Building industry gains momentum, most housing consented since 2008

Property

November building consents issued rise 20% from October, mainly for apartments; big increase in Auckland

9th Jan 14, 11:25am by David Chaston

(Updated with an observation about the sharp non-residential building consent fall.)

2,267 new housing units received building consents in November, the highest level since April 2008.

Auckland's levels were particularly strong, reaching levels not seen in the city since September 2006.

Nationally, the total value of building work consented in November 2013 was $1.087 billion, a slight dip from October.

The total value of consents issued for all building and alterations has now exceeded $1 billion per month for the past five months, the longest $1 bln streak on record.

The $140 million in approvals for housing alterations and additions in November is also the highest level on record.

In Christchurch, consents for earthquake-related reconstruction were valued at $40 million for 64 new dwellings, $36 million for residential building work plus another $4 million for non-residential work on buildings.

Since September 4, 2010, $1.385 billion of building consents have been identified as earthquake-related. This includes consents for 1,243 new dwellings, including apartments.

Auckland's 779 consents issued in November were the highest since September 2006. The total included 511 new houses and 268 new apartments.

Wellington also had high apartment consent levels with 121 units gaining approval in November.

The growth in building activity is not widespread. Most regions are missing out as the extra activity is concentrated in Christchurch and Auckland.

The November data also revealed a very sharp drop in non-residental building consents - maybe to the lowest level since 2000. Canterbury was much lower, but the fall in Auckland was also large. In addition, there were substantial falls in most other regions. These falls come after very strong levels in October.

ASB economists made the following comments on the data released today:

Excluding apartments, 79 more dwellings were consented in Auckland. This result is very encouraging given signs over much of the second half of 2013 that house-building demand may be slowing in the region. Business surveys indicate a rebound in confidence and activity outlook in the construction sector over November and December, particularly in regards to residential construction.

The RBNZ announced in early December it will be exempting new residential construction loans from the LVR restrictions, applicable for all qualifying construction loans from 1st October 2013. The exemption covers loans to finance the construction of a new house only, and does not apply to the purchase of a newly-built house. There had been anecdotes from building companies that the restrictions on high-LVR lending, which took effect on the 1st October 2013, was discouraging house-building demand with households worried a top-up in mortgage borrowing would be required (which may hit the 80% LVR threshold) should unexpected additional building costs be incurred once the building project commenced. Indeed, the RBNZ acknowledged in its earlier analysis of the effects of the high LVR restrictions that reduced construction of new houses may be an “unintended consequence” of this new macro-prudential tool. The exemption is likely to support a continued improvement in house-building demand in Auckland over the coming months, given the acute housing supply shortages in the region.

Building consents - residential

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Source: Statistics NZ

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45 Comments

by MikeM | 9th Jan 14, 11:39am 1389220782

Good news on the Auckland supply front.

by dh | 9th Jan 14, 12:02pm 1389222133

As alluded to in the article, there is probably some scope for reviewing what various commentators said was happening with consents and the introduction of LVRs. Possibly with dome idea of judging the accuracy of their future wisdom.

by kin | 9th Jan 14, 1:38pm 1389227917

This is what the Goverment is hoping for before the election fever starts...it's do or die time (or is it built or die ?)....

But whatever the amount of building consent is, if prices do not start falling by the middle of the year, National is still toast when the election comes at the end of 2014.....

There will surely be more action from National and Labour before this is over...

by Hamish | 9th Jan 14, 3:58pm 1389236312

Hi Hugh, I think it would paint a more interesting picture to add in another factor. Consents per capita doesn't give me any context. But if you were to compare these regions on the basis of current capita per dwelling, then it would give some insight as to where there is stress or not on current housing stock.

by dh | 9th Jan 14, 8:20pm 1389252007

Hugh, you asked about what Stats NZ has.

From the census meshblock data you can, for each census meshblock (which is effectively a tiny area), get number of people, number of households, household income, number of dwellings, dwellings owned and rented, number of dwellings with various numbers of bedrooms and other types of rooms. You can directly get household capital or value of the dwelling, but there is a bunch of other data to work with. The only real limitations are it is only for census years (so 2006, 2001, 1996, as the 2013 meshblock data isn't released yet). http://www.stats.govt.nz/Census/2006CensusHomePage/MeshblockDataset.aspx?tab=Download If someone is doing geographic analysis/ map generation the shapefiles for the meshblocks are at http://www.stats.govt.nz/browse_for_stats/people_and_communities/Geographic-areas/digital-boundary-files.aspx

by PhilBest | 12th Jan 14, 9:53am 1389473612

Hamish, a reduction in the number of people per house is a contributor to "shortages".

But the social factors that cause this are non-negotiable.

The British government, in desperation (because they are terrified of touching the sacred Green belts with development) have proposed a "spare room tax" but the idea went down like a lead balloon.

But if house prices were affordable you will find more younger people marrying and having kids, putting the number of people per home back up again. Which is the chicken and which is the egg?

by BigDaddy | 9th Jan 14, 5:19pm 1389241191

"2,267 new housing units received building consents in November, the highest level since April 2008.

