The number of new homes completed in Auckland in January dropped sharply, but the number of homes being built in the region remains at a record high.
Auckland Council issued 965 Code Compliance Certificates (CCCs) for new dwellings in January this year, down by 27% compared to the 1327 issued in December.
January's figures were also less than half the number issued each month from September to November last year, when more than 1900 CCCs were issued each month.
CCCs are issued when building work is completed and are the best indicator of new housing supply, unlike building consents which are issued before work commences and are an indicator of likely future supply.
However January's slump was not a surprise because it is usually a slow month for dwelling completions.
That's because as well as being affected by the Christmas break, builders usually try to finish as many projects as they can at the end of the year before they head off to sun themselves in Bali or Whangamata or wherever, and then work slowly picks up again in mid to late January.
So the dip in CCCs issued was not a surprise and dwelling completions were still running at record highs, with January's figures up 14% compared to January last year, and up 40% compared to January 2022.
That means the widely anticipated downturn in residential construction, as indicated by the slide in building consents issued for new dwellings, is yet to hit the number of new homes being completed and available for occupation in Auckland.
That's because on average it takes about two years from the time a building consent is issued for a new dwelling to be built and a CCC issued on completion.
However although the latest figures show no decline in dwelling completions, a closer look suggests they may have peaked.
The monthly average (over 12 months) of new dwellings completed in Auckland has been steadily increasing since June 2022, but has barely changed over the three months from November last year to January this year (see the graph below).
That suggests dwelling completions in Auckland may be peaking and the expected decline in Auckland's new housing supply is probably not far off.
The comment stream on this story is now closed.
•You can have articles like this delivered directly to your inbox via our free Property Newsletter. We send it out 3-5 times a week with all of our property-related news, including auction results, interest rate movements and market commentary and analysis. To start receiving them, register here (it's free) and when approved you can select any of our free email newsletters.
62 Comments
Good news for now for rental supply.
Depends which side of the fence you are. The needy or the greedy.
to be clear, the needy who's expecting free housing is greedy.
If all of the government intervention in the housing market was removed, what would be the price of a house? More than today?
Providing housing for people rather than subsidising rent is cheaper in the long term, which I'm sure all property investors would agree as they intent on making a profit off the cost of the house which they purchase with interest bearing debt. Whereas the government don't intend on profit. They require taxation which they receive as the earners of the income derived from the house they create is spent and taxed in the economy. The better question might be, can we support our growing population sustainably with the building resources we have? Can we support the aggregate economic demand of creating all of these jobs to build housing at scale? If so, then the govt should be building houses.
So I assume by your comment you mean removal of accommodation sup., which I agree with.
I'm a property investor and I disagree.
By their own report the EBITDA that Kainga Ora makes per dwelling is MINUS 20k. For most private landlords the EBITDA per dwelling is between 30 to 40k.
KO is notoriously inefficient even for a government department. The accommodation supplement, though far from ideal, is considerably less strain on the taxpayer than social housing.
I have studied HNZ annual reports. The figures indicate their rentals cost the taxpayers 4 times the money paid out for accommodation supplement for private rentals. Housing assistance should be allocated on the tenants financial need not on the landlords need be they mum and pop landlords or HNZ who have become a soft touch due to political mantra.
So with Auckland Council needing new settlers-ratepayers every year, about 33,000-40,000. The squeeze in supply will hit by the years end?
Fall in newly constructed residential dwellings likely
It seems that current house prices relative to current construction costs make it financially unviable currently.
Lots of new builds listed for sale by developers with construction costs above what buyers are currently willing to pay. One builder recently shut down as they had not made one sale in the last year. Developers unable to sell their current inventory.
https://www.oneroof.co.nz/news/latest-news/cruel-reality-developers-off…
Land prices are falling from Nov 2021 levels, labour is becoming available at potentially cheaper prices (as construction slows down and job layoffs). I have no idea on prices of construction materials. Council costs seem to be increasing due to increasing infrastructure costs, funding shortfalls at councils. Will be interesting to watch. At some stage in the future, it will become financially viable again to build new residential dwellings.
