The head of the country's largest real estate company believes Auckland house prices have risen to a frightening level and sees more apartments as the solution to the region's housing needs.
In a Double Shot interview with interest.co.nz, Harcourts chief executive Hayden Duncan described Auckland as the problem child of the housing market.
The average price of homes sold in Auckland by Harcourts last month was $721,553. (Our story on Harcourts' latest monthly sales figures is here).
"There's no doubt that's a frightening number," Duncan said.
"It's not being driven by cheap money, it's not being driven by reckless borrowing, it's not speculation," he said.
The main driver was the region's population growth, coming both from within New Zealand and overseas, which was putting pressure on an "under invested property market," he said.
He saw the solution as more intensive residential development rather than building more houses further out into the countryside.
We have to go up, we can't keep going out, he said.
Duncan said there was no question that Aucklanders would buy apartments, if the market could provide them.
Reviewing property sales around the rest of the country, he said there was an ongoing imbalance of demand and supply in Christchurch, although new stock was coming to market as earthquake damaged homes were repaired and new homes were being built.
"The rebuild of Christchurch has been slower than Cantabrians would have liked.
That doesn't seem to be changing, the pace is pretty consistent," he said.
While the Auckland and Christchurch markets faced challenges, the Wellington market was remarkably stable.
"If you are concerned about [housing] values in Christchurch or Auckland and you still want to live in a main centre in New Zealand , then Wellington is the place to go," Duncan said.
The average price of homes sold by Harcourts in the Wellington region in June was $350,078, less than half the average Auckland price.
The market in Wellington and many of the provincial centres had been hard hit by the introduction of restrictions on high loan to value ratio (LVR) residential mortgages last year, whereas they had not had much of an impact on the Auckland and Christchurch markets.
In Auckland in particular, investors had moved into the market and filled the gap left by buyers of lower priced homes who didn't have enough money for a 20% deposit.
"Wellington was one of the losers in that because they didn't have that supply and demand pressure, so first home buyers were hindered in their efforts to get onto the property ladder and there wasn't the demand form investors that we saw in the heated markets.
"It's probably just a well balanced market really," Duncan said.
In most provincial towns the housing market was still tough, he said.
Most provincial towns and cities were reliant on the rural sector and since the Global Financial Crisis, farmers had been more conservative with their money.
"I think our farmers, after the GFC, have really focused on debt repayments and even with strong milk prices, I don't think there's been a lot of that money flowing out into the communities, or not as much as we would have seen prior to 2008," Duncan said.
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Agree. New Super City plan has lots of multi-story zoning on the way, and it’s pretty much up in the middle and transport corridors, and out slightly at the edges.
The first impact on this will be crippling rate increases for those sitting on any grass in the new high density zones. Council will not wait for buildings, it will target the land value for all the additional income it can get. Be interesting to watch Councils stance on development contributions, especially as they will try to force external infrastructure development onto the developer. Higher prices all around.
And I fully agree that Councils with a mandate from the voters for a "compact city" should use targeted land taxes to break the land bankers and site-withholders.
Don't like it, don't give the Council a mandate, simple.
I constantly find reasons to admire the intuitions of Americans from the bible belt and the south of the USA, ironically they are the most sneered at people in western civilisation, by the PC “sophisticates”. They have worked out long ago that if you don’t want apartment blocks in your backyard and you want your kids to be able to afford their own house one day, you “let houses be built somewhere else”, which means “beyond the existing urban fringe”. Possibly out of sight of existing built-up areas by judicious use of nature reserves as buffers.
It is utter nonsense that the consequences are not worth the affordability (median multiples of around 3) and the preservation of existing neighbourhoods. Congestion delays are lower, average commute to work times are no higher, and productivity is higher than comparable decades-contained cities like the UK’s ones.
If every apartment is a shoebox here's some shoeboxes for you - a bit smaller than houses in the same location and half the price:
http://www.trademe.co.nz/property/residential-property-for-sale/auction…
http://www.trademe.co.nz/property/residential-property-for-sale/auction…
Around 130sqm plus decks - 120sqm of lawn in one case and next to parks in the other.
Affordable apartments go along with affordable fringe McMansions.
http://www.realtor.com/apartments/Houston_TX?pgsz=50
There is NO evidence, repeat, NO evidence, that any city in the world where they are constraining fringe growth, has affordable housing regardless of how much building "up" they have done.