Auckland's levels were particularly strong, reaching levels not seen in the city since September 2006.

Nationally, the total value of building work consented in November 2013 was $1.087 billion, a slight dip from October"

I make that $479,000 per consent. If that's right then when you add the land and all the bits and pieces it must end up around $700,000 plus. Is this what is called "affordable housing?"

by Chris_J | 12th Jan 14, 12:30am 1389439841

For 10 year old multi level timber framed buildings north of the CBD to suffer soft storey collapse in a 30 second earthquake is not good performance by any stretch of the imagination so any suggestion our building codes are too rigid is fanciful.

In fact some simple single storey timber framed houses on good ground were badly damaged with gib tearing and bracing buckling, so even though these homes may look ok, if they are not fixed properly (which many aren't) they could perform much worse in another big quake.

Overall NZ building standards are actually quite low especially when weather tightness and heating is considered. Compare to the standard of work on houses in North America as seen on "This Old House" currently showing on the Living Channel.

Hugh, I would be interested to know why you think the house was over engineered? Was it the stud size or spacing, the truss spacing, the size of lintels or beams? I would be surprised if anyone specified above the 3604 requirements, which certainly aren't excessive.

by Chris_J | 12th Jan 14, 5:36pm 1389501392

Well actually Hugh, I have been working towards completing my masters in structural engineering at UC at the end of this year, in between battling insurers and getting innumerable projects off the ground (which I might add are not particularly worthwhile, the projects that is, given the capital gains on simply sitting still at present!).

Now as you will be well aware, I am generally a little curt and a tad terse with you, over your persistence on median multiples and building homes for $1000/m2 all up etc, which for various reasons are not particularly realistic, and of course over your continued comparison of NZ cities to the sparsely populated urban prairies of North America! So as always I apologise if I sound impolite or disrespectful.

Now back to the original discussion.

Christchurch buildings in general remained standing so on those grounds they performed well (apart from those that partially or fully collapsed being half a dozen or so large reinforced concrete buildings and a few hundred unreinforced masonry buildings, a few dozen partially reinforced concrete block buildings, and maybe a hundred or so multilevel timber framed buildings and the odd single level structure too).

However if we look at serviceability after the earthquake, the building stock performance was not so good. Thousands of buildings on good ground have been demolished. Many thousands more remain uninhabitable three years later.

So please let me know why you think the Riccarton house was over engineered as per my previous question.

by Chris_J | 12th Jan 14, 10:38pm 1389519517

Hugh, I shall avoid multiples!

Certainly not struggling as a developer. Just that it's more profitable sitting and investing than building to sell.

13000 earthquakes is not that unusual. Most of them are tiny and it is only because we're right on the faultlines that so many have been felt. You will find Seddon has had large numbers as well.

In fact the Chch quakes were not that big and the only reason they were some of the strongest recorded ground motions ever is because (again) we had a city right on the fault and therefore there were many accelerometers/seismographs (and people!) in close proximity to the epicentre.

In terms of dwellings requiring demolition. Probably about 20,000 will be written of by insurers or red zoned. Some thousands of those may however remain in use or be "patched up" without full repairs. EQC has left many thousands of claims on TC3 land and multi units in limbo so relying on their figures of under 15000 so far confirmed as overcap is unreliable and that of course excludes the "repairable" red zoned properties too.

I would estimate at least 20,000 dwellings possibly 25,000 (counting all individual flats) which were occuppied before Sept 2010 either no longer exist or are still empty.

As for roof trusses, they need to be close together (normally 900mm centres) for the purlins and ceiling battens. Just because old versatile garages may have trusses at 1500mm centres or even 2000mm centres (with 100x50 purlins on edge) doesn't mean that is acceptable for snow loads or deflections on a house which also has to support a lined ceiling and not sag!

In terms of using my own name, I don't want Internet searches to bring up a thousand moaning comments from this website! I did mention previously that I would contact you, but I probably have nothing to useful to add. I can be in contact if you would like, but I am fairly busy which is why I've cut back on the moaning on this website!

by steven | 12th Jan 14, 6:52am 1389462745

So you have no clue on engineering as seen before, but "think" they are over-engineered.

Well they are not. They have become heavier in light of experience pointing at them needing to be stronger and because architects want "complicated"shapes that need complex strengthening/bracing.

Go back to the simple straight design circa 1950~1960s and that would save a heap of wood and expense.

regards

by steven | 13th Jan 14, 7:43am 1389552202

No, you have issues with a few engineers it seems. Not massive issues, I worked in consulting engineering for a number of years and mostly they did their job well, especially given the pressures of cost and time on the projects, let alone the unknowns. My experience was quite simple, developers often moaned at any slight increase in expense but would sue if something went wrong in a heart beat, and expect lots of extras for free. I got out of that game, twas stupid.