As someone that is building. Prices have not come off and no one is suggesting they will. My feeling is that they will just accept lower volumes.
You are absolutely correct in that it is uneconomic to build. I don't think many people understand how far the imbalance has gone.
Crazy times.
Yes but building a new home for yourself is quite different to a spec home.
On the question above about raw land, it needs to drop in price as councils are slapping higher infrastructure DCs cost on. Housing buyers can't sustain higher prices so margins have to drop somewhere. Reduced land supply is the complete opposite of what should happen
Building your own home is not that different. There are only so many people that will want to build and then have spent $500k above what it is worth to sell.
There is no development margin in any of it and expecting a reduction in land value won't solve it. Land values are simply not going to reduce sufficiently.
Different standard
Affordable home has bedrooms kitchen bathroom etc without all the nice extras
Btw the development margin comes from land valued in the 10s of dollars to hundreds of dollars per sqm for unusable land which becomes residential
How many feasibilities have you worked on lately? They are not working no matter the spec or type.
Nothing stacks up at all. Even KO cant make it work and they have the lowest hurdles of all.
My secretary just built a nicer than average but still modest 4 bedroom home in Warkworth. It's cost them $1.9m. The market value is $1.2m if they're lucky. They're 65 and suppose to be retiring. It's horrible.
"My secretary just built a nicer than average but still modest 4 bedroom home in Warkworth. It's cost them $1.9m. The market value is $1.2m if they're lucky."
What is the size of their mortgage?
CN - You’re missing the point. People are not going to build to go backwards financially.
If they are unleveraged, they are more likely to be able to hold on until the house price recovers.
Unfortunately there will be many house buyers in the 2020 - 2022 period in that will have similar experiences in large house price falls. Some property promoters with vested financial self interests are denying that there is even a house price crash in parts of NZ and that house buyers don't experience regret in their house purchase.
Some of these buyers will have high levels of leverage and will be under cashflow stress and mental stress and be unable to hold on.
The property promoters with their vested financial self interests continued to tell people to buy at the peak and attempted to continually discredit those who gave warnings of the elevated house price risks.
A lifetime of good decisions can be entirely undone by one single decision.
Depends. Developers develop, builder build, that's what they do. For many at the moment mid project, they have no option but to complete, not so much to make a profit, but to minimise loss.
Just like on the way up, how much profit they make is relative over time, so is the loss they might incur in a down market - while they wait for a recovery, which could be a long time coming.
Half a million. They will never retire.
"They will never retire."
Seems like building their dream home came at a large financial cost and entirely changed the future trajectory and quality of life in their retirement years.
Is that the build only or house AND land. What was overspent
House and land. The overspend was mostly unstable Geotechnical conditions meant an in ground retaining wall had to be built. 200k in council and consultant fees. Building materials in general were 20% more than what they budgeted in 2020.
For the Govts. land supply reforms to work, they also have to break bureaucratic council monopolies to do it. In fact get the land use settings right, and everything else will naturally follow.
All that is happening at the moment is a revenue battle between the landbankers and councils, with developers caught in the middle, and the end user having to foot the bill.
Or in the case of the bigger manufacturers, increase prices still further to make up for less volume.
Starts are collapsing. That won’t come through into the completions data for 18-24 months
This has been coming ever since sales off the plans cratered about 80% a couple of years ago. The rest of it has been folks working out how big a bath they want to take.
"There was an annual net migration gain of 126,000 in the December 2023 year"
So it's good news that building supply is strong, but circa 20,000 homes is not even enough to keep up.
house prices may very vell be flat/falling but rents are only going to move in one direction in the next couple of years.
"house prices may very vell be flat/falling but rents are only going to move in one direction in the next couple of years."
Yes, there is a divergence between market prices in
1) residential real estate ownership market
2) residential real estate rental market
If one market price rises more rapidly than the other, there can be conditions of having one market price rising whilst the other market price is falling to get necessary adjustment in market prices in both markets.
