Residential construction activity in Auckland appears to be slowly declining after peaking in the middle of 2021.
However the downturn is probably only temporary, with activity likely to surge to new heights next year.
The latest data from Auckland Council shows that the number of Code Compliance Certificates (CCCs) it issues when a new dwelling is completed peaked at 14,381 in the 12 months to July last year.
The rolling 12 month total then declined in each subsequent month to 13,133 in November before ticking up slightly to 13,470 in December.
The trend is clear in the first graph below, which shows the rolling 12 month totals from January 2019 to December last year.
A flattening and possibly a slow decline in new residential construction in Auckland has been widely anticipated, however the trend indicated in the graph below could be the result of pandemic restrictions, capacity constraints or simple market forces, as supply and demand for new housing in Auckland come more into balance.
Construction activity over the last couple of years has likely been influenced by all of the above.
However the slight downturn in the number of new homes being completed may be short-lived.
Building consent figures for the Auckland region suggest that far from settling down, residential construction in the region could surge to a new peak next year.
Auckland Council figures show that 88% of new dwellings are completed and receive their Code Compliance Certificate within two years from the date they received their building consent.
So building consent activity over the last two years should be a reasonable indication of construction activity over the next two years.
The second graph below plots the number of CCCs issued for new dwellings in Auckland each month from January 2013 to December last year and compares that with the number of residential building consents issued for the same month two years previously.
So the December 2021 CCC figure is paired with the December 2019 building consent figure, and so on.
Because the monthly figures cane be reasonably volatile they will never be a perfect match, but the graph clearly shows the two sets of figures broadly follow along the same track.
That suggests that the number of building consents issued over the last two years should give a reasonably reliable indication of the number of new homes being completed in Auckland over the next two years.
That trend is also evident in the graph below and if the number of CCCs being issued stays true to form, the number of homes being completed in Auckland should remain a bit soft over the next six months or so and then start to rise again towards the end of the year.
The figures suggest a surge in new homes completions in Auckland in 2023, and it's possible that numbers could top 2000 a month occasionally if the construction industry has the capacity for that amount of work.
At the very least, residential construction in Auckland is likely to remain at highly elevated levels well into next year.
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56 Comments
Those building consent numbers are a mirage, Greg.
Who's going to be buying all these little 2 bedroom shoeboxes at 800-900K, with rising interest rates and stronger barriers to lending? The answer is: much fewer FHBs, and much fewer investors.
Not to mention a number of building companies are teetering.
Dwelling construction is going to fall off a cliff later this year, we'll probably see it starting proper around the middle of the year.
Yes, CCC numbers generally track building consent numbers quite closely, but that is in good economic times.
Go back to 2006-2008, you might see quite a different picture.
Seeing literally hundreds of these shoes box terraced houses going up in areas I frequent in Auckland. I imagine there is many more in other areas. Indeed, who is going to buy them all? They are hardly a first home for a family, you can barely live in them as a couple.
In fact, I got a mailer from a real estate agent just yesterday, talking up some local terraced houses and how I should BE QUICK (literally, lol). It reeked of desperation. Maybe 400-500k would be seem reasonable for what they are. Doubt they would part with them for them for less than 850-900k.
Even in less than average areas of Auckland, 2 bed 60 square meter shoeboxes are marketed for typically north of 800k. People only need to get a mortgage calculator out to see what a 650k mortgage at 5% over 30 years equates to (and add $100 on top of the weekly payments for rates, insurances and resident association fees).
The shoeboxes currently being completed would have been sold off the plans 18 months ago, at say 650-700k. So they are a lagging indicator, and it's easy to be deceived in to thinking the building boom is here to stay.
It's not. It's always been boom/bust.
If people don't believe me, have a look for yourself at 2006-2008 and see what happened to building consent numbers when interest rates rose and a credit crunch struck.
CCC numbers will stay quite high for much of this year, as current projects are completed and signed off. As building starts plummet from around mid year, we won't see that reflected in CCC numbers till late this year / early next year.
Do units constructed lag sales, or do sales lag construction of units?
I guess to know that, we'd need to know what percentage of places are pre-sold before construction.
In this febrile climate, I'd guess there are plenty of developments going ahead optimistically without pre-sales. Does anyone have such numbers?
Don't have data, but usually developers need to have at least 80% of units locked in via Sales and Purchase agreements before they proceed in earnest.
Ditto Hamilton. A Hobbiton house in Morrisville would be preferable to these sh#t boxes.
And yet the government insists those earning even a cent above the median wage should be allowed to live in NZ permanently.
Many recent migrants working in hospitality and retail struggle to make ends meet, let alone muster up ridiculously high deposits for these shoeboxes. However, the industry wants more in the tens of thousands each year.