Hong Kong is 2.5 times as “built up” as Manhattan and it is significantly more expensive.
Vancouver has been ramming through permissions for building “up”, over-riding NIMBY opposition, and it has done NOTHING for the affordability of floor space.
If you want to see the most affordable CBD office rents and apartments and condos in the world, look at Houston. In a city with no UGB (and no proxy for one) the land rent curve is kept low and flat, and building “up” does not increase site rent automatically like it does when the land is rationed and the land rent curve is elevated, by a UGB. Increased site rents at the city centre, in a free-market urban land market like Houston, is purely the result of agglomeration economies, productivity, and income increases, to which overall city growth contributes. These increased site rents are moderate and incremental over a long time frame and never reach anything like the absurd heights that are the norm in distorted, speculation-driven urban land markets.
Manhattan was similarly a remarkably affordable location back when the NY urban area’s surrounding suburban development was sprawling at even lower density than Houston. See Fulton, Pendall et al “Who Sprawls the Most”. Manhattan is still more affordable than most other “global cities” for this reason. If you look at RE sites to see the prices of property within 40 minutes train ride of Manhattan, you will get an inkling of how “option values” work in an urban economy.
Actually many people would - including me. The problem is Auckland has a history of building terrible, leaky, noisy buildings with short life spans due to a deregulated building industry. I've lived in apartments overseas and it's great. If it's well planned there's communal space and facilities and it's far more interesting living in a vibrant city than a dull ready-lawn suburb where everyone drives cars to their front door and fails to acknowledge each other.
Poor noise and thermal insulation are huge issues in NZ apartments. I have even stayed in one (for a short time) where you could smell the food the neighbor was cooking through the walls, sinks etc. Horrible.
I dont see it coming that proper building standards will be enforced in NZ. Solution is to leave 10 or 20m of air to your neighbours i.e the old free standing hut.
A policy of high density apartment living should come in combination with a modernization of building standards. If you keep building as is, you will further degrade people's quality of life.
Agreed. A look at the body corporate rules could be a good idea too. The perception is that they are often a rip off.
Building standards in general could still be improved. For instance double glazing improved the heat loss and condensation problems of the glass component of windows. But nothing was done about poorly insulated aluminum framing. At a minimum aluminum frames should be thermally broken.
Kiwis dont like apartments and prefer the privacy of a free standing house.
Going up is not cheap and will never solve the affordable housing problem .
In fact , going up is ridicluously expensive , parking bays are a premium , lifts are a nightmare to instal and maintain , and body corp fees are also problematic
In fact I live in an apartment now and it's great - right in the heart of the city. I walk pretty much everywhere or catch a bus if I need to. Admittedly Auckland is decades behind other international cities, but public transport is improving and hopefully so is the population - Auckland needs much more people to make it vibrant!
We are talking about trends, not established majority opinion. Most Kiwis by far still want a separate house. Most people in most countries around the whole world, want a separate house. As soon as incomes rise and if there is not distortions in urban land markets from planning or corruption or both, people get themselves separate houses. Saturation tends to be reached at somewhere around 70 to 80 percent of the population living suburban.
Bear in mind that the evidence of price gouging in urban land, is evidence that people have not yet got as much space as they would prefer. Even in Liverpool, which has shrunk in population by more than 1/3 in 3 decades, but is still about twice as dense as Auckland, house price median multiples are around 6, and the price of land per square foot is dozens of times higher than a non-growth-constrained US city with a median multiple of 3.
This is evidence; objective, scientific evidence that people have not got as much space as they would choose given a non-rigged housing market. Every city that is unaffordable, is de facto withholding the amount of space that people would naturally choose. It is Marie Antoinette morality to say that look, people are "choosing" smaller units of housing, you could do this with food too, look, those North Koreans "like small helpings".......
This paper is typical:
"Attitudes towards compact city living: Towards a greater understanding of residential behaviour"
Peter Howley, TEAGASC, Dublin, 2008
From the Conclusion:
"Compact city policies are designed to meet the primary sustainability aims of ending car dependence and hence pollution, and minimising the loss of open countryside and habitats to development. The onus on the planning systems of most advanced capitalist societies to develop a more sustainable urban development pattern has resulted in an ever increasing emphasis on policies to increase residential densities.