So the question is do we want house price affordability in:
1) residential real estate ownership market or
2) residential real estate rental market?
Under current conditions, we can choose to only focus on one.
If builders/developers can't turn a profit in overpriced Auckland, there is no hope for the rest if the country.
The supply of housing for sale in Auckland is the highest I have seen for a long time. The house prices are so over valued compared to income it has already dropped 20% from highs trapping many in negative equity with cost of mortgage shooting beyond some families capabilities of servicing payments the price crash will pick momentum over coming months.
Plus add in the 20% inflation over the last 4 years (NZD lost 20% of it buying value!!) real property values in Auck have dropped over 40% in real terms NOW....
Its the biggest Resi Housing crash NZ has ever witnessed.
We are just part way into this property crash.
Bottom to be found maybe somewhere in 2025-27?
"Its the biggest Resi Housing crash NZ has ever witnessed"
Many don't know:
1) Residential real estate is the largest asset class in NZ.
2) At the peak, the total value of residential real estate was estimated to be $1.763 trillion.
3) Prices of residential real estate are 13.5% off their peak - this is roughly a decline of $239 billion before inflation (note that this decline is 146% of the entire current market capitalisation of the companies listed on the NZ Stock Exchange of $163 billion - https://www.nzx.com/markets/NZSX)
the job losses have yet to bite which will start to accelerate what is now looking more and more like a crash rather than a soft landing of any kind.
We have a situation where we have reduced revenue for businesses, reduced tax take for government, persistant inflation and that is pretty much a perfect storm. Because the govt cant spend and RBNZ cant drop rates (this is exactly why squirrels store nuts in the cold hard times... re the govt shouldnt spend in the boom and rbnz shouldnt keep rates low either)- we now have to belt in and watch as the drollercoaster starts to drop without any brakes.
On top of that tech companies and service industries are already deploying AI as a means to reduce headcount and maintain service levels (maintain profits).
The next year is gonna be a real wake up call.
I agree with your points DTRH. But I'd also counter that the replacement cost for a dwelling is now over 20% above the market price. My prediction is that the Auckland house market is now at its floor and it will remain static for the remainder of the year.
With the amount of people trying to sell in Auckland and many having to for financial reasons prices will fall very quickly and if the government does open up more land the land prices will lower.some developers will struggle but more housing will be built overall.
Yes more houses will be built but not in line with Immigration.
It does not matter when we are bringing boatloads of poorly skilled, third world immigrants, many with just 5 to 10k in total to their name - who are happy to live 10 to 20 to a house.......
These poor souls won't be your ponzi housing market savior......
Every market can fall well below new replacement or product price......for many years, when the fundamental supports are out of whack.
NZ Housings fundamental supports, are still well below market prices......so it is and will fall lower.
No matter what spruikerfest talking goes on, the bottom is well below current levels.
My understanding that is only possible with luxuries not necessities at the base of Maslow's hierarchy, which houses are. People have to live somewhere.
"My understanding that is only possible with luxuries not necessities at the base of Maslow's hierarchy, which houses are."
If you can answer why these newly built houses are going to be sold at a loss (i.e below their construction cost), you might find an answer as to why house prices can fall below their replacement cost.
https://www.oneroof.co.nz/news/cruel-reality-developers-offering-huge-d…
by DTRH | 19th Mar 24, 1:18pm 1710807483
The price crash will pick momentum over coming months.
by DTRH | 11th Nov 23, 10:46pm
The price crash will pick momentum over coming months.
by DTRH | 27th Aug 23, 1:46pm
The price crash will pick momentum over coming months.
by DTRH | 11th Mar 23, 2:14pm
The price crash will pick momentum over coming months.