One house gets removed from a large section. 8 get put on it and approved by councils.
Now those intelligent council approvers, answer my few questions
1. What additional facilities did you create for those 8 houses when initially the facilities were planned for just one house and one family?
2. Where will these 8 people/families park their additional cars? Most of these 8 houses are one garage and most people don't park their car in the garage. So road sides get filled with parked cars.
3. What about the drainage and water infrastructure?
4. What about recreational facilities?
This new trend is creating micro slums in our suburbs and in few years this will become the bed of crime and hatred.
But our councils don't care about that they just want their money.
The alternative is to make big blocks of land available where a group of multiple storey 3-4 stories buildings can be built up, sold individual floor wise. Have a campus inside with swimming pool, park, clubhouse, open bbq areas. This will help a community feeling abd good quality of life.
But currently our councils do not have any long term thinking, they are just bunch of bureaucrats warming their bums on seats and getting paid multiple of six figure salaries.
Notgreedykiwi writes: "This new trend is creating micro slums in our suburbs......."
Agree. We don't want a repeat of Herne Bay, Parnell and Remuera.
TTP
Councils can't mandate parking for developments anymore, just wait, more and more developers will build low quality developments without parking, and roads will become absolute cluster f#$%'s.
yes, and now that the nanny state has stopped interfering with the free market, people will either 1) deal with it. 2) pay for a house with a car park. 3) ride a bike instead.
If it turns out that everyone hates parking on the street and is willing to pay the true cost of an offstreet carpark, then you will find developers are very happy to build houses with carparks.
Not you obviously... never underestimate the demand and need of others HM
Even if a couple would 'accept' living in a cramped two bedroom shoebox in a lower than average location, how many do you think will be able to afford it HW2 at these prices and with interest rates rising?
The answer is a small number that's getting smaller...
Contrast now to 2 years ago when a FHB could buy one of these shoeboxes for 600k at 3%. Huge difference mate
Not my type of house either, at the moment. We need lots of room and storage. But for some there has come a time when they're downsizing.
The more new dwellings that are constructed in Auckland, the better...... because there's scarce other means of keeping the lid on house prices.
BUT, construction quality needs to be high. It's vital that comprehensive checks and balances are in place to ensure that's the case.
TTP
sums up NZ pretty well, highest price for lowest quality
Yes, and the scary thing is that not only are you paying north of 800k for a shoebox, often the quality of build and materials of said shoeboxes is mediocre at best. You don't even have the 'privilege' of a good quality build, typically, at that outrageous price.
I'm hearing lots of stories of problems with crap, and 'cheap', Chinese materials.
Mentioning anything about the quality of Chinese things is raaaaacist.
Report to the re-education camp, comrade.
Haha.
A lot of their building materials are crap, fact.
We've experienced that to a certain extent in our place.
The Chinese concrete reinforcing mesh debacle was not that long ago but it seems like it was
My grand kid is a drone fanatic and has owns drones made in several different countries.
What is astonishing is nothing comes remotely close to the DJI drones made in China in terms of quality build and technology- yes I spend the whole day figuring out what my grand kid was trying to say with all that technical jargon.
Perhaps if people instead of buying cheap Chinese stuff and and starts buying expensive Chinese stuff their perception may change. The last 500ml Moutai I bought for my Chinese neighbour cost $600.
Builders use building materials from everywhere not because they want to but because the Kiwi buyers on the other end are cheap.
Not all Kiwis are cheap, I for one.
You can't live in a CCC nor can you live in a drone
I share your sentiment but I think a lot of immigrants (which it is pretty clear is the target market in many suburbs and the engine for housing demand overall) would consider these shoe boxes as standard, if not superior, to what they are used to. Generalising again, they're not big on outdoor living either so tend not to value land size and privacy as much as NZ born.
The cost of these unappealing (to us) dwellings is then the issue. But then it is not unreasonable to suspect the purchaser possibly has access to funds from family and possibly the entire village back home, making it affordable without need for formal borrowing. Speculating here again.
There are also, no doubt, super profits that have been made by many a developer and their subbies over the past few years. So if prices drop they might have to work with thinner margins and adjust back to lower hourly rates if they want to keep alive. Supply might not fall as quickly as some think in the same way as it didn't immediately respond to price rises.
I acknowledge however there will be a few developers that go bust near term and that will crimp supply to some degree.
How many immigrants with household incomes of circa 100k-120k do you think will be able to afford these prices? Especially with rising interest rates.
It's one thing for people to find the living conditions acceptable, it's quite another for them to actually afford to buy.