As it says the process is in-exact, I mean someone has to look at a building and its construction drawings and estimate the strength V today's standard and do it as a reasonable cost and with an eye on being sued at the drop of a hat if something goes wrong.

regards

by two otherguys | 9th Jan 14, 7:24pm 1389248689

I reckon the rot set in back in the 1970's when Hopper Brothers developed Pauanui and introduced all those new-fangled covenants - you had to build to a certain standard

You dont see any discussion about this practice, but most new private subdivisions seem to have these features - you are not allowed to build a slovenly down-market $200,000 house

by Kate | 9th Jan 14, 9:23pm 1389255798

I'm with you on that one - but I asked Hugh some time ago whether he thought covenants were used to retain high/higher values on the subdivided land - and he said he didn't think it was a big problem where land price was concerned.

Regardless of their influence or otherwise on land prices - they definitely are there to purposefully increase build prices. It seems nuts that in some streets of the same subdivision the minimum build is x metres square, whereas in the next street over you must be x + y metres square. And all the sizes are normally higher than 100-110m2 which is perfectly adequate for most young families. Anyone wanting 100m2 or less gets relegated to the townhouse designated area.

It's just so Stepford, Conneticut :-).

by two otherguys | 9th Jan 14, 10:01pm 1389258093

oh - really - Hugh said that did he? - what can one say? - ah well he's from chch. They must be a bit slow down there

by iconoclast | 9th Jan 14, 10:34pm 1389260049

FYI, even the councils are into it

Coupla years ago looked at some bits of dirt north of auckland, mainly blocks that had been farm land and been broken up into smaller lots and being sold off in 10 and 20 hectare blocks. No services, just bare land. Nearly every one I saw had native bush on it and where there was native bush the council consent was given to the subdivision with covenants attached preventing anything being done with the bush area. Up to 75% was locked away in perpetuity. You could build a corrugated iron lean-to humpy if you liked. But not in the protected covenanted area. One was a 25 ha block with only 1 hectare that was capable of being built on. The rest was bush covered mountain goat country. So you were buying 25 to get 1 - vendor had little say in the matter - take it or leave it

by Kate | 10th Jan 14, 12:17am 1389266223

By "stiffen up the covenants" do you mean existing residents create greater barriers to entry by way of more stringent design specifications?

by PhilBest | 12th Jan 14, 9:49am 1389473342

The interesting thing, though, is that plenty of urban areas in the USA have "exclusionary" covenants in suburbs all over the place, and yet their house price median multiple is still around 3.

This is because the land price is a dependent variable based on incomes and rent potential and location advantage; rural land convertible to urban use is so darn cheap that it hardly even counts as a cost input. Half an acre sections in covenant-protected new fringe subdivisions in these affordable cities are still half the price of our 1/10 of an acre sections.

When the land is cheap ($30,000 per acre or less) the developer maximises ROI by sacrificing "number of saleable sections" to create amenity value. Large sections, green space, community facilities, bike paths, etc etc. When the raw land is costing over $1,000,000 per acre all the developer can do is cram in as many houses as he can get away with under regulations and hope to be able to sell at a profit. "Over-capitalising"; ie big 2-story homes on postage stamp sections, is another logical consequence.

In the affordable cities, homes in mature suburbs are cheaper than new ones to the extent that the structure depreciates in value. Here, the land they are sitting on is so expensive that it is many times the value of the depreciated structure. Hence nothing affordable whether new OR old.

The Americans in the systemically affordable cities are practising "exclusion" in some parts of the city, we are practising straight-out eugenics.

by Kate | 12th Jan 14, 10:18am 1389475132

",, rural land convetible to urban use is so darn cheap.."

True for the US, but here, especially if that rural fringe land is flat and hence suitable for dairy/dairy conversion the land is not so darn cheap. Therefore much of the land suited to subdivision on our fringes (i.e., land that is generally flat to medium slope) often competes with dairy or cropping as a land use. Much of the rural urban fringe land in the US (particularly in places like Texas, the Midwest and the desert / mountain states) are competing with rural beef and sheep grazing where the number of stock units per acre is very low. Phoenix is another good example - they are growing out by subdividing flat wasteland/scrub - it is no surprise that it is cheap land.

by Dale Smith | 12th Jan 14, 10:35am 1389476113

If that was only so Kate.

Rural Dairy land is still only about $50,000 per ha, compared to the $400,000 per ha if it has future residential zoning, or the $600,000 plus if it has current residential zoning.

The highest rural value is always far lower than the lowest residential value in a country or state that has restrictive zoning policies.

Of course Federated farmers who are against residential growth because it diminishes rural land, never mention that their support of this also benefits hugely financially those fringe farmers, as surprise surprise, they always one day sell their land to a developer for as much money as they can get for it.

If keeping their land as rural was so important to them, they could covenant it in any sale so it could only be used as rural.

There is a word for people that say one thing and do another, or maybe Federated Farmers do not speak for their members as much as they claim?

by Kate | 12th Jan 14, 11:07am 1389478052

So what you are saying is the price differential is a reflection of the proximity of the land to an urban centre - as opposed to its existing rural productivity/land use value. Your proposition then is that if all rural land were capable of subdivision for residential, rural land in close proximity to urban centres would sell for much, much less.

