The supply of new dwellings now exceeds the demand from population growth by a substantial margin following a major turnaround in the balance between supply and demand for new homes.
The latest figures from Statistics NZ estimate New Zealand's population increased by just 12,700 in the 12 months to June this year. That's down from an increase of 21,200 in the 12 months to June last year, and well below the average of 94,800 a year over the three years from 2018 to 2020.
The slowdown in population growth was mainly caused by the sharp drop in immigration occurring as a result of the pandemic and a decline in the natural increase in the population, the excess of births over deaths, which is at its lowest level since World War II.
Interest.co.nz estimates the population increase of 12,700 in the 12 months to June this year would have created demand for an additional 4885 new homes, based on average household occupancy in the 2018 census. But it's likely around 37,614 new homes were completed during that period, giving a surplus of supply over demand of 32,729 homes.
That comes on top of an estimated surplus of 26,650 homes in the 12 months to June last year, giving a total surplus of 59,379 homes over the last two years.
That is a substantial turnaround from previous years when demand for housing was significantly exceeding supply, creating a growing housing shortage.
Interest.co.nz has previously estimated that high levels of immigration in the year to June 2020 meant the demand for new homes exceeded supply by almost 10,000 homes that year.
The strength of the turnaround has come about because the immigration pipeline was turned off very quickly by pandemic restrictions introduced in March 2020, but housing supply continued to increase at pace.
It generally takes about two years from the time a dwelling is consented until it is completed, so building supply usually takes longer to adjust to changes in demand.
The big turnaround in the balance between supply and demand that's occurred over the last two years should have substantially, if not completely, alleviated the housing shortage built up in previous years as soaring immigration levels saw demand for housing significantly exceed supply.
That has major implications for the housing market because it is likely to reduce pressure on rents and could significantly reduce rental yields for residential property investors. This in turn could put downward pressure on property prices and capital values at a time when they are already under stress.
However it's important to note that the supply and demand figures are estimates and not exact figures.
That's because Statistics NZ's latest population growth figures are provisional and could be revised over the next few months, either up or down.
And the dwelling completion figures are based on the number of building consents issued two years previously, although when these are compared to Code Compliance Certificate numbers, issued when a building is completed, it suggests using consent figures offset by two years gives a reasonably reliable indication of new housing supply.
The tables below give the regional breakdowns of housing supply and demand over the 12 months to June 2021 and 2022.
They show the biggest new housing surplus has occurred in Auckland, which had a net population loss of 19,000 over those two years, meaning the supply of new homes exceeded population driven demand by 35,386 dwellings.
There were also substantial surpluses of housing in Wellington, Canterbury and Otago.
In the year to June 2022 two regions, Northland and Gisborne, had housing deficits, although the numbers were small and the data suggests supply in those regions may also be catching up with demand.
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104 Comments
Less demand, more supply, ever higher cost of debt. Its like watching the reverse of the last ten years of speculative stupidity.
Just when I thought there was no more room in the coffin for anymore Nails. It must be Harry Houdini's coffin !
Less demand, more supply, ever higher cost of debt. Its like watching the reverse of the last ten years of speculative stupidity.
Summarizing the situation perfectly in two direct sentences. Good illustration of how to write.
I am also admiring the precision of this comment Averageman. Ponzi is bust.
what is the lag for rent price falls? they appear to be trailing house price falls but will they catch up?
In my area, rents have fallen noticeably. But it's hard to lock them in as an existing tenant - as some of us have pointed out before, your rent needs to be substantially above the 'market' rent in order for a tenant to get it reduced at their yearly review. So often the only times rents drop is when people move houses - and that is a significant disruption people are generally keen to avoid.
It's all too easy for a landlord to increase rent by a couple of %, and claim 'market' rent - I've seen several agencies, for example, point to similar houses in other suburbs as 'market' (and typically the more expensive suburbs).
By all means, tenants, threaten to move if you want reduced rent. But be prepared to follow through to get it.
Threatening to move does work to avoid rent raises. Not sure if it would work to get a rent reduction (yet), but I'm keen-as to try it in a year or two if the market keeps tanking.