As I said, I think you are potentially ignoring informal financing methods from offshore relationships (which may also give rise to circumventing offshore purchases). And come to think of it, a willingness in some cases to live very frugally with multiple tenants. It is no coincidence, I believe, that the places being built next to me have 4 bedrooms plus ensuites but hardly any living space. But again, the more expensive this stuff becomes the harder it is to justify it by greater tolerance for shoe box living.
Sure, that happens, but I don't think it's that common. And I think it will be accepted less by banks.
When the option is a 800-900k "shoebox" or a 1.2m house i think people will choose the "shoebox"
Auckland in particular doesn't have the option to grow out any further, we have to grow up (as do some posters here). The "shoeboxes" are the future, like it or not.
For once I agree with you, there will probably be a downturn later this year. Way too many issues with supply at the moment (very knowledgeable in this area).
Isn't Auckland surrounded by farmland? So there is plenty of land avaliable to build on, instead much land is 'banked'.
The rise in building consents is an effect of rising prices.
Damage the prices and you hammered the actual house building.
If DGMs are right about a crash in prices, we will also see a crash in all kinds of building work.
In the long run, boom or bust, it will always be good for house prices.
There's still room for upward valuation.
Be quick!
There's still room for upward valuation.
The beauty of being a bull is that there is always room for upward valuation. There is literally no upside limit.
It is tough being a bear as downside is limited to zero.
Will the property bulls step in and keep the price pumping? Or are they running out of ammo?
Does inflation has an upside limit?
I used to be able to buy an entire Chicken for just $1.
Think about it and perhaps you will understand the fallacies of being a DGM.
It's a mathematical truth.
Until the price reaches +infinity, there is still room for upwards valuation.
Until the price reaches -infinity, there is still room for downwards valuation.
To obsessively repeat it ad nauseum would usually be a behaviour associated with mental illness or dementia.
Prices and value are integrated. The former cannot go to zero unless the latter does. A roof over the head will never be valued zero. Since it cannot attained the threshold of zero, it's a natural number which has no negative case.
You had just demonstrated how to misapply math concepts on top of having a cerebral malfunction.
Apple to orange comparison. Most oil traders don't take stock of actual oil deliveries.
I've not seen house buyers not taking deliveries even if they're flipping it.
Any property that comes bundled with liabilities or holding costs that exceed it's utility could certainly go below zero. Where you'd have to pay somebody to take it off your hands.
Surely your advanced years haven't robbed you of all your imagination yet?
A roof over the head will never be valued zero.
Sure, but this doesn't mean that a particular house - or a particular house in a certain location - cannot be valued at zero. Plenty of developers give away houses for free or very little to people who move them off the section. There are plenty of places round the world where you can effectively get a house on land for free, or very close to it (i.e 1 euro).
And it's certainly plausible that a house could be valued at less than zero. Houses (and the land they are on) incur ongoing costs. If you can't meet those costs, and it's a place in the middle of nowhere that no-one wants to live, then it could conceivably make financial sense to pay someone else to take on ownership of that house and therefore the liabilities (rates, property taxes, etc).
Point being, there is no logical reason why a house, or a house and land package, couldn't be 'worth' zero or even less than zero just because people value having a roof over their heads.
Your overseas example doesn't apply to NZ.
Even with the extremities of gold and coal mining busts, the towns in this country survived and no houses went for free.
Until there comes a precedence, it is illogical to assume the plausibility of house zero.
The idea that came from a deranged remains inane.
Dreams are free.
lol, yeah the real examples overseas of houses being given away for free are actually not real just dreams in my head. NZ is special and the usual economic forces do not apply here.
Or did i miss your sarcasm?
https://www.independent.co.uk/travel/news-and-advice/castropignano-moli…
https://www.forbes.com/sites/rebeccahughes/2021/01/26/italys-bargain-1-…
Seem to recall Tim Shadbolt spruiking houses in Nightcaps for a $1.00 back in the eighties they were being sold due to people not wanting.the ongoing rates liabilities.
Also some two years ago... wonder what they went for
https://www.stuff.co.nz/southland-times/118230301/southland-district-co…
48 Hastings Street, Ohai. sold for 5K according to homes.co.nz
Nothing in my post points to me being a DGM. Quite the opposite could be concluded..
there is always room for upward valuation. There is literally no upside limit
Another convenient assumption by yourself to fit your narrative *rolls eyes*
Many Builders I deal with regularly take up to 2 years to get the paperwork in to even apply for the CCC, not to mention Council's lag in approving them (the paperwork requirements can be absolutely diabolical and getting it together like herding cats). That graph is only useful, if related to time of practical completion.
Yep, exactly. This data is very lagging in terms of what it might mean moving forward from here.