The house prices have crashed 20% from highs add in 15% inflation house prices are losing value all the time at the same time the NZD down 15% interest rates could lower slightly but will never go back to easy money times. Yvil do you have a problem with these facts and that many people are trying to sell at a time when most families couldn’t afford to buy the property they are in at today’s prices, it is obvious to most the next phase of crash is here. Yvil I understand your concern if you are over leveraged my advice would see a good financial advisor because many are already in negative equity and prices will continue downward path until more than top 10% of earners can afford to buy in Auckland from scratch.
I think he's trying to show how on the button you are.
With inflated costs and ponzi land price development is very risky, so all engines stop. No surprises there. The bigger issue is continuity for trades work essential to retain the skills.
So what to do....protect the ponzi at all costs thus export another generation of young tradies to straya, or, start a mass state house building program...
Time for the return of Kiwibuild? Obviously renamed and tweaked by the current government.
Imagine signing up for a new build 2 years ago, and now having to finance it on 7% interest rates. No wonder listings are piling up.
Not just the interest rates, but the value on the contract not matching the bank's present day valuation, therefore not willing to lend.
As mentioned yesterday on the auction article, I know three cases of this. Two have had to walk away, and another friend is looking like they might have to walk away as well.
One of them bought 940k off the plans, revalued at not much over 700k. Bank asked for an additional 140k. They did not have. Fortunate to have an option to sell written into the contract, maybe the developers knew. I know some (most?) contracts restrict selling with a window as it can impact buyers ability to get finance if the completion next door is revalued lower.
"One of them bought 940k off the plans, revalued at not much over 700k. Bank asked for an additional 140k. They did not have"
Unfortunately there will be more coming.
There were news reports starting Dec 2022 highlighting that this issue was starting back then. With the number of off the plan sales, it was likely there would be more coming. Most people didn't realise the potential impact of potential magnitude at the time of the news reports.
1) https://www.oneroof.co.nz/news/i-would-be-nervous-right-now-settlement-…
2) https://www.stuff.co.nz/business/132448217/settlement-looming-no-financ…
Yes it was always going to happen and be quite ugly
Are you sure they are being allowed to walk away?
Well the one mentioned 940k was able to sell - unsure what for, unsure if still owe money.
The other I am unsure how it ended, haven't heard an update. Was late last year I heard and they're not close friends. Similar deal though.
The one looking like they will have to walk away is able to sell as well as part of their contract, but not due complete until later in the year.
I also know of another couple who got caught out like this but managed to make it work by getting an additional loan to cover the shortfall. I assume second/third tier lender. Don't know a lot about these people, colleagues of friends. The stories are coming out though, everyone seems to know someone.
I would assume that if they sell for say for less than the contracted price, say 800k in this instance, they will still owe the remainder (140k) to the developer, probably wiping out much of their deposit that took many years to build.
Likewise if they can't make the purchase, if the developer ends up selling the unit for less, then they can claim the difference from the original purchaser, net result is essentially the same.
Maybe the contract has a sunset clause which would be the way out if construction took too long. These were much maligned a few years back when prices were rising and they were being used by the developers, but now they can work in favour of the purchaser, but it depends on how the clause is written.
The new plush suburb of Milldale has the salvation army bus delivering food parcels to the heavily leveraged FHBs every Thursday between 6-8pm. Horrible situation.
The new plush suburb of Milldale has the salvation army bus delivering food parcels to the heavily leveraged FHBs every Thursday between 6-8pm. Horrible situation.
Terrible really and you wonder what it will do to their credit history.
"Imagine signing up for a new build 2 years ago, and now having to finance it on 7% interest rates."
Already seen a couple of vendors looking to sell their off the plan purchase before settlement date.
Yes, an ugly scenario that will be quite common. Going to cause a lot of financial distress
There's a clear two speed economy in construction at the moment. Auckland still ticking over but the rest of the country is dead. First signs here that Auckland could follow.
That should push the prices of existing properties up with thousands of immigrants arriving each month.
My neighbour has just sold. $2m.....CV $1.7m.
These poor sods are live 20x to a house!! These people have no money to buy or rent, as we would.
- Its queing up for the crapper and shower stuff......
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.