If you word your letter carefully, you can easily avoid painting yourself into a corner where you HAVE to move.
Just word the letter to say something like: "we've enjoyed living here, and have looked after your house well. However, if you choose to raise the rent we will be forced to look for somewhere more affordable."
It works well. And in this market, a landlord would be a fool to lose a good tenant. Only the most greedy/overindebted/most blood thirsty of bloodsuckers would raise rents when there is such a cost of living crisis.
Landlords have enjoyed 40%+ capital gains over the last few years. It's time they absorbed a few of the costs.
Father Fitzgerald - "Only the most greedy/overindebted/most blood thirsty of bloodsuckers would raise rents when there is such a cost of living crisis."
I wonder if this Company would qualify ? I bet you cant guess who it is ???
"A nationwide property management company is actively discouraging landlords from offering rent holidays to struggling tenants during the Covid-19 shutdown."
https://www.rnz.co.nz/news/national/412965/property-brokers-tell-landlo…
Soulless vampire squids.
What a low-life tactic to deploy by a Gargantua Leech. It speaks volumes when even Landlords thought it was poor judgement.
Surplus supply of new builds - another major headwind for the residential construction sector.
Thats a pretty big understatement......
‘Major headwind’ an understatement?
there is an old chinese curse.... May you own two boats....
Houses are the same if one is empty
Boom and bust cycle repeats, as it has so many times before.
Do you think the building construction industry could build a steady amount per annum?
No as builders spec build, while the money is there they fill their boots....
Do you think the building construction industry could build a steady amount per annum?
Not without some sort of government intervention to incentivize it.
Wait for the many builders who initially scoffed at Kiwibuild to put their hand out for this work.
Great opportunity for the likes of Kiwibuild, KO and community housing to step up and pick up the slack in construction activity.
More people in stable housing, fewer construction job losses, less taxpayer funds wasted on emergency housing, more private rental stock freed up - this downturn could bode well for NZ provided the agencies involved play their cards well.
Agree, lower costs to construct and dropping land prices will provide better overall value to taxpayers rather than trying to build at the peak of a housing boom.
If we have too many houses now, and the government is overspending. Why build more? Just wait for economy to worsen, for people to sell and the govt can buy existing houses cheap.
We need land and building matetial costs to fall anyway. Employment to drop.
Finally it is time to let market forces reset new house build costs and existing house stock prices.
We do not have enough houses, the oversupply is only talking about the private sector. There is a massive shortage of public housing. Also, the overall quality of the housing stock is generally of a poor quality. The private market has been dire at addressing either of these issues. A housing crash is exactly the right time for the government to ramp up public housing construction. It address the housing shortage when land and labour is getting cheaper and helps support the construction sector, keeping skills in the country.
Great opportunity, but it won't be taken. There's a disconnect between the ministry and local TA's that prevents land from being released at the volumes required to make bulk housing contracts worthwhile for any PPP.
Good for billable time from consultants though.
Do these stats measure demand as ‘who needs a house’, or ‘who can afford a house’? I’m sure demand in the first sense far outstrips demand in the second, at least in Auckland.
Add to that 'who wants to buy another rental' when there has been no equity gained in recent times (actually equity lost). So there now is even less demand to buy and property investors don't have any equity to release to buy even more property.
Hence with rising prices, our housing market had many of the characteristics of a ponzi scheme - which risks implosion if prices start falling as demand will be destroyed at the margins and spread right through the market.
Yes for anything but the cheapest investment properties there are no FTBs who can afford these, not sure where the bid comes from, I guess I will try and buy if things get cheap enough. Wake me up another 30% down.
Many of those 165k special covid residency visa applicants would be part of "I want to buy a house and I can afford one" crowd. INZ takes forever to process them though.
I doubt that. The intention of the entire scheme was to provide migrants already here a pathway to residence who otherwise wouldn't have qualified through the usual categories (skilled migrant, long-term shortage, etc.).
So, I doubt 'can afford one' can be said for most of them. Also, with MSM reporting daily on falling prices and sky-high cost of servicing a mortgage, the ones with good credit scores and a deposit handy will likely choose to wait until the dust settles.