But as Hugh points out in this article re LSBs;

http://www.scoop.co.nz/stories/PO200711/S00183.htm

Not surprisingly – the further out the lifestyle blocks, the cheaper they become, to partially compensate for the additional and unnecessary travel costs involved.

Same would apply to rural (non rural-residential) fringe land.

I think LSB/rural-residential zoning is the defacto covenant for lifestyle block owners. They pruchase an LSB on the fringe of an urban community because they desire to own open space around them - in most cases for the privacy it affords, but also for the opportunity to raise a few animals as pets and/or for the freezer. If one argues that these landowners should not be "protected" by zoning - then one must also argue that subdivision owners should not be "protected" by covenants.

by Kate | 12th Jan 14, 11:40am 1389480049

Sure the research needs to be done - but the point is, if (as it seems you are arguing) lifestyle blocks are a part of that artificial scarcity value - do you agree that the current restrictive zoning policies for lifestyle block designated land are simple substitutes for restrictive covenants as apply to residential subdivisions?

My point is (and I think it was Dale who explained the background of these restrictive residential covenants very well) restrictive covenants are simply an extension of the concept of zoning. If you don't agree with zoning in principle, then you shouldn't agree with residential covenants either (in my mind). Both have a direct influence on pricing where residential housing is concerned and that influence is intended to keep prices (i.e., barriers to entry) higher than they need be.

I guess what I'm saying is your apparent support of restrictive residential covenants contradicts your position with respect to residential/rural residential/rural zoning restrictions. They are both the same sort of beast.

by Dale Smith | 12th Jan 14, 12:42pm 1389483776

To clarify my position on covenants. In most part, covenants are poorly written and used by developers, in that they are overly restrictive. Covenants and especially the RMA have also given home owners the perception that their rights extend way beyond their property boundary.

Many owners of Lifestyle blocks for example are not content that they can get an uninterrupted view to their boundary some hundreds of metres way, but they think they have the right to look across their neighbours property, the whole valley and not to have that interrupted as well. Your example about LSB owners is correct and they do get all those benefits you mention but it stops at their boundary.

If their LSB neighbour wants to enlarge their home, build another house or more, then they should be allowed to do so. As long as the main zoning/covenant right is protected which is sun angles, unimpeded access, water in and out, noise, then the rest of it is degrees of NIMBYISM.

Research has shown that the one amenity that effects land price the most is an uninterrupted view. Hence you you can get houses, apartments, high quality new homes next to 1940 run down bach’s , cheek by jowl, but if they are on the beach front looking out to sea, the owners are not so concerned about how close their neighbour is to the side, or what condition the property is in. The uninterrupted view over the sea will forgive most of that. The same applies in places like Queenstown.

Your opening paragraph … So what you are saying is the price differential is a reflection of the proximity of the land to an urban centre - as opposed to its existing rural productivity/land use value. Your proposition then is that if all rural land were capable of subdivision for residential, rural land in close proximity to urban centres would sell for much, much less
Yes, but for further clarity, if all rural land was deemed as of right as subdivisable, then its subdivisable value would be closer to the rural land price.

Of course this does not mean that all land would or could be subdivided. For example, environmentally sensitive land, or land that is not suitable for building on would be excluded.

Just because land is close to a city does not automatically mean it should be build on (if they had thought about that more, then certain subdivisions around Christchurch would not have been built on, and they were told).

And following this train of thought it also means just because land is outside the city by any distance, it should not be built on.

But the net result is a potential oversupply of subdivision land at anyone time. Supply cannot be artificially restricted, and hence prices forced up no matter the demand. That is not to say prices do not go up.

They do go up by value added methods of buying the land, doing the work to put in infrastructure, adding a fair margin for time, risk and reward.

Restrictive zoning policies are examples of non-value added work, society would not put up with artificial shortages in the food industry to artificially push up the price of staple foods, or the monopoly position a robber with a gun to your head can get you to transfer your wealth to them without adding any value in the transaction.

The amount of non-value wealth transfer that restrictive zoning allows is criminal. This transfer becomes a debt on all home owners in the form you are paying about twice as much for your property, twice the mortgage, giving you far less for your families health, education. lifestyle etc.

It does not matter what city in the world you go to, whether those cities have restrictive or non-restrictive land zoning policies, there is a direct correlation between the price paid for subdivision land on the fringe, and the price going back into the city.

What the facts show is that the cheaper the price of land on and around the fringe of the city, the cheaper relatively is all land going right back into the centre. So in cities with non-restrictive zoning polices, if you want to live in any type of accommodation, you can afford to do so closer into the city than in cities that have restrictive zoning.

by Kate | 12th Jan 14, 1:09pm 1389485393

You said;

Your example about LSB owners is correct and they do get all those benefits you mention but it stops at their boundary.

Yes, and of course the same 'stop at the boundary' - or the right to do what you want with your own land - should apply to all residential land as well. Hence, if you want to build an 80m2 Keith Hay home on that land, you should be able to do so, as long as the building complies with residential building regulations.

