The Government’s push to allow for more housing densification is expected to have differing effects on land prices.
The Government on Tuesday announced plans to tweak the Resource Management Act to enable landowners to build up to three homes of up to three storeys on most residential sites in the country’s main centres without the need for a resource consent (building consent will still be required). Previously, district plans would typically allow for one home of up to two storeys.
The proposed change will affect Auckland, Hamilton, Tauranga, Wellington and Christchurch, and may be rolled out to other cities/towns with acute housing need.
Minister for the Environment David Parker acknowledged the change may cause some land values to rise. But overall, he expected the cost of land per dwelling to fall over time.
Parker gave the example of a large section with a low-value house on it. In this instance, the value of the land may rise, due to there being a lot of development potential. The property might be worth more with three modest houses on it, than with the existing run-down house.
Conversely, Parker said the value of a section in an affluent suburb that has a big fancy house on it, is unlikely to rise in value.
Referencing work done for the Government by consultants at Sense Partners and PWC, Parker also said the policy’s impact on land prices is likely to diminish, the further you move from a city centre.
People who live in cities tend to prefer living close to the city centre. Hence there’s more potential for densification there.
Parker said central government wasn’t going to meet local government’s requests for more funding for infrastructure to support densification. See this story for more on Local Government New Zealand’s position and exactly how much funding central government is providing for infrastructure.
“Councils get increased rate revenue that come from the additional dwelling,” Parker said.
“They have the ability to, and responsibility to, fund some of this infrastructure. It’s not all a central government responsibility.”
Parker also made the case, infrastructure to support densification is cheaper than infrastructure to support urban sprawl. Plus, densification results in lower carbon emissions.
Pushed on whether the blanket policy undermines town planning and well-thought-out urban design for the sake of urgently increasing housing supply, Parker said, “We do have to be a wee bit careful that we don’t allow matters of taste to intrude too far on planning, because they can become a crutch upon which NIMBYism [the ‘not-in-my-backyard’ approach] lies.”
He said the Government isn’t “forcing anyone to do anything”. Rather, it’s “enabling” densification.
As Revenue Minister, Parker is also the architect of the Government’s other major surprise policy, aimed at improving housing affordability - the removal of the ability for residential property investors to deduct interest as an expense when paying tax.
Asked whether the Government was scrambling to cool the housing market, having let it get out of control, Parker said, “Oh, do you think it was us that did that?
“The greatest determinant of the recent increase in house prices has actually been beyond the control of any government. It’s been the rapid drop in interest rates caused by monetary policy [controlled by the Reserve Bank].
He said the Government had a “social responsibility to react”.
“If there’s a change in the property market that moderates house price inflation and enables more people to buy a home that they live in, rather than rent - that’s something I will be shouting proudly, rather than finding that as something I have to defend at the next election,” Parker said.
For more detailed information on the proposed change to the Resource Management Act that will allow for more densification, see this story.
Below are some of the specifications property owners seeking to subdivide without resource consent would need to meet.
92 Comments
NZ has some of the most drab, badly thought out designs to begin with! The book "Sh*t towns of New Zealand" didn't come out the blue. Nimbys know that increased supply means lower house prices and that is the actual reason for their objection. I guarantee after this is implemented we will still see KFC opposite Pak and Save and liquor stores beside TABs as they always have been!
What you're describing only applies to Auckland... I lament the demographic trend since the '70s when "urban was the new suburban" when young professionals wanted to move back into the city to enjoy the city/night life and amenities of the concrete jungle. You know, night clubs, theatre, shopping malls, apartment living, office jobs, schools, etc.
Back then you could have a home for equal to or a little more than your annual income, one car was all that was needed and even one income earner in the household. Homes were a basic necessity and not a speculative investment. Politicians were the same though... LOL
Carlos67 that is not correct. Its an envelope 6m at the boundary and then up 60 degrees. So it's 7.75 metres just one metre off the boundary. At about 2.8 metres (the width of a narrow drive) its the full 11m. Max height at the roof peak is 12m. David Seymour from ACT pointed these numbers out.
It is staggering Judith Collins has gone in with the Govt to force this through - it undermines all town planning in NZ's main cities. Lets hope she gets rolled asap and some sense comes back to National
And this wont even lower house prices as its the lack of housing land at the fringes that is the problem. Any muppet can see that.