DP
That has major implications for the housing market because it is likely to reduce pressure on rents and could significantly reduce rental yields for residential property investors.
That is a big assumption that houses will automatically go on the open rental market
Investors would be better off holding a term deposit now over an empty house now there are no capital gains in property and yield of the TD is around 5%.
5 percent gross yield before income tax IO
Have you heard of a BTR. They are very efficient tax vehicles. Claim interest costs, development margins are tax free, generate passive cashflow that even ACC cannot levy. But you need capital in spades
Are you referring to Build to Rent? Pretty risky in a market with falling prices and rising supply relative to demand - and the talk of developers going under.
Yes build to rent
Might make sense if the money being used was being laundered. I think the world has moved on from that being an easy task.
Would you stop trolling my every post
We are watching YOU !
Well good for you 👏
Talk about being paranoid🤕
It's reads rather lame when a troll acuses others of trolling 🤡
BTW have you seen ANZs latest house price forecast?
I must say that you do a better troll retort than Future can 👏
Don't make me remind you of your Future HW2 !
Boaring 🐖🐗
More if you wish to buy bank capital notes, more risk then a TD probably less risk then property right now
When you happen to be on the wrong side of the fence, predictions are scary things 🤕
Hi Crash Crusader (a.k.a. Retired-Poppy),
Given your abysmal track-record of predictions re the housing market - prudent for you to keep away from here.
If you stop making predictions, you'll avoid your previous embarrassment when you abruptly fled from this site and hid (cowardly) for 2-3 years - hoping that people would forget your overt forecasting incompetence......
But tough luck for you: we'll never forget the humiliation and shame that you ignorantly brought upon yourself.
TTP
Tim, are you seeing me as a barrier to your lies? Your poorly thought out responses says that you do.
When in desperation, make stuff up - right?
I'll take it then that youve been trapped on the wrong side of the fence. Perhaps you are simply on the wrong side of the tracks🚂
He sure as heck doesn’t do his business any favours with his rants here. This website has quite high readership numbers.
Sure, but many / most will.
Not really..
Nope.
They enter the housing pool and ease the demand on rentals directly or indirectly. Yes some may be rented directly to avoid selling at todays lower prices. Or they are sold and a portion will be to FHB's and as data on this site supports, they are a greater % of the market than before. That's less FHB's renting and indirectly reduces demand on rentals.
QED
Nah apparently people build houses with scrap material they just have lying around. They don't sink a whole load of money, borrowed or otherwise, into building the house on the expectation of a return of capital + profit, or a return on capital. They'll just sit tight until the houses sell for their expected price.
WhoCouldHaveNooed
by tothepoint | 20th Oct 22, 9:09pm
"and remember, even Jacinda acknowledges the continuing shortage of houses in Auckland"
Tim, your sources of information are as questionable as your motives.
Why does the government not go and buy a couple of thousand and stop paying hotel rentals..surely that would be cheaper in the long run right?
There is a reason why landlords will not give those homeless people tenancies, so now you want Labour to buy new houses for them..... how long will the queue get? I guess if you play stupid games you win stupid prizes....
Government build and supply efforts were a big part of what made housing affordable for today's older generations, in fairness.
The Ponzi looks shakier by the day.
Yes NZ Property is fast approaching its Wylie Coyotte moment
So another argument of supply or hope is also down the drain.
Now what ?
Perfect receipe for disaster.
Unless Jacinda Arden or Mr Orr intervens with lollies
But
unable as now economy fundamentals have taken over and is beyond manipulation of central government and ploiticians.
Labour will not intervene, rather they could say at next election they have made housing more affordable, GR can lie with a straight face.
It is not that Labour will not intervene, It is that they No Longer can intervene as Inflation and economy fundamentals have taken them by Balls..more they try more the squeeze.
Need to keep rolling out new supply, as it's the best way of keeping the lid on house prices.......
As we all learned in the not-so-distant past, housing supply can inconspicuously fall back, leading to a sky-rocketing of house prices - with all the anguish and despair that creates for prospective homeowners. 🤬 🥵
TTP
Builders are not financed to hold, if they cannot sell, further construction stops dead.