Residential preferences appear to be at variance with this policy agenda as an ever increasing share of individuals are residing in lover density locations outside the central area of cities. This is by no means an Irish phenomenon, as declining residential densities in the central area of cities coupled with population expansion on the urban fringe has been symptomatic of most or the worlds advanced capitalist societies for the greater part of the last century. Despite the general trend towards urban sprawl, in recent times many cities have been successful in attracting large numbers of residents back into the central area. While this is likely to be a good starting point in urban consolidation efforts, questions still remain relating to the livability implications of such developments. For instance, this paper demonstrates that the residential preferences of individuals living in new relatively high density residential environments in the central area of Dublin city are weighted towards (ultimately) buying in lover density areas. This raises a number of questions relating to developing more sustainable patterns of urban development if these residential preferences manifest themselves into actual behaviour. While policymakers stress the need for compaction, current residential preferences if unchecked will lead to further sprawling development patterns. In this context, policy makers need to consider not just the environmental impacts of the residential communities they are building but also the wider liveability implications of high density living. Respondents perceive the main benefit of urban living to be greater accessibility levels and better social life, whereas the limitations relate to cost of living, lack of space, transport related issues, noise and pollution......"
If we prefer the 'privacy' of a free-standing house, why is it that just about every section in AKL has been in-filled so that the houses have almost no garden and all the windows stare straight into the neighbours houses? At least in an appartment you usually get a nice view.
And if we don't like appartments, why has the population of the CBD risen from 16K to 40K in less than 10 years? For less than the cost of these appartments, there are pleanty of cheap free-standing houses in Weymouth.
Living in free-standing housing is ridiclously expensive, you have to own a car per householder to get around as the PT in the burbs is a nightmare, you have to park on the street as there's not enough off street parking for everyone, and all the maintenance the home needs is problematic and takes up too much free time and money.
@dtcarter, I maintain the KIWIS GENERALLY DONT LIKE APARTMENTS in response to your question ..... "why has the popn. of the CBD gone from 16k to 40k "
I am not sure about your numbers , but have you heard of immigration ?
Thats folk coming here from countries such as China and its seems they quite like apartments in the CBD . From my travels I have observed that they also like apartments in Hong Kong , Shanghai and Singapore, among other places .
I dont have any emperical evidence supporting this , but I have walked around the CBD both day and night , and a significant proportion of CBD dwellers seem to be of Asian oriign .
I dont think that the 16k or 40 k is correct , and the 10 years looks wrong to me because we have not built any high-rise during the recession, but I dont have the stats to dispute your statement
Apartment living in Hong Kong:
https://www.youtube.com/watch?v=MiqJ5ncbwIs
And for the poorest:
Len Brown's favourite city, huh? The guy is a moral cretin.
Bullcrap this is about population growth.
Auckland grew far faster percentage-wise in the 1950's, 60's and 70's than it is now.
Houses were affordable then because we freakin' got on and built them. Same reason that cities in the USA growing more than twice as fast as Auckland now, have house price median multiples of 3.
Obviously RE sector "experts" can't be trusted either due to their vested interests and their dishonesty, or due to their ignorance and incompetence.
PhilBest, you should go and read the history of New Zealand house prices in each of those decades you mention.
There were big increases in house prices during those years. For example the rise in prices in the early and mid 1950s - on the back of not much house building during the depression and war years, followed by the wool boom - was truely immense.
People were complaining then about rises in prices.
If you doubt me, go and read newspapers from those years.
More historical realities on trends and preferences.
When economies start to develop, most of their populations are rural. The initial wave of urbanisation is high density because of lack of mobility beyond walking for most people. Horse ownership is for the elites only. In modern times cars are limited to the elites initially.
Many of the elites live in mansions in the countryside, under these conditions.
The next stage of development, as incomes rise and people get increased mobility due to affordable technology, involves the upwardly mobile getting out of high density living and joining the elites in "the countryside" although as suburban development, not mansions. There is an interesting historical balance between the "rural" population of a country and its "suburban" population. As the suburban population increases, the rural one tends to be decreasing commensurately. Rural migrants tend to move into the high density, low-decile housing being vacated by the upwardly mobile in favour of the suburbs.
At some stage, central cores of cities tend to reinvent themselves as the dirtier and noisier occupations, sweatshops, warehouses, etc, also depart for lower-cost suburban land now serviced by infrastructure and with mobile workforces no longer requiring proximity at high density. The central cores new functions tend to revolve around "rentier" activities in the urban economy like finance; the strength of a nation's CBDs tends to indicate to what extent it is a rentier economy rather than a "producer" one. NZ is a severe rentier economy IMHO; a comparable US State is Kentucky, and it wouldn't have anything like Auckland+Wellington's tall-building floor space.