Because just as a restrictive residential covenant serves to retain the value of the land/building on the other side of a residential fence, so the lower density of a rural residential subdivision serves to retain the value of the land/building on the other side of a rural/residential fence. There is to my mind no difference. Both restrictive residential covenants AND rural residential (min section size) zoning are examples of NIMBYISM.

If you are prepared to accept that arguement, then your credibility improves in my mind. I do not support restrictive residential covenants, neither do I support rural residential zoning with restrictive (i.e., minimum) residential land sizes (although of course it is important that ex-urban dwellers accept that farm animals and farm activities on the other side of the fence are different than the norm for urban dwelling). Standard residential height to boundary ratios cover that planning issue/matter, The Fencing Act covers fencing matters - and so on and so forth. You could say I believe our urban and periurban neighbourhoods should grow 'organically' with a high diversity of dwelling and people types with the very minimum of planning and building restrictions. But, the building restrictions are equally as divisive as the planning restrictions .. this is the point I am trying to make. And the building/dwelling type restrictions are to my mind even more divisive in today's climate - as they tend to apply in most of the rural residential as well as residential subdivisions.

by Dale Smith | 12th Jan 14, 2:19pm 1389489555

Kate –in short we agree with each other, but to leave my answer at that would leave it too open for other readers to misinterpret what I am trying to say.

Zonings original purpose was to ring fence my boundary from things I did not want to happen within that. And if enough like-minded individuals got together, we had a community, subdivision, even village/town that reflected those similar biases. This zoning was the equivalent of covenants today.

And that in my mind is fine, because the influence of that zoning did not extend past my boundary, or our agreed collective boundaries. All those other groups that were excluded from my zoning were free to congregate in their own place of choice, and have their own zoning with like-minded individuals’, which of course many did, if sometimes informally.

Today’s zoning is very different. In effect local Govt. has captured all land, there is no ‘free-range’ land as such (it’s hard enough to get back free range eggs). All land is now under monopoly control by some sort of councils, and for the most part solely for the purpose of revenue gathering.

Developers in putting together subdivisions are meant to put together the covenants that reflect the individuals they think will buy their sections. Like I said, most are poor at doing this. Covenants also allow the owners that are covered by covenants to have some control over that environment.

It is interesting to action reaction to things. I think we all agree that individual responsibility is good, yet for those that are victims of those that are not responsible, we then hand over part of our rights to others on our behalf. So for example if your neighbour was playing the bagpipes at 2 in the morning, in the good old days you might have been able (both physically and legally) to stop him. But under today’s zoning (country laws) you have to call the noise control and in time past, they would have turned up, problem solved.

But not today, the home owner is left with no ability to stop the noise and no one they can turn to. So what is the counter reaction to this, move into a community with more covenants (like a gated community) and as a group you can afford our own manager/noise control officer. Later, even if the problem was never going to happen again, the community is still left with another unnecessary rule.

One of the worst examples of poor covenants is not allowing smaller houses on larger sections and for these houses to be organically added to over the years as the family’s needs change.

This forces many growing families to move unnecessarily as families grow, or they end up initially buying a bigger house of less quality, that they can grow into. A smaller house of better quality that can be added to as finance’s and family grow should be allowed.

by Kate | 12th Jan 14, 7:11pm 1389507064

One of the worst examples of poor covenants is not allowing smaller houses on larger sections and for these houses to be organically added to over the years as the family’s needs change.

Yes we are on the same page, for sure, Dale. I particularly agree with the above comment. But this practice not only affects young buyers who want to grow their home in line with family needs - it also restricts the elderly who wish to downsize and release capital but want to continue living in a community/neighbourhood with both young and old residents. Many of these people have few options as well - hence if they want to exit the family home and buy new, they end up having the choice of postage stamp (i.e., subdivided or cross-leased) sections in existing residential streets or purpose-built retirement communities to choose from.

And the problem as I see it is that the elderly persons existing family home on a full 800m2+ section (which hasn't been updated for some years) is often worth less than the new build on a half section in the same neighbourhood - hence making it difficult for them to move unless they get an inflated price (inflated in the sense that it requires renovation work) for their existing home.

by Dale Smith | 12th Jan 14, 7:51pm 1389509514

Kate, you will be pleased to hear that there are more than just us that think like this. Sadly at a local level and within the DBH there is little thought in this direction.

When I was talking with a senior DBH official and queried him about what information they had sourced from overseas about earthquake building solutions, his reply, ‘was why would we want to do that.’ Implying that whatever they were doing now was ‘it.’

Our isolation in the South Pacific sometimes also affects our ability to look at how others may have already found a solution, we want to re-invent the wheel, or learn the hard way.