Most new builds townhouses are way to expensive for Labour to use as emergency housing, sure Glenn Inness was cheap but they owned the land as over 50% of suburb was Housing NZ, but these 60k most will need well over 1mil to break even, lots of blood on the street if no buyers, at least Gib will get more available, the builders can just move to aussie to build a million over there.
Labour has removed every tax incentive for landlords to enter a falling market.
You are not going to see investors back in the market unless we see 30% falls, even then they will only help form the bottom, most investors are donkey deep at low rates and scared now how long they will hold at higher rates.
Personally know people who are trying to put rental investments onto market before xmas as they are involved in construction. They bought about 4 years ago will probably get out flat, trust me they will not re enter at 40% down from the top, they probably get out 25-30% down about where the got in.... where are the new investors coming from? luckily they can sell to FHBs .
IP bought 4 years ago will be subject to BL test which was 5 year timeline from March 2018. Inc tax is calculated and taxed on any profit in the year of sale and puts the owner in to the top tax brackets 33 and 39 percent. That could mean a tax bill of 100k plus liable for prov tax
only if they make a profit - which depends on being able to find a buyer.
And holding past 5 years also doesn't work if
- you have a pattern of buying and selling or building and selling your main home
- or a person you’re associated with are in the business of property dealing, developing or building and the property was bought for the business
FHB's, beware of Tim - the wolf in sheep's clothing 🩸🐺🩸
He DOES NOT want the rate of supply that is currently in play.
Reverend Retired-Poppy.
"He DOES NOT want the rate of supply that is currently in play. " Especially when the public are listing their properties with competition to Property Brokers. Even Ray White is the King of the Castle in Havelock North now. And Tim is the Dirty Rascal !!!
Obviously lower prices would stimulate demand.
Not if interest rates keep rising.
If prices go low enough it will stimulate demand..
..houses turning from assets to liabilities would do it.
Another 15% lower and it might
Maybe at the low end for FTBers but Manurewa sh*tboxes... they got to 1.2.... would still be 800k, these where 300k in 2009, I dont think you going to see demand until they have a 5 in the front with current tax settings and the 3 odd years it takes to buy/plan/build with unknown costs etc etc etc, no one will take this risk
Do these figures take into account that approx. 3 new houses per annum per 1,000 people are needed just to replace the existing end-of-life stock?
That would be approx. 16,000 new homes per annum are needed without any population growth.
Shows to me how resilient NZers are and how different people's mindset is over here. THAT is to me the main driver of the real estate market. Apply the same conditions (interests doubling in a year and over-supply) to any other country in the world and you're in for a major crash.
Maybe we're just a bit slow to figure our the situation
Many here are still in denial mode with hope (Just like politicians- Ostrich) and cannot blame them all together as housing market uprise has been for such a long time specially in last two few years that many cannot even think that housing market can fall that too in NZ.
Many still believe that come what may Mr Orr and Jacinda will come to their rescue forgeting that fudamentals have taken over.
Two headline by themselves confirm what everyone knows. Rising interest rates are bad for housing ponzi and with supply increasing, not only from existing unsold house but also by new built ...........need say more
Mortgage interest costs rose 39% for Kiwi households in the past year
Major turnaround in supply of new housing compared to demand
Forgot, read this headline and article also from the same website :
https://www.interest.co.nz/business/118160/independent-economic-researc…
Get ready for another immigration wave, I guess.
Definitely if Conehead is PM
Its already underway. 2.5 years of people leaving the country has been reversed as of August, now people are pouring into the country at a rate of 25,000 a month (October's net inflow). It wont be long before immigration has absorbed all the over supply in housing (particularly rentals) and we'll be back to having a shortage exactly as the construction industry shuts up shop and goes broke.
I love it when a plan comes together... :)
B.A. would have a lot to say about fools at the moment.
I must be thick.I don't understnd this at all.
Why have we so many homeless people or is it i have read this wrong or don't understand it at all.
No one is lining up to put homeless people in $950K two bedroom townhouses. But that's what we've been supplying to market in some places. There's a huge over-supply of properties with stupidly high price tags. There's still a shortage of reasonably priced, reasonably sized houses.