BS. They inherited a shambles from 20 yr + of deliberate policy to increase house prices. Give the man credit, he is rightly pointing out this has been caused by central bank policy. An honest change from blaming it on supply rubbish which is the favoured approach to date.
if labour can bring come sanity to this market a lot will be forgiven.
Why did Labour pass a law in 2018 requiring the RBNZ’s Monetary Policy Committee to target “maximum sustainable employment” as well as inflation? This law has contributed to looser monetary policy than what may have been the case. Instead, they could have required the RBNZ to take into account asset inflation (a brave, clever Labour administration from years gone past would have). But this lot didn’t. It was easier to blame National and pronounce that 100k affordable homes were on their way.
Parker is right regarding the RBNZ.
Opening up the credit spigot over the last 18 months fueled the already overheated housing ponzi.
Pushing the very cheapest credit into a single asset class and allowing rising equity in that asset class to be used to draw down even more credit was only ever going to have one outcome.
It's pretty simple maths - just none of the vested interests have dared to call it by it's name.
As soon as they locked down the country and printed billions to pay for it all - they only way to keep all afloat was to drop interest rates! The cause was our reaction to COVID.
I wonder what the balance of damage would have been? Locked down and it’s affects vs no lock down.
Asked whether the Government was scrambling to cool the housing market, having let it get out of control, Parker said, “Oh, do you think it was us that did that?
“The greatest determinant of the recent increase in house prices has actually been beyond the control of any government. It’s been the rapid drop in interest rates caused by monetary policy [controlled by the Reserve Bank].
This minister has to go if he doesn’t understand how government policy directs the RBNZ.
In July 2021, previous RBNZ chair, Arthur Grimes warned that NZ was heading for a well-being disaster & said NZ government needs to ditch the maximum sustainable employment target when setting the OCR as this has created excessive house price inflation.
https://www.newstalkzb.co.nz/on-air/heather-du-plessis-allan-drive/audi…
Removing LVR's though...that was the RBNZ's call wasn't it, not the governments?
Watching the central bank remove something in a time of crisis, that was implemented in order to prevent a crisis, was one of the most insane things I've ever witnessed from a state entity in my life time.
Investors swarmed in like vultures to a freshly dead animal carcass.
The Dual Mandate was a clear mistake, Just like the Fed has with their dual mandate, their liquidity has gone to drive the sharemarket to the moon.
Here is a link to Arthur Grimes comments in 2018.
https://www.rnz.co.nz/news/business/353391/govt-gives-rbnz-biggest-shak…
Its quite telling that he said it was "Crazy and that it would destabilise the economy". Me thinks Uncle Arthur was on the money.
“The greatest determinant of the recent increase in house prices has actually been beyond the control of any government. It’s been the rapid drop in interest rates caused by monetary policy [controlled by the Reserve Bank]"
What flavour of idiocy is this? Mortgage rates dropped by around 1.5 percentage points between 2019 and 2021 and house prices increased by more than 30%. There were clearly other factors at play - favourable tax settings, Govt-subsidised rents, lack of affordable / social rental housing, and, probably most importantly, Govt stating clearly that they wouldn't let house prices fall.
The only thing I would blame RBNZ for is believing that dropping rates would stimulate the productive economy at all.
Yes there may have been other factors but they are trivial compared to interest rates. https://www.fresheconomicthinking.com/2020/09/low-interest-rates-will-b…
No, it is not.
The reason interest-rates are low - and it's a global phenomenon - is that there isn't enough planet left to support exponential debt repayment. The problem now is that not only can't interest be repaid, but increasingly principal as well. Atop that, scarcity/competition is raising 'prices' of resources and energy, exponentially.
And you can't solve scarcity-driven inflation by raising interest-rates. All that creates is a last-person-standing rich-get-richer-poor-get-the-picture scenario; temporary because the next phase is collapse.
Parker has no idea; nice fellow, well meaning; no idea. Not that anyone else seems to either. If you increase population and consumption, you will run into problems - eventually terminal ones. They are trying to cram more folk into a Titanic stateroom, in relative terms. Won't work.
The natural rate of inflation is ZERO - it is only through interference, distortion and manipulation that it changes.
The relative prices of things change as they become more or less available / desirable in relation to each other, or when externalities like killing the planet are factored in.
Would the Covid response of lower interest rates excess liquidity have happened without the Employment Mandate? Technically not if the RBNZ was only following the inflation mandate without political interference.