Gentrification results in the last low-income residents in city cores being forced out to planned "social housing" in suburbs. Decent job opportunities for the poor also tend to be more suburban; there is cleaning etc to be done in the cores, but few such workers don't have to travel in to the core from a suburban low-decile home.
Modern fetishisation of high density urban living is based on a kind of "Second Life" type assumption that everyone can exist in an economy based entirely on economic "rents", ie wealth transfers; and consumption.
It is also worth noting that ALL "vibrant" high density locations are based on high local incomes - there is NO low-income high density locations that people are not keen to get out of, even carefully-planned ones in the modern era. Pruitt-Igoe (Google it) would probably have worked had it been built as yuppie apartments 30 years later. Same for France's ghastly Le-Corbusier-designed public housing projects, and Sweden's "Million Programme" projects.
http://www.newgeography.com/content/003811-a-million-new-housing-units-the-limits-good-intentions
Wan't to know if a real estate agent is in a position to comment, ask them this question, 'Is now a good time to sell my house.' Remembering they are commission based.
The reality is that an agent only makes any money if the market is moving. They don't make anything if the market is standing still. They will take your money on an up market, even if you might have over committed yourself, and will take your money on your way down, even if you are selling at a lose. That's their job, to help you move property.
Expecting them to recommend solutions that are not designed to move property and increase their commission turnover is stupid.
We should take a leaf out of Chairman Mao's book : He had Dixia Cheng built , a city capable of housing 300 000 people .... underneath Beijing !!!!
.... yup , that's right folks , Harcourts gotcha going totally in the wrong direction , we should be building down in Auckland City , not up ...
No screeching from the nimbys , you can't ruin their view when you're actually living under them .... and you can go down as deep as your little heart desires ... just dig another room when it suits you ... or a whole new level ....
.... " subterraneum is the life for me ,
Auckland Citie's where I wanna be ...
.... take your shovel and come join me in the mine .... "
Re AFFORDABILITY ....Anyone over 40 years of age will tell you that owning your own home has ALWAYS been very difficult for the average wage /salary earner .
- Its always been "expensive "
- It has always involved sacrfices
- We always had to save the deposit in the past
- It usually begins at the worst time in your life , like when the first kid arrives and there is only one income
- It takes discipline to manage a mortgage
- It requires you prepare a budget and stick to it , you budget your income and control your spending habits
- Gone are the new cars , that boat, the holidays on the GC , etc .
The good news is that once you have bitten the bullet , it usually settles down after two or three years , and things stabilise
Is that rant meant to justify why we are not implementing policies that would improve matters? Life in the past was tough for all sorts of groups. The elderly are lucky because they don't have previous generations of elderly saying how tough they had 20, 50, 80 years ago.
Major global trend, fueled largely by cloud based networking of companies data, is working from home. How this effects things in the next 10 plus years I don't know. Any one care to guess? I would guess more affordable cities will see pop growth as people get a chance to work from home and not have to relocate to auckland for work.
Cloud computing means i have outsourced my server room. I don't see how it changes where people can work. Someone can connect via the VPN and access a server in my server room just as easily as a server in googles data-centre. People were predicting massive changes in the 70s and 80s with telecommuting. It didn't happen then and i don't see it happening much now.
Besides, if i am working from home that makes me want to live in a city even more than before. Agglomeration benefits my social life just as much as work oppurtunities.
Auckland is geographically constrained by water. That kills lot of building space, but gives us a great harbour. The new plan is a long term view and imho a good compromise. Wether you like appartment living or not is irrelivant. Id like lots of things but reality applies.
If you want grass and a standalone house in the central city it’s going to be big $. If you purchased it a while back then well done, but expect higher rates and development around you, unless you’re in some sort of heritage zone. That is the same in any major city of the world. I agree that better rules around better quality appartments would go a long way to wider acceptance, but that will impact cost.
To those who have their central city grass, and just want it to stay the same (nimby), change is coming... just like winter.
The issues are not unique to NZ/Auckland and are not new. Here is a very recent report from Canada that looks at what has happen in four major Canadian cities and what is happening now plus some reccommendations. I think that although the report is academic it has a lot of relevance for Auckland. The report can be downloaded from:
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