The booming housing market is spilling into home renovation work with a 26% rise in the value of dwelling alteration consents issued in the year to May, compared with the previous year.
Latest figures from Statistics NZ show that building consents were issued for $1.34 billion of dwelling alteration work in the year to May, an all time high.
However building consents are only required for structural alterations to houses, such as removing load bearing walls or adding a room.
Simple home improvements such as repainting, replacing gutters or renovating a bathroom or toilet where no structural alterations are made, do not usually require a building consent and the cost of that work is not included in the consent figures.
Although much of the increase has been driven by the Canterbury market as repairs to earthquake damaged homes gathers pace, there has also been significant growth in structural alteration work in Auckland and the Waikato, while Wellington has gone against the trend, with a decline in the value of alteration consents issued in the capital.
Not surprisingly, the value of dwelling alteration consents issued in Canterbury has more than trebled over the last two years, from $92.9 million in the year to May 2012 to $285.1 million in the 12 months to May this year.
Over the same period the average value of alteration consents in Canterbury has almost doubled, from $35,803 to $68,410.
Although growth in the value of dwelling alterations has been less spectacular in Auckland, it remains the biggest market by far for such work.
In the year to May, dwelling alteration consents worth $549.4 million were issued in Auckland, up by 26% on the year to May 2012, and the average value of Auckland's alteration consents was $110,275.
The value of alteration consents has also risen strongly in the Waikato, increasing by 32% to $82.4 million in the year to May.
However in Wellington, the home improvement market appears to have been sluggish over the last year, with alteration consents worth $139.9 million issued in the 12 months to May this year, compared with $156 million in the previous 12 months and $136.4m in the 12 months to May 2012.
The average value of alteration consents issued in Wellington in the year to May was $52,811.
Real Estate Institute of NZ chief executive Helen O'Sullivan said the increase in alteration consents in Auckland may indicate that more people are choosing to stay in their existing homes and renovate them to add value and move up the property ladder, rather then sell up and move to another suburb.
"People think they can't afford to get off the property ladder because they won't be able to afford to get back on," she said.
"So they might spend $100,000 on their existing place and not have to move."
That could be a contributing factor to the relatively low number of sales in Auckland compared with the last market peak in 2003 to 2004, she said.
14 Comments
Greg,
Your articles are so biased they're ridiculous. You talk of rising rents and now, "the booming housing market is spilling into home renovations..."
What booming housing market?
I challenge you to come to the B&T auctions tomorrow morning at 10.30am. If the room is only half full (as i strongly suggest it will be) then how about you write an article which reflects what is actually happening in the property market NOW.
Kimy,
So you think that achieving more rent for one of your rental properies represents a booming housing market for Auckland?
My wife is a property manager and she managers over 100 properties and she said rents have barely risen over the last few years. In fact, some properties around $750, she has had to recently reduce the asking prices, because they can't get tenants.
If the market is booming Kimy then why are the auctions rooms now only half full?
So you think that achieving more rent for one of your rental properies represents a booming housing market for Auckland?
My wife is a property manager and she managers over 100 properties and she said rents have barely risen over the last few years. In fact, some properties around $750, she has had to recently reduce the asking prices, because they can't get tenantc.
If the market is booming Kimy then why are the auctions rooms now only half full?
Triple, the truth is good stock is selling for rediculous money, I too get fed stats from agents on a regular basis, many examples of auctions going for $100,000's above expected reserves. In regards to rent, maybe your wife is not up to the job and the landlords she works for should look for a more capable property manager? Just saying...
Brenda,
i hear this exact rubbish from agents all day long ..."oh good proerties get good money." Well the market is not just judged on good properties it's judged on the COMPLETE MARKET.
If everything is so great then you explain to me BRENDA why are the B&T auction rooms only half full now???
And my wife has been offered jobs from all the agencies in the Bays because she is very good at her job. She just gets sick of dealing with landlords who think they can get more rent than their property is worth.
.......and when she lists too high like they request, the property just sits there vacant until the landlord accepts the asking price must be reduced.
If you are more experienced than she is in rentals, then may i ask how many residential properties you currently own or manage?
Triple, I think you are just too negative to see the good returns available when investing in property. I have several rental properties across Auckland. Rents have been increasing steadily over the last few years. One expample is a 2 bed unit in Henderson, I purchased in 2009. Rent was $300 per week. Increases occured each year since then and now rent is $385. This is typical across my portfolio. oh and yes interest rates are good too. I signed up a very large amount of money for 5.99% for three years and the bank paid me $3,500 cash to do so. That was just 4 weeks ago. oh and yes capital growth has been strong now for three to four years around 10% compounding in Auckland. Yes I have noticed B&T auctions not so fill now but last year it was a frenzie, now I would call it steady. I think mid winter and election year have slowed things down a little but prices are still rising.
Appreciating Assets, I've owned and invested in property (both commercial and tenanted residential), for over 20 years. I realise the potential benfits of property ownership.
But this is the current reality in my opinion - returns (i.e. yield) and household incomes have become completely divorced from property prices. The numbers simply don't make sense - unless you have overseas investors throwing their money mindlessly at auctions continually pumping the sale prices up. I try to attend the auctions every week and i do not see the same investors frantically buying everything like last year. So that part of the equation appears to have changed.
I think prices are beginning to soften.
If prices softening results in say price growth droping from 10% to lets say 5%, it is still a good asset to own becasuse the mortgage I have that paid for the house does not increase, so I am still gaining all the way. If prices growth goes negative then its a good time for me buy a few more properties.
I agree to a certain extent - but you are accepting the key driver here is capital gain, not return. Most investors go interest only and seek a doubling every 10 years (that requires a 10% capital gain on average each year).
If you can hang on if prices fall or flat line for a number of years then you'll probably be ok. And i also agree that there may be some great buys coming - i'm just not sure whether this will be later this year or in a couple of years when higher rates really bite.
My point is - the market is no longer booming. And for those investors who think prices can't fall they should seek advice from those that held property during the 87' crash. Some prices fell between 25 to 50%. Admittedly they bounced back in 94' but by then many people had been financially wiped out which led to desperation and in some cases even suicide.
On a different note, I would also like to see our future generations get a fair go at owning a family home. In my opinion this requires a correction. I think the market is overcooked. The only winners at the moment are the banks.
Why are you even considering selling if you're so over the moon with your rental returns?
On one hand you're saying, "my rents are increasing" and on the other hand you're saying, "i'm going to sell now".
If you are so sure of continued capital gain then why are you selling??
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