrupted me also. If it works happy days, I am set for life, if not I have learnt valuable skills and setup valuable networks.
But just questioning what has Jacinda done, what makes you think, she thinks you have had it handed to you. I don't get that feeling at all, so curious if anything, am I missing something. Genuinely don't know, other then immigration (which I want drastically reduced) I can only see good things.
I know what Key has done by aiding and abetting house price increases where they are extremely unaffordable for average income earners starting from scratch and for any young coming through. Its only affordable to people like me who already have a house. He conned me and I voted for him, now NZ is unrecognisable to me, rampant immigration and nutty house prices.
Jacinda tried to pin the CGT on.
At present she should be stepping up and at least talking about troubled times ahead. No a word.... What is about to happen was foreseeable two years ago and very little has been done to create infrastructure projects that will spark the economy. Let's face it, this Gov't has a dismal rate of success.
So Cgt on capital gains that didn't come to pass, as opposed to rampant immigration and unaffordable housing that impacts us, our children and their children. Interesting. Im still not keen on Jacindas immigration record, but cant see any problem with her implementing something she didn't implement.
What type of infrastructure projects did National implement, again curious. National just implemented policies that allowed housing to become unaffordable. I can't even drive a 50 min drive now in Auckland, it takes 1.5 hours. Thats how poor infrastructure was under National.
Also in terms of business no change for me.
"By far more than I could have earnt on the tools for someone else." Good on you for making a go of things. I would just caution you to fully converse yourself with Unearned Income, and its downstream effects. https://en.wikipedia.org/wiki/Unearned_income It seems like it is free money now, but someone always pays. In your case it may be the children you are so proud of that pay the price.
anecdotes are under-rated.
what sort of prices?
Auckland has crawled far enough and Sydney slowed so severely that we are now surpassing them. Demand getting pretty bad in NSW for them to have fallen to below the peak productivity of Auckland.
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