The relatively high target of 1% to 3% with a midpoint of 2% for CPI has been problematic in driving a lower cash rates. Why not accept near zero inflation and react if we get deflation.
This will not make houses more affordable on a like-for-like basis and is also a betrayal of the social contract that Govts. have with their citizens. That is why we don't trust Govts. They are so focused on a 'Common Good' that most individual expectations are overlooked.
To make housing more affordable you need to allow the opportunity to build up and out at the same time, with the Govt. setting any city-wide changes over longer time frames but allowing communities to determine a quicker transition or protections based on local referendums. Just because the opportunity to build up and out is there does not mean growth happens, other policies will determine that, but what it does allow is housing to become more affordable as there is more of a free market that allows supply to equal demand.
And there is no reason to have tier one and two cities, if it is good for one it's good for all. Why would you wait for a non-tier town to become the same type of cluster&^*# as the tiered cities before you did something?
Irony is that they throw catalyst to boost house house price and is done in the garb of helping FHB wheras reality is that whatever they do adds to house price growth.
Have done now again as had fear that house price growth may stop or slow so is done futher ignite the housing market.
This would barely have any effect on the ridiculously over priced housing market, just another tax scheme.
If the Corona virus which has distributed the entire world has not been able to slow down the housing market in NZ, nothing will, NZ housing market is now well on its way to intergalactic.
But its the opposite of that - every crisis is good for house (asset) prices because it gives governments and central banks the mandate to implement 'emergency monetary and fiscal policies' that push the prices of houses (assets) further up.
What will be bad for housing is a period of stability/normality as it will allow a return to balanced monetary and fiscal policies (i.e. no more excuses for RBNZ or government to pump prices), which will be bad for asset prices.
So investors best pray that the crisis never ends....pray with me...'we shall live in a never ending crisis so that fiscal/monetary policy can continue to make the wealthy, richer...now and forever....amen'.
So this people admit that their is a housing crisis and 50% plus rise is not because of them but because of Mr Orr and Uncle Orr say that it is not his job to control housing ponzi.
So.......
On the other side when had a fear last year that house price may fall by 8% to 10%, Mr Orr acted overnight ( without discussion, going with policy of LEAST REGRET and act before thinking), did he not knew that interest will have to be dropped to support economy and that will boost house price and than to add booster removed LVR.
Mortage holiday was to protect house owner, Can understand but in crisis with uncertainity throwing everything to boost house price is beyond......if last year were caught by surprise with the way house price flew, What excuse does Mr Orr or anyone has now when all data suggest that house price is growing from strength to strength.
THIS IA PACT BETWEEN GOVETNMENT AND RBNZ ALONG WITH OPPOSISTION TO PLAY WITH TIME.
"Minister for the Environment David Parker acknowledged the change may cause some land values to rise. But overall, he expected the cost of land per dwelling to fall over time."
He is telling half truth....this will lead to further rise in house price....will not help instead add by throwing a catalyst for house prices to jump further.
Hilarious! It will be side-splittingly funny to see how this works in real life, when one still has to get Resource Consent to demolish a 100-year old dunger in a character-overlay or some other zone, and the Local Board votes 'no'. Or the various other machiavellian hoops developers will have to jump through, to get a scheme up and going. I see this measure as having some value, but only in limited cases. S..t - when one can't even demolish a non-heritage listed earthquake prone building with a rating of around 5% NBS, and the processing officer seems to forget Chch and wants to know why a lick of paint won't improve its rating: I call this as just more short-term political point-scoring, as they just want to be seen to be doing something.
You do realise that councils are reviewing their 'special character' rules and the number of houses protected is likely to be less than half the current number.
Savvy developers with good advisors will have been looking in places like Grey Lynn and Ponsonby months ago. Many of those properties could easily double in value.
Well, I think you will be surprised then.
The National Policy Statement - Urban Development sets a very high bar for continuing to use special character protection rather than intensifying with higher density development.
What I've heard is that the number or properties in places like Auckland and Wellington with special character protection is likely to be less than half of current numbers.
Once special character rules are taken off these properties, then sections that previously had trouble adding small additions to one house will be able to build several townhouses with no character protection. 3 townhouses will be able to be built with no resource consent, provided you comply with the very liberal new development rules.
That's why I've said constantly that all these changes are only going to push land values, and median house prices, up. Especially in the shorter term.