The Canadian Govt. for example has what they promote as Flex- housing
http://www.cmhc-schl.gc.ca/en/corp/nero/retousar/2013/2013-04-26.cfm

NZ is behind the times on land development, building methods, and providing truly affordable housing. But of course many gain huge financial benefit by us being like this.

by Kate | 12th Jan 14, 9:24pm 1389515082

Well that is good news. Great link as well.

by Kate | 12th Jan 14, 1:42pm 1389487344

And as for this comment;

I could not agree more. How many first home buyers have had to buy an over-sized CAD 'designer' residence in a relatively new subdivision when all they wanted was a roof over the heads and to be in a financial position to start a family? But the majority of choice for them has been a 3 bed, 2 bath property on 400-500m2 in a subdivision which grew out of these restrictive covenants. In many places these subdivisions of the 1980s and 1990s are going out of fashion - and hence the reason why older inner city residential bungalows (and the renovation that comes with them) are highly sought after. If the subdivisions of the 80s and 90s had been quarter acre plots and build what you like developments, they too would have retained better value in my mind - and what would likely have happened is that the inner city land would have intensified - as people in the old neighbourhoods migrated to new subdivisions to get more space around them as the family grew older and wanted to make use of a good sized backyard.

Instead during the 80s and 90s, we made newly subdivided sections smaller than their inner city counterparts and we have relative urban intensification everywhere - hence the appeal of lifestyle blocks. The inner city urban dwellers sell their 800m2-1000m2 home and section to someone who is likely to cross-lease/subdivide and they move to the country (i.e., rural residential subdivision).

by David Chaston | 10th Jan 14, 8:19am 1389295194

Those numbers are not correct. You have mixed the number of residences with the value of all building work consented which includes a lot of non residential work plus alteration work. You can't divide that total value (which inludes hotels, schools, office building, factories, etc !) by just the number of houses.

Here are the November 'averages'. There were 1,775 houses consented for $598 million, which is an average of $336,900 each. That is up from about $300,000 each at the beginning of 2012.

There were 492 apartments consented (which includes some retirement village units) for $59 million, which is an average of $120,000 each. That average jumps around a lot depending on the retirement units involved (and the student accommodation units too). The range over the past two years has been between $90,000 and $200,000.

by BigDaddy | 9th Jan 14, 7:48pm 1389250095

Some consents may be for apartments which will be one consent for multiple dwellings and thereby lower the average.

I suspect we need to see the raw data they used for the article to calculate meaningful averages.

by BigDaddy | 9th Jan 14, 10:55pm 1389261301

Here is the raw data from dept of Statistics:

In November 2013, building consents were issued for:

2,267 new dwellings, including apartments
492 apartments, including 61 retirement village units

by Dale Smith | 9th Jan 14, 11:30pm 1389263414

Since there is some general confusion about covenants, here is a 101.

The history of why land was zoned is not so much to 'limit' what can be done with it, but to give the land an exclusive use.

This exclusive zoning use was first used to segregate people by colour (There are still subdivisions in the States with very old zoning that prohibit 'Blacks'), religion, and ethnicity, not so much as separating housing from say noisy factories.

While we think we are beyond that today, especially in NZ, when a Christchurch developer that was trying to develop a small more affordable subdivision at Rolleston for displaced red zone home owners from the east of Christchurch, even though the houses being built will be more modern than those in the neighbouring subdivision, some of those neighbours said that they are going to object to this new subdivision because of quote "We do not want those type of people here."

Something that is more exclusive is generally more valuable. This is different from the word 'limit' as in limited use ie less valuable. Thus the more exclusive (restrictive) a zoning, the more valuable it is. There was a hierarchy to this, Residential zoning was mainly for residential use, Commercial zoning was for commercial but also residential (eg retail shops on ground floor, residential above), Industrial was for industrial, commercial and residential and rural could be for anything. In effect rural land had fewer restrictions, and therefore less exclusivity, that is, because you could do more with it in a general sense and there is so much of it, it has less value.

While the interpretations on the exact use of these zonings have been changed over time between countries and councils, you can see the basic original form still used.

Historically zoning was not just imposed by councils but as they passed laws and took control, then they became the designators and administrators of zoning. However council zoning sets more a minimum exclusivity of value which in many cases did not allow the developer to obtain the maximum value for the property, especially as lower social economic groups could afford to move up into the areas once zoned by value for middle and upper social economic groups.

Hence developer covenants. Again these covenants are known as restrictive covenants in that they further restrict the use the land can be used for, with the intent of increasing, or at least protecting its value, and they sit within the framework of the zoning rules. So for example, the zoning may stipulate boundary fences can be no higher than 1.88 metres. The covenant is allowed to restrict this further by saying no higher than 1.5 metres, but is not allowed to say they may be higher than 1.88 metres. This is because the value of a fence is seen to be more negative the higher a fence is, rather than lower. Ironically, some developers have interpreted this to mean than lower fences are more valuable and no fences the most valuable of all. I suppose the logic for this is in a Utopian society, fences for protection would be unnecessary, thereby if I covenant no fences, then my subdivision by default is better. However, if you want privacy, want to keep small children and pets in, and stop neighbourhood dogs from entering your property, then you would have a different view on the benefit of no fences.

Another example is that under a residential zoning you can have certain type of commercial businesses. A Developer covenant can restrict this, even to the point of saying that no commercial use is permitted. In past history, commercial uses could be very disruptive to residential neighbourhoods, but with modern communication like Internet, it is quite common for people to work from home, yet many covenants still prohibit this, not that anyone would enforce it, but in allowing people to continue an illegal act, it makes criminals by law of good people and undermines all law.

