The Auckland Region is likely to face a serious decline in the supply of new housing by next summer and it will probably continue to worsen over the next couple of years.
A downturn in residential construction has long been signaled by a decline in the number of new dwelling consents issued in Auckland. But so far that has not translated into fewer homes being built because of the length of time it takes to build a home after a consent has been issued.
A rough rule of thumb is that it takes about two years from the time a dwelling is consented until construction is completed, so the residential buildings being completed now were probably consented around a couple of years ago.
And so far the supply of new homes being completed in Auckland is running hot.
According to the latest figures from Auckland Council, 1728 Code Compliance Certificates were issued for new dwellings in March this year. That's up 14% compared to March last year, and is a record for the month of March.
That should not be a surprise because the Statistics NZ figures show the number of building consents issued for new dwellings in Auckland two years previously, in March 2022, was also a record and the highest number in any month since Statistics NZ began collating the figures in their current format in 1990.
So to get an idea of what is likely to happen with new residential construction in Auckland over the next couple of years, we should look at building consent trends over the last couple of years.
The chart below shows the number of Code Compliance Certificates issued for new dwellings by Auckland Council every month from January 2021 to March 2024 (the blue line).
Code Compliance Certificates (CCCs) are issued when a building is completed and so are the best indicator of new housing supply.
The graph below compares the CCCs issued from January 2021 to March 2024, with the building consents issued in the same month two years previously (the orange line).
So the March 2024 CCC figure is compared to the March 2022 building consent figure.
This shows that both sets of figures follow very similar trends, suggesting the building consent figures of the last two years should provide a reasonable indication of dwelling completions in Auckland over the next two years, as shown by the orange line in the graph.
What this suggests is the number of new homes being completed in Auckland is probably peaking about now, will remain relatively high over the next few months, and by the beginning of summer will probably start a slow but steady decline.
If building consents continue to provide a reasonably reliable indication of future dwelling completions, then the number of new homes being completed in Auckland in two years time could be about 25% lower than it is currently.
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.
25 Comments
Its possible it could trend worse then 25%
How much Kianga Ora will be cancelled too...
Remember all those involved in the building sector commentating on this site about how the fall in building wouldn't affect them because Kianga Ora would pick up the slack? I wonder how confident they feel about that belief now.
KO and charities seem to be the biggest source of new residential tenders, so it probably will keep a lot of residential construction types busy.
Not the best work, but if there's no greenfields private subdivision work of not going on, it'll keep some above water. That and retirement villages.
Retirement villages? Most have pulled back massively.
And KO started pulling back well before the new government came to power.
Yeah I can only comment on what's currently on the go and being tendered on. They are both still showing signs of ongoing works for the next 5 years +.
The article mentions a 25% fall. That's probably not going to be distributed evenly
Certainly the listed retirement cos have been pulling back their developments and selling land, but I believe they are all still ploughing ahead with some level of development. Walking the line between acceptable debt levels and missing out on the inevitable demographic dividend ahead.
I think the downturn will be less than expected. If you compare completions to consents over the last few years (lagged one year) there is about 18,000 consents floating around. This reflects the log jam of building and consenting. Although house prices are lower, building costs are becoming more reasonable. And the number of houses demolished to make way for new developments has been significant. I think consent holders have the option of sitting on a vacant site; selling at a price that someone can afford to build; or continuing with the development. And a lot of the feasibility numbers were before the Covid price hikes so may look reasonable
We've never been this busy since Covid (non-group residential work). What I see, is necessary projects that were shelved due to skyrocketing costs and a lack of resources (tradies + materials) are now underway (design and / or construction) because prices are now reasonable, material & labour are available. I don't see building costs reducing much, largely because of Code upgrades and new systems requirements. I am somewhat hopeful that land cost will reduce.
What trade are you in? Seems like you’re bucking the trend for most involved in residential construction
Residential construction is a bit fragmented.
- there's house and land style group home builders, your GJs, Jennians, etc. Entry level, highly dependent on finance
- there's independent builders, who are building houses on commission. Doing mid and upper tier work. They generally remain consistent in more adverse times
- one man band style builders doing mild renos, decks, etc. more of a lifestyle business, generally manage to get by picking up odds and sods
That first group is the most fickle, if someone was solely doing that, they'd be doing it tougher.
This is the classic construction/ property cycle. Give it two years with low build numbers, falling interest rates and high immigration and we will be back on the upswing.
It's tidal as Piggy points out.
Therefore prices will go up? In two years time?🤔
This winning specuvestor/deweloooper in Rewa will see the thick end of 500K to 600K of losses........big losses on the doggy doo bag passing in 2021 is coming home to roost in 2024.
Holding costs plus the reduced land value costs, killing the specuvester pests off and good job.
13 John Walker Drive | Manurewa | Manukau City | Houses for Sale - One Roof
Expect a lot of similar ratbox cleared, tumbleweed sites, to change hands over the next couple of years at ever decreasing prices, as the return of a real cost of money bites.
Yep, if you're in the market for a project, that's the segment that'll have the biggest bargains. Renovations are expensive and time consuming, lotta holding costs.
These places are worth feck all, nothing to rent out after purchase, to give you a piddly 2.5 to 4% and ZERO demand for scrappily built townhouses made by bonded foreigners, that cannot speak a word of the local Reo.
I smell the waft of firesales galore in 2024....2025....2026.
The builders nationality doesn't affect how well or badly they do their job, it's mostly about competent oversight. Anecdotally a kiwi construction worker is more likely to give you troubles.
A standing legal house is still going to have a value purely based on the replacement costs. Unless it's so trashed as to be uneconomical to refurbish.
The recently imported cheap labour comes from places where corruption is rampant and building standards are routinely ignored.......
- would I trust the produced product, given this? No.
Not many others trust it either. Thousands stay vacant in Auckland as the buyers have fled.
Most of those places have buildings still standing that pre-date anything in NZ.
Most houses everywhere get built ok enough to last decades, or centuries if maintained.
Would you move into one of the 50 million plus+++ Zombie apartments now empty and desolate in China?
- If so, I suggest you have a good parachute at your side and a bed near the window, in case a mild quake starts and the columns crumble like dry Weetbix........
The Chinese property crash is teaching all there, an epic lesson on the dangers of Specuvesting. NZs milder crash atm (Auck down -40% in real terms) will catchup to the Chinese crash, later in 2024,2025,2026.....
I wouldn't want to live in China full stop, but I can and have lived in shacks in some fairly dodgy places.
Nothing wrong with a sturdy shack, (like mine) if its just one level and you have not overpaid for it.
Sorry to say the modern multilevel, flood prone shacks, masquerading as quality newbuilds, do not measure up as value or quality that have been recently spat out by the slick willy, interloping, fly-by-night developers.....
The new Govt is creating a dire mess of the economy
That should ensure that existing house prices stay elevated, esp. with all the immigrants arriving and wanting to live in Auckland.
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.