Given that this Labour government has a 4 year track record of complete failure in almost everything they've attempted .... its counter intuitive to think that maybe they should do everything possible to increase house prices ...
.... a raft of new " packages " , " frameworks " , traffic lights " ... all designed to bugger up supply & construction ...
Guaranteed that 6 months to a year the housing market will have slumped 30 to 40 % ...
Hang on! Don't shoot the messenger. We now know now that there are populations of Maori who are holding out from being vaccinated for whatever reason. The only rational course to deal with Covid is high levels of vaccination.
So one would have expected that Maori MPs from all political parties would strike a truce and form a united 'war cabinet' from whence they would all be out on the front lines encouraging Maori to get vaccinated. It's only in the last couple of days that I have seen any Maori MP (Henare) appear on tv advocating vaccination.
It looks like most Maori MPs have been AWOL. Are they only 'token' MPs?
But anti-lockdowner Brian Tamaki has been wallowing in media saturation for ages. Go figure.
I'm genuinely curious about what people think about the impacts on our newly designated 'tier 2' towns and cities - places like Dunedin, Invercargill, Timaru etc were are up 30-50% over the last two years. Recon this will this refocus speculative activity on the 'tier 1' zones?
It will be interesting to see if house prices go up or down due to this change. Case in point, a small 500 sqm section with an old house on it in a low income area in Christchurch recently sold for $1M, simply because it was zoned RMD. Presumably now that all houses are effectively zoned RMD you would not expect that developers would be drawn to overpaying for small sections like that. On the other hand, maybe all houses will start selling for $1M+ now that there are no impediments to knocking them down and building 3-6 story apartment blocks.
that's fine in theory, but the reality is out of the rezoned properties, there will still be a subset that are good for redevelopment.
that is:
- they are big enough
- they are flat enough
- they have easy infrastructure connections
- they aren't flood prone
- they have willing sellers
Of course, the pool of properties that meet this criteria will grow a lot. And that will moderate land value escalation.
But it won't stop it.
"Minister for the Environment David Parker acknowledged the change may cause some land values to rise. But overall, he expected the cost of land per dwelling to fall over time."
That defines what Govt means by affordability..... Something small enough , which becomes affordable to most. eg. Hong kong shoe box apartments.
Not really the promised solution to unaffordable housing ..... that was promised.
ALSO... I think Mr Parker understates the possible impact on land prices..
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Surely the reality about the Unaparty's plan is that it will not reduce the price of land - as no land is being released under it - and therefore have very little effect on house or apartment prices?
A new apartment price is just; land price, plus construction cost, plus developer margin. So a brand new 80 square metre townhouse in suburban Auckland will still cost at least $800k...Which is a disaster.
We all agree it will increase land values, no argument there. But you seem to keep missing the main point, which is that it will reduce the land price per dwelling because more dwellings can be built on the original piece of land.
At a time when property prices are very unaffordable, what matters is the land price per dwelling so that more FHB can buy, not the overall price of the original land.
But it makes little difference to affordability. As an architect you should know that building townhouses and especially apartments is expensive.
Sure, it means there will be more opportunity to build and sell 2 bedroom townhouses in Auckland for 850k (which is what is happening now on medium density zoned sites) that makes very little difference to affordability.
It's not going to mean those 2 bedroom townhouses suddenly sell for 700k.
It just means there is more opportunity to build those expensive townhouses, for which there is finite demand, especially as interest rates rise.
Why would it go down? We have years of pent-up demand to get ahead of thanks to investors taking out entry level housing stock and doing them up for tax free gains. Why would the price the end buyer pays go down if you can just charge the same price and pocket more?
A piece of land was $500k and you could until now build only one unit on it. After the densification rule, that piece of land has risen in value by 50% so its worth $750k but you can now put 3 units on it, therefore the cost of land per unit is now $250k ($750k/3). So the cost of the land oer unit has halved from $500k to $250k, meaning it has gone down
That's the cost per unit to the developer though. Not necessarily the cost per unit to the end buyer. There's obviously some correlation between costs to developers, and the price to the end buyer, but I don't think it's as direct as you seem to think. Houses sell for what people will pay for them.
Thy government failed to react to the interest rate drops. Pretty sure the RB governor had already highlighted this. This change to potentially build a 3 level container house on a tiny section next to existing houses is going to result in some nasty developments. Does NZ really want to decrease the quality of living environments we live in? Green space is one of the reasons people live in NZ. UKs houses looks a lot better than this and cheaper too in much of it , and they respect heritage. This feels developer driven.
