The supply of new homes being completed in Auckland is continuing at record highs, despite the slowdown in new dwelling consents.
Auckland Council issued 1499 Code Compliance Certificates for new dwellings in May, which was the highest number issued for the month of May since the council began collating the records in 2013.
However the monthly figures can be volatile depending on whether any high density housing projects were completed in a given month. The Council also compiles a rolling 12 month figure. This shows 14,767 new dwellings were completed in the Auckland Region in the 12 months to the end of May this year, a record for any 12 month period since 2013.
Those figures suggest there is still a solid pipeline of residential construction work in place, and the slowdown signalled by the decline in residential building consents may not show up as a decline in the number of new homes being completed until 2024 or even 2025.
That's because building consents are issued before construction work commences, while Code Compliance Certificates are issued when the work is finished and it generally takes around two years or so for a project to be completed.
However, it's likely the building industry in Auckland will already be feeling the effects of the decline in building consent numbers in the region as these suggest that fewer new projects will be getting underway, freeing up resources to complete existing projects.
The high numbers of new homes being completed in Auckland may also be a factor in why rent increases in the region have been relatively constrained, in spite of a significant surge in immigration since the Government re-opened the borders as pandemic restrictions were eased.
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43 Comments
interesting....
one large development site in Wellington just went to mortgagee sale.
There aren't many good homes for sale in Wellington. Plenty of apts, and as is where is though.
Yes. But strangely the mortgagee signs they put up yesterday have been removed today.
Keep pumping them out, flood the market - awesome :) For investors who are after tax advantages on new builds, one would have thought these would be snapped up pretty quick - hmmmmm. Not so easy accumulating a portfolio when precious equity is imploding is it?
Rental yields have fallen behind investor cost increases (borrowing costs, insurance premiums, council rates, etc.) in the last 18 months or so. So either rents rise much faster, which is unlikely given all the other cost pressures putting a squeeze on household finances, or house prices come down further for better ROIs.
There's also the current elevated and hassle free yields of TD's that, by comparison, are far more attractive.
Many investors have no cash for term deposits, they used equity in there own home to buy the investment,
Or rather.......they used equity in their own homes to gamble with.
Agreed. Also, a TD is at low risk of losing its investment value in the current environment (more so with the soon-to-be introduced deposit insurance scheme) but can't say the same about houses.
"Not so easy accumulating a portfolio when precious equity is imploding is it? "
Not just equity shrinking. Their borrowing power is also decreasing due to rising bank stress test interest rates of 9-10%.
How many extra people we can house these?
Per townhouse: 24 inside, 8 more in tents and lean-tos against the walls, 6 in the garage, 6 in campervan parked in driveway, 9 more in cars parked on road paying a few bucks to use toilet.
Total: 53
See no problem - we can adapt - where is all this panic coming from?
The change in dwelling completions over ten years shown in the graph is... insane. It could be attributed to many factors but the result of it all has to be instability. Wouldn't it be great to have a government that could anticipate and react effectively to problems before they become a crisis, and give us somewhere a bit more stable to to live in?
The said they would when they came to power, another broken promise
Uh-oh. Wasn't it House Mouse that predicted a major property crash due to over supply of townhouses? These will all likely be sold close to, or below cost in the current climate. Not great for typically small building companies.
The company liquidations list in the public notification section of the Herald are reflective of the building industry being under pressure - this all supports HM's predictions.
As I predicted, we are seeing a surge in completions in early-mid 2023. These will mostly be projects that got building consent approvals in mid 2021, when consents were booming. We will start to see completions falling away as the year progresses.
This is great news for the rental market, bolstering supply.
Are they going to be affordable rentals though, assuming they don't sell to owner occupiers...
Is that a question?
I'm sure the landlord subsidy aka accommodation supplement will surely offset the unaffordability
What - the one where rates were last reviewed in April 2018? Its not keeping up with inflation.
"accommodation supplement will surely offset the unaffordability"
How are tenants able to afford increased rents charged by private landlords?
From a property investor chat group:
"I've just had an interesting conversation with my property manager in Papakura. I asked her what the rental market was like. She said they are struggling to find tenants. She said people are finding the cheapest rentals and trying to squeeze 10 people in."
"She said people are finding the cheapest rentals and trying to squeeze 10 people in." Yes, in times of growing hardship, people make do in any way they can. One of them is to cluster into larger groups per dwelling. Adult kids head back home to their parents - you name it.
One only has to view the slums of Brazil and Mumbai to see how endless the untapped options In NZ are.
Those that think housing need will guarantee rent increases need to ponder how it works in the real world.
Well said!
Dump enough 2 bed shoeboxes on the market and it will help ensure low rental inflation.
But they aren’t really cheap, circa $600 pw in low value locations?
An article and analysis of construction cost over the last 15 years would be appreciated.
Trafficked Chinese labourers building into a a bust. What could possibly go wrong?
Wow, now I see why plumbers, sparkies, painters etc, are 'demanding' $1000 a day now. 😳
Yeah, and why nothing will get built next year. Too many project are uneconomic.
That's pretty reasonable considering ya'll want us to work 10 hr days.
No we just want you to get the job done. It's all you trades charging out hourly that turn a simple task into a 10 hour day.
The pecking order for these trades are plumber, sparky, painter. At least $15/h difference between the first two and probably $20/h or more for the last two.
Is anyone hearing about off the plan buyers who are unable to settle at settlement date?
If these were sold off the plan in 2021, then the valuation might be lower than the purchase price by the off the plan buyer. A lower valuation means reduced amount of bank lending. This means that the buyer would need to come up with additional equity to settle the transaction.
E.g
Purchase price in 2021: $1,000,000 (80% LVR is $800,000 and expected equity of $200,000)
Valuation today: $800,000 (80% LVR is $640,000)
So to finance the purchase price of $1,000,000, with the bank now lending only $640,000, the buyer has to come up with $360,000 of equity now compared to the originally expected amount of $200,000. The buyer has to come up with an additional $160,000 (or 80% more than the original expected equity amount of $200,000).
Yes a ticking time bomb. But I haven’t heard much
Piece of 636m2 dirt going in Beach Haven for 725k. Listed for three months. Don't know how many 3 storied terraced style houses you can get on it but if only one single storey house its not affordable in my book. By the time you've put on say a 150m2 house on it, its +1100k.
Unless the property prices drop by another 15-20% there's very little affordable in Akl.
It’s affordable, just uneconomic.
Very little stacks up at the moment.
It’s getting closer to land having to be zero cost for development to stack up.
Correct - I have seen exactly that on an $80m build. Uneconomic with free land.
Land won’t be given away so materials need to come down.
I am noticing that many new builds are now being advertised at prices 7-10% lower than they were 2-3 months ago.
And a few developers are doing the 4.5% finance thing.
It’s precarious.
with so many new builds hitting the market, and prices being slashed, how can the economists reconcile that with their views of 3-5% price rises over the second half of this year?
"how can the economists reconcile that with their views of 3-5% price rises over the second half of this year?"
Its all now timely well coordinated Spruiking of the vested. They know full well that continued falls beyond this point are uncharted territory and will likely cause serious economic carnage - a race to the bottom you might say. There's a combination to lost equity, impossible loan repayments combined with soaring insurance and rates affecting ever increasing numbers in a way many participants ever thought possible. Its hard to gauge how bad its going to get....
"the Coatesville of the Waikato." Now you guys know where to invest your money, in or near Coatesville.
https://www.oneroof.co.nz/news/the-elite-suburb-thats-become-a-magnet-f…
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