Hi Befuddled,
There ought to be sanctions/penalties on local authorities that are tardy/inefficient and hold up construction progress.
Local authorities have monopoly powers vested in them. The impression of many/most people (including some of their own staff) is that they exploit those powers to the disadvantage of the public. In other words, local authorities cause a welfare loss to the very communities that they are supposed to serve.
TTP
To be fair, they're usually good at sign-off - it's actually obtaining the Records of Building Work, Warrantees, Producer Statements, Site Notes, Certificates etc from extremely busy tradies that becomes highly problematic - and impossible if one goes thru (then how on earth does one get that piece of paper?). Other than that, wrt AC they never take more than 20 days hahahahahhahaha and anything to do with Public infrastructure, ACE, WSL, AT etc can literally take years to get them to approve a single pipe and ain't no time limit on those processes and they're shielded from you (you can only contact them thru AC. The supercity sure ain't so super...
Ain't that the truth, we're still trying to pull the paperwork from builders and subbies, 4 years after finishing a 55sqm extension with drains etc all on 'wrong' side of concrete slab as the sewer line on the Council records we based the design on was in the wrong place. Watercare refer us to Council, Council send us back to Watercare. "Why didn't you survey the land to find out where the sewer line was actually located?", "Because you didn't ask us to and you approved the plans". The GIS map mysteriously got updated the day after that phone call!
Council move goalposts on final inspection and insist on all Producer statements being 6 months old, despite it taking 2 years for Watercare to remove a tree blocking the sewer lines from being reinspected for damage from our build.
Council don't check a company / supplier is registered in their system as an approved PS supplier. This minor inconvenience was only found out in the small claims court (successful on our part) after all parties concerned ran for the hills after a leak in the new shower, "Not my fault, it was the plumber", "not my fault it was the tiler", not my fault, it was the builder" etc. Council had passed the faulty work, said "We don't check it, we rely on the suppliers to do their work properly". I asked why they are charging us good money to sign off on work if they aren't going to check it's done to their own standards? Met with blank waters all round. The 'inspector' who signed off this work, didn't sign the paperwork nor provide their name, but ticked the box, saying they'd inspected and approved the work. Incompetence in the entire chain.
Yet as stated, 88% of CCCs are issued withing 2 years of consent being issued. So your builders are the 12% outliers.
So these figures generally represent the aggregate of houses finished within a 2-year timeframe, so we're counting a significant portion of those finished early 2020 onwards. The corollary is that even if housing bombed now, we'd see similar results likely over the next year or more, before seeing the tail-off (actually likely higher, as there would be more time to complete paperwork). So again, the plain figures are not necessarily representative of the current situation. Although yes, it is crazy busy out there atm, with another wave of business coming.
Exactly.
Even if forward building workload fell off a cliff tomorrow, we'd still see high CCC numbers for most of this year, as all the current work underway needs to be completed.
That is, of course, assuming the work is completed. Some of it may sit uncompleted for a long time, as happened from 1976 in NZ.
Some of us have been around across a few of these cycles.
"The corollary is that even if housing bombed now, we'd see similar results likely over the next year or more"
Yes, that is what this article is saying:
"That suggests that the number of building consents issued over the last two years should give a reasonably reliable indication of the number of new homes being completed in Auckland over the next two years."
Yes that is what the article says but I disagree with it, because I think things have fundamentally changed, although because of the lag effect we won't see significant changes in CCC numbers until later this year / early next year.
I think we will see numbers of building consents falling away quite a bit by mid this year.
You are exaggerating massively. Or the builders you work with are beyond stupid.
You can't sell a house without ccc. You aren't even supposed to occupywithout one, but some do.
Standard period to get a ccc is 2 to 3 months after completion for an average house.
Let's avoid name calling please.
Multi-award winning builders working on architectural masterpieces? Generally tend to be quite intelligent.
Not occupy a house until CCC is issued? Yeah right - just let it sit there for a year or two, while you chase up that last electrical certificate from the now-gone sparky, as Council won't issue CCC without it. And what about a reno?
As a CMEngNZ / CPEng, these are issues I see everyday, and they are not rare by any means. Just a manifestation of the complexity of the sign-off process.
Yeah we lived in a house without a CCC for 17 years, it really only became a problem when it came time to sell it. Not advisable to leave it a long time because the building code changes and you have to start jumping through hoops to meet the latest standards.
Are you 100% sure you do have to meet the new ones, as it would be normal for standards to change when many houses are being built. I almost purchased an unconsented house that I wanted the council to issue a CCC on, and I thought the council told me that it only has to meet the standards that were in when the consent was issued. Didn't buy it though because the owner didn't want to do the required things to get CCC
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