Have they not heard of recession planes for light? 1 meter setbacks and then an 11 metre high wall blocking light, that could be horrible. I wonder how many politicians will want to live next to that. NZ has plenty of land, we just haven't created new towns and cities to cope with the increase in population, or invested in infrastructure in existing places.
... the thing that bothers me , is that some character houses will be bowled to erect modern slip / slop / slap up prefab concrete monstrosities ... I'm not a Nimbly , not by a country mile .... but , I've seen the removal of 2000 olde buildings from the Chch CBD post earthquakes ... .... its devastating to strip away the past , holus bolus ....
No you are getting irrational. Right now it is possible to plant a row of poplar trees which grow 20 meters up, smack beside the boundary and nobody can say boo. At one stage we owned a residential property that was beside a huge supermarket with a high block wall maybe 10 metres high ON the boundary and not even one metre back. The issue was not the lack of sun I did not notice that, it was the constant racket I hated
Wow.
We have put 2 Auckland developments ( build to rent) at RC stage on hold until these rules come in. No problem waiting a couple of years, crazy not to. It will take that long for councils to sort themselves out and to redo plans ect.
Christmas has come early for land owners but I wouldn't want to live next door to one of these developements. Crazy HTB's
When DP talks about the limited increase to land values I'm convinced that he has no idea about property developement
As for removing interest deductibility on existing rental property DP, that's reprehensible. Something I would expect in North Korea or some Banana republic not the OECD. It's similar to outlawing investor second hand property and fining people for owning it. Communism anyone ?
This is hysterical. Australia flirts with removing negative gearing every so often. Unless I missed something, Australia is very much part of the OECD.
No wonder people tune out this kind of nonsense from property investors every time someone suggests something that doesn't stack the deck further in their favour.
Australia did remove negative gearing for a few years, it was a total disaster, rents shot up about 30% in Sydney and they had to reintroduce it. Have you noticed how much rents are rising now ?
The "official NZ inflation stat" for new rentals was something like 7.8%, cant remember exactly.
Its pretty easy to see where this is going
... the removal of tax deductibilty for interest on mortgages was barking mad ... all accountants said so ... it's a legitimate business expense ...
We're currently in a bizarro universe , the Government totally detached from reality ...
... they need to give a mandate to Phil Twyford to double house prices across the nation within the next 5 years .... our boy would thrust out his jaw , look to the heavens , and set about to turning us into a $2 million / house paradise ...I'm betting that by 2026 average house prices would've fallen to $500 000 ...
Interesting that a Labour Govt should cancel interest deductibility for private sector landlords when it was a Labour Govt that introduced this concession to encourage the private sector to provide rental accommodation in order that the state did not have to do this entire job itself (ie - provide and manage rental accommodation for those that did not want to or could not buy their own dwelling). Will the Labour Govt allow corporates interest deductibility on large scale built-to-rent developments? These corporates are lobbying for it.
Yes it might help a small amount, but why do they keep stuffing around at the margins.
Open up land. vast tracts of it to the point that it simply more economic to leave it to the only other competing use it has-farming. I.e the cost of a section = it's farmland value plus the cost of developing it. i.e. a fraction of what we are paying now.
Anything less than this is a corruptly rigged market.
The new rules are you can build three dwellings per lot without needing resource consent. But if you want to subdivide the lot three ways you still need resource consent. So the new rules are best for investors who want to create three rentals. Owner occupiers need not apply. This the best news investors have had in the last decade or so.
So stuff all the owners who bought into a low density suburb by choice and at increased cost/ price and who have gone onto improve their houses and sites with further capital input and been the subject of higher than average local authority rates as a consequence this government has decided unilaterally , without public consultation , to detrimentally affect these owners property values by allowing intensive cookie cutter townhouses ( because that’s is what will eventuate as is happening elsewhere) to be built. A great equitable process .
Who are going to buy them . The elderly and those with young families won’t live over three levels ( try the latter with small children) . Investors singles and dinkies perhaps ? A lot of them will be rented with the resultant tenancy problems associated .Their uniform Coronation Syreet design and development don’t hold great appeal , or potential value appreciation , for home owners .
Who exactly is the author of this hair-brain scheme ?
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