Covenants can be very restrictive and it is my observation as someone who has had a lot of experience in administrating and formulating covenants, how little developers understand the rational, and how they should be used. Use the wrong type of covenants on a subdivision and you can negativity effect your marketing and sales, ie the covenants take value away from your subdivision. For example, land that already has developer covenants that had been put on the title by a previous contingent owner and were already bound to the development next door, cannot be altered. A further common example of this is a covenant that stipulates a minimum house size of 160m2 excluding garage. This m2 size is seen as a high minimum and would automatically exclude many first home purchasers or retires scaling down in size, no matter how high a quality the house was.

What all the above is leading up to is that zoning and covenants have given people the right and the expected right that they can stop anyone whom they perceive as diminishing a value they have.

The first diminishing of value is not so much a physical diminishing of a property’s value, but if everyone can have what I have, ie is common, then I may lose a psychological value. Therefore I want to deny you the same rights that I had, efficiently shutting the door behind me. My name is Jones, and I will stop you from keeping up with me.

It is understood, but not always agreed with, that views are not protected by zoning in general (but in some cases are), however developers can establish protective covenant view corridors, although this is not common. What council zoning does do regarding light is provide height to boundary ratios, building line setbacks etc, which guarantee minimum sunlight etc. This type of zoning is common sense and more importantly as the developer has sold this land at a higher value because of the zoning and covenant restriction, then the purchaser has an expectation that that value will be protected. If the purchaser sees no value in the zoning or the covenants ie does not agree with them, or sees that anyone can undermine them, then he is free to purchase elsewhere and the developer loses a sale.

So we all understand and agree to a point why a property owner may expect some consideration from his neighbour with regard to what he may build next door, and how he may have some control over what his neighbour is allowed to do (just as his neighbour does on him), but just how far does these restrictive influence extend?

After all if I can stop others from diminishing the value of my property, by adding properties of less, equal to, or more value (especially 'those type of people') then the more valuable my property will be.

The worst and most disruptive issue about re zoning that can happen to a community (in their minds at least) is where a residential zone is rezoned to allow less restrictions. Normally you would associate this as allowing more commercial, industrial etc., but it can also apply to allowing higher density residential zoning within a lower residential zoning. All residential zoning allows for some further increase eg adds a room, or a minor residential unit etc. but these extras were already within the original zoning and/or covenants when the owner purchased and thus have agreed to. However, changing to a higher density residential zoning that was not allowed for in the original covenants can also alter height to boundary, light angles etc. Hence your neighbour on your sunny side could now be a 3 or 4 storey apartment block. And as these apartments will generally be less in value than your property, there is a double negativity between lower neighbourhood house values and less amenity (possible loss of light and views) on your property.

The irony of the re zoning plans is that councils are trying to reverse a democratic process that owners within a subdivision agreed to; naturally the owners are resisting this. But of course the owners may have brought this upon themselves by extending their covenant opinions (NIMBYISM) beyond their subdivision borders.

by Kate | 10th Jan 14, 12:33am 1389267197

Well explained.

by PhilBest | 12th Jan 14, 9:49am 1389473390

The interesting thing, though, is that plenty of urban areas in the USA have "exclusionary" covenants in suburbs all over the place, and yet their house price median multiple is still around 3.

In the affordable cities, homes in mature suburbs are cheaper than new ones to the extent that the structure depreciates in value. Here, the land they are sitting on is so expensive that it is many times the value of the depreciated structure. Hence nothing affordable whether new OR old.

The Americans in the systemically affordable cities are practising "exclusion" in some parts of the city, we are practising straight-out eugenics.

by Von | 11th Jan 14, 11:50am 1389394201

"We do not want those type of people here." Remember that old song "Harper Valley PTA" Those types of people are everywhere even behind the facades of multi-million dollar homes.

by iconoclast | 11th Jan 14, 1:18pm 1389399481

Get a load of this - would you buy it?

This is what is happening in Auckland

An example of stupidity and greed, and a good demonstration of the "covenants" discussion above where a low cost development can drag down the value of surrounding properties and a high cost development improves the value of surrounding low cost houses

Remember 6 months ago an inscrutable paid $1 million each for 2 ex-state-houses in the Suburb of Sandringham, each with a land area of 1000 square metres

Look at this Brand New infill house at 609 Sandringham Rd Sandringham Auckland

It is on a large section that has now been subdivided by a spec builder-developer

The land area is 446 sqm, value of that land is approx $500,000

The house is 156 sqm with 4 bedrooms and 2 bathrooms approx cost $300,000

It is down a side-drive behind the back of an old 1940's state house painted blue

Have a look at street view on google maps

Google Maps street view 609 Sandringham Road

Have a look at all the photos

Notice the view in the dining room

Notice the views from the bedrooms

Notice the view out on the side deck-patio

Lounge suite extends past the full-height windows All the furnishings are rented for presentation

Have a really close look at the lounge-dining room

Lounge furniture with back to the windows and non-view, staring at a blank wall

www.bayleys.co.nz Listing 609 Sandringham Rd, Sandringham

Total cost $800,000

Be interesting to know what it goes for

Why they didn't knock over the old house and do a total enhance redevelopment defies explanation

If the front house is eventually knocked over and re-developed it can never fix the defects of the rear house

Would you buy it?