Many are homeless as they have addition problems, low education, no employement and no landlord will have them. I am not going to discuss why they are like this, its complex. Thenew builds are too expensive for the Gouvernement to buy, and they themselves know that a high % require remedial works due to tenant damage, it would be a huge ongoing bill......
Around 6 years ago for 650k you could buy a small ish 3bdrm glen innes multi story townhouse , new build ok, think Fenchurch Street, then the prices went up now the build cost has gone up, good support services in these low income suburbs as well. Nothing wrong with Glen Inness is as safe as.
To provide cheap houseing you need
Cheap Land
Cheap building Materials
Motivated developers as they normally make more elsewhere....
In Glen Inness they gifted land to developers in return for houses.. it worked
You mean they worked in with the private sector? Sacrilege! Only the great, mighty Labour Party know how to build houses!
Just because someone presents as a vagrant, it doesn't mean they're homeless or even desire accommodation assistance.
Also, desire is NOT demand. Just because someone wants a certain standard of housing, it doesn't mean they have the ability to participate in the market (at current prices/rents) and thus drive demand.
tell that to the greens. they desire, and desire more. deliver disaster, and more disaster.
There were reports that up to 20% of townhouses/apartments were being sold to Singaporeans (and maybe other Asian investors using Singapore as a back door) who, like Australians, are exempt from foreign purchase.
I wonder if some of these excess demand sales are to these types of investors who may be looking just to park some funds outside of Asia in real estate and have no intention or care to rent?
The NZ equivalent of Chinese Ghost Cities
With forex movements their returns will be looking interesting right now.
Rental yields are increasing at the moment as house prices are falling faster than rents
question...what amount of GST would be included in a $950k new build.
Quite a lot. It’s a bit more complicated than it would seem, but circa 100k.
The government will therefore lose quite a lot of GST revenue in 2023 and 2024 as private residential construction slumps.
It's almost as if immigration effects property prices! Who knew? We've had very learned people tell us over the last 10 years that immigration has nothing to do with it.
Credit costs do of course, as well. But immigration has it's part to play. I expect them to open the floodgates very soon to fill everything up again.
I have got my crystal ball out….
National win the election. They reverse Labour’s changes on property. They open the immigration floodgates.
2023 and 2024 are bad years for new construction. Less new supply + population increase starts to reduce housing supply surplus.
Interest rates start getting cut from late 2023 and through 2024. National implement income tax cuts.
property prices start lifting again late 2024, but only gentle-moderated increases this time.
You don't need to wait for National to open the immigration flood gates, Labour has already done it. No cap on immigration numbers anymore, lifting of skills requirements for jobs, removal of the labour market test, lower wage requirements, easier pathway to residency ... as a result people are already pouring into the country as we speak. That rental surplus will be gone by Christmas.
Spot the brain cell
Why is the residential landlord picked out as a profiteering scumbag? When you go to the supermarket, you are lining the pockets of the building owner and one of the duopoly suppliers. Unless you work for a charity, your employer is doing the exact same thing. I don't recall being offered much for free in my lifetime.
Boomers were keen to put their money in housing as they all experienced the 1987 stock market crash. I know people that mortgaged their houses to invest at the time. They lost everything, with some having to sell their homes. I don't think many will be wanting to sell and move the money to the stock market or Bitcoin!
It's the condescending you need to save more /avocado on toast commentary that people had to endure. Now that the boomers have not listened to their own advice and borrowed beyond their means to get that extra investment property in one of the largest property bubbles in the world don't expect the younger generations to feel sorry for them.
Because rather than do something productive they just plonk their name on the title of an existing house that could have been bought by a first home buyer, and then rent out to said aspiring first home buyer for a profit.
If residential landlords were adding to supply, then they might not be seen as such profiteering scumbags.
I guess residential landlords will become hugely respected now. They are providing housing at a capital loss, as well as not being able to claim interest expenses They must be the most charitable people one can imagine right now. They are literally saving a first home buyer from financial ruin.
So where should they put their money?
Elon Musk's Recommendation To Invest In 'Physical Things' May Be His Best Advice Yet.
You moaned when there weren't enough houses, now you're moaning because there are too many
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