The pipeline of residential building work in Auckland is becoming decidedly sluggish.
That's because fewer new homes are being consented in the region and those that are being consented are taking longer on average, to be built.
That means new builds are spending longer in the construction pipeline, meaning fewer of them are coming out the other end each month.
The latest figures from Statistics NZ show that 13,863 new dwellings were consented in Auckland in the 12 months to October 2024, down from 16,669 in the 12 months to October 2023 and 21,960 in the 12 months to October 2022.
That's 8097 fewer homes consented (-37%) over the last two years.
Fewer homes being consented means fewer homes being built, but that's only half the story.
A rough rule of thumb has been that it takes about two years from the time a new dwelling is consented in Auckland until it is completed and issued with a Code Compliance Certificate (CCC).
CCCs are issued by councils when a building is completed, unlike consents which are issued before construction starts.
Which makes CCCs a very reliable indicator of new housing supply.
Back in 2019 it was certainly true that nearly all of the new homes being built in Auckland were completed within two years of receiving their consents.
Auckland Council figures show that in 2019 more than 90% of CCCs were issued to new dwellings that had received their consents within the previous two years - in some months it was as high as 98%.
But that figure has been in steady decline ever since.
Initially that was due to Covid pandemic restrictions, and then the subsequent disruptions to supply chains and the labour market that followed.
But even though those problems are now in the past, the length of time between consents being issued and CCCs being issued on completion, continues to increase.
By October last year the number of new dwellings receiving their CCC with two years of their building consents being issued had dropped to 65%, down from more than 90% in 2019.
With supply chain problems no longer an issue, the most likely explanation is that developers are increasingly delaying the start of construction on consented developments due to the difficult housing market.
A small time builder/developer who may have been planning to build a couple of townhouses on spec, may hold off until he has buyers lined up for them.
Larger developments may now be built in stages rather than all at once, and so on.
This, combined with the general downturn in consents being issued, is resulting in a general sluggishness in the market.
Interest.co.nz compares the number of new Auckland dwellings receiving a CCC each month with the number of consents issued two years previously and the result is shown in the first graph below.
We also record how many dwellings were consented each month but not completed within two years, and aggregate the figures to get an annual total - this is displayed in the second graph below.
The second graph, which shows how many consented dwellings were uncompleted after two years, shows a particularly striking trend, rising from almost nothing in 2018 to around 4000 a the year to October 2024.
Both graphs suggest residential construction in Auckland is continuing to slow and along with it, the supply of new homes.
29 Comments
Kainga Ora was the slush fund that some developers relied on to fund their other developments. Someone reported on the FB Property group that KO was signing off on $8500 per sqm build costs!
Now that its gone, they are going to struggle to stay in business, let alone redirect all their construction to other projects. Certain stadiums may need to look for new name sponsors shortly.
"Someone reported on the FB Property group that KO was signing off on $8500 per sqm build costs!"
OMG. Just staggered. That comment explains so much about you K.W.
Who was that someone, K.W.?
Did they provide facts? Or just hearsay, K.W.?
How many projects was it, K.W.?
Was it perhaps a problem case, K.W.?
Perhaps a case of protecting other investments, K.W.?
For those that don't know - Too many members of that FB group hate Kainga Ora because K.O. is the competition !!!
Here in NP a bespoke at least two storey apartment block was completed and occupied last year, opposite PnS. Another bespoke 2 storey apartment block is about 50% complete. Both on prime blocks of a land. I can see the building costs there being about $8.5k/m2.
After tossing out Labour and doing what National have done is a breath of fresh air. My perception is that whatever Housing NZ wanted and a number shoved under the relevant Minister's nose, not just Housing NZ, was signed off willy nilly. Basically how much do you want I'll sign the cheque.
Only thing National may come a cropper on is the ferries unless Winston First can magic up a rabbit out of the hat.
Nine apartments built, $11M build cost. That's $1.222M per apartment, three are 3 bedroom, 6 are two bedrooms. No lifts or anything. Below average quality kitchens and bathrooms. Small lounge and dining rooms. I'll wager this one is more than $8500 per sqm.
https://www.nzherald.co.nz/nz/12m-per-apartment-new-kainga-ora-apartmen…
The fall is somewhat predictable, what is different this time is the levers to be pulled in order to maintain the current (lower) level of activity are somewhat exhausted.
There just seems limited options from here. Input, labour and financings costs are very sticky and still increasing at a lower rate. Values/revenue have stalled and the risk is on the downside.
I'd be interested to see this information from all the Councils. Particularly Christchurch. Currently on my dog walking route in my neighbourhood, there are over 60 unsold, empty townhouses. And trust me, I dont walk that far. Many of the big development projects from the major builders have been canned, and the land put up for sale.
Higher constructions costs thanks to wages and materials inflation, higher consenting costs thanks to same, and more normal cost of capital making borrowing more restrictive. The only variable that can give way is land prices, or dropping the cost of capital (interest rates) which refuels the whole ponzi to continue.
Land speculators beware.
Not sure how you think that works.
If a subbie does work or supplies materials, they put in an invoice or payment claim for some or all of any work conducted, and the developer/project manager has a month give or take to pay it (either the 20th, or last day of the following month).
Lay 40% of the bricks, get paid for 40% of whatever the bricklaying cost is (and maybe supply of all the bricks, even if a pile sits around for months)
It's usually in the developers interest to complete ASAP, unfinished houses don't yield any profits, and have a lot of sunk costs. When the project finishes is of little significance to the builder/subbies, apart from maybe the annoyance of a screwed up calendar.
I’ve gone from four full timers + myself in 2021 down to just myself. The boom times are well and truly over. I was smart and worked my ass off while the work was there. Happy to sit this one out of the sidelines. I feel for companies out there with debt or excess staff.
I would suggest that dwellings not being completed within two years of them being consented is not a result of construction being delayed, but much rather because of construction not going ahead at all, after obtaining the consent. This would mean that the actual drop in completed dwellings is much sharper than the 37% in consented homes.
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