How much would you pay for it?

by Kate | 11th Jan 14, 9:40pm 1389429646

Seen it hundreds of times - that's what you get on a 400m2 section - most folks build a two story however - so you look at your fence on the groundfloor and your neighbours bedrooms from the second story. Would I buy it - nope (not at any price) but then I wouldn't live in Auckland either. One has to sacrifice too much lifestyle in favour of accommodation and traffic.

by Appreciating Assets | 10th Jan 14, 8:32am 1389295958

It is the rising prices that encourage developers to build. If prices started to drop then the building projects will be cancelled becasue there will be little room for profit. I think and hope prices keep rising and supply continues to grow for the next few years, ultimately slowing the rate of price increase.

by MikeM | 10th Jan 14, 1:28pm 1389313715

Not necessarily, all developers will require is a margin. If land can be acquired for less,for example, then the sell on price can be lower provided there's still a profit.

by PhilBest | 12th Jan 14, 9:36am 1389472570

In markets with rationed land supply (urban growth containment), developers firstly have to pay a lot more for land, and house prices inflate like they have in NZ cities. But volatility is increased too. The UK has been this way for decades.

Developers are at far higher risk than in more stable markets, because they have to carry about 10 times higher costs of site holdings while they are doing the development. And small fluctuations in "house prices" actually conceal the fact that the fluctuation is in the LAND value, and this fluctuation is a LOT higher than the "house price" fluctuation.

If "house prices" go down 5%, that means every developer who has paid money for a site, based on making a margin of about 5% at the end of the project, is suddenly faced with a "no profit" situation. Or, worse, you get developers desperately out-bidding each other for the available sites and the winner of the bidding war counting on property prices continuing to go up, so that they will make a profit on the finished development in 3 or 4 years time.

This works while the market is inflating, but even if it levels out for a bit the business model is cooked. This is what took down so many "bubble bunny" developers and their finance company backers 2006 onwards in NZ.

You also see a lot of condemnation of developers "withholding sections from the market" to "force the prices up" - this is grossly unfair, as the prices of land have BEEN forced up BEFORE the developer buys it, the original seller of the land has already run away with the massive capital gain that end up built into house prices, and the developer is actually having to wait for "break even" point to come about in the housing market. The poor b-----y developer is like an innocent victim of a frame-up where some other person has got away with serial murder including the developers wife and kids, AND the developer is strung up for it.

by Dale Smith | 12th Jan 14, 10:20am 1389475242

Well added Phil. The price of land is so expensive in NZ that it even affects the design of our houses, even on detached dwellings.

When you are paying $400,000 plus for a 520m2 suburban section, you will most always build a house that is larger than the permitted site coverage, meaning you will automatically build a two storey house, and even that extra storey will be built to the maximum of the permitted coverage.

You can see the effects of this in that the shape of the house and roof line is identical to the height to boundary angle and.

The result being a street frontage of two storey square boxes, all with equal distance to the side boundaries. Not the best look.

by Muppet King | 10th Jan 14, 10:10am 1389301835

Goodbye Builders. Hello Programmers. http://www.businessinsider.com.au/3d-printer-builds-house-in-24-hours-2…

by iconoclast | 11th Jan 14, 1:15pm 1389399304

Remember 6 months ago an inscrutable paid $1 million each for 2 ex-state-houses in the Suburb of Sandringham, each with a land area of 1000 square metres

Google Maps street view 609 Sandringham Road

Look at all the photos

Notice the view in the dining room

Notice the views from the bedrooms

Notice the view out on the side deck-patio

Have a really close look at the lounge-dining room

Lounge furniture with back to the windows and non-view, staring at a blank wall

Lounge suite extends past the full-height windows

All the furnishings are rented for presentation

www.bayleys.co.nz Listing 609 Sandringham Rd, Sandringham

Total cost $800,000

Be interesting to know what it goes for

Why they didn't knock over the old house and do a total enhance redevelopment defies explanation

If the front house is eventually knocked over and re-developed it can never fix the defects of the rear house.

Would you buy it?

How much would you pay for it?

by Alter Ego | 12th Jan 14, 9:01am 1389470490

http://www.radionz.co.nz/news/business/233048/council-invests-in-oil-companies

Dunedin also invested in a huge loss making venture, to offset any gains, from the ratepayers money, thereby doubling down anything invested above.

I believe the real factor is about gambling with other people's money to the tune of millions.

Is that a Council perogative.?

Lucky Dunedin ratepayers have such deep pockets.

Must be those crippling student loans chipping in, helped all round, along with the crappy rentals ruined by same students, you lucky people.

One question or two or more, that automatically springs to mind, will the Mayor get a knighthood as well as a pay rise, when and if the investments fail entirely?.

Who bears the losses, arising todate.?

Is no one accountable these days?.