There was a big jump in the number of dwelling consents issued in Auckland last month, suggesting the government and Auckland Council's attempts to increase the supply of new homes in the region may finally be starting to get some traction.
Consents were issued for 912 new homes in Auckland in April, up 20.7% compared to the 756 issued in March and up 30.9% compared to the 697 issued in April last year.
It was the third consecutive month that new dwelling consents have risen strongly in Auckland, suggesting attempts to free up land for housing and speed up the consenting process may be starting to produce tangible results.
Around half of the new consents issued in Auckland were for apartments and at the national level, the number of apartment consents issued last month was at a seven year high.
Nationally, 2112 new dwelling consents were issued in April, down form the 2271 issued in March but up slightly from the 2082 issued in April last year.
In Canterbury consents dropped to their lowest level in more than a year, with 427 new dwelling consents issued in April compared with 588 in March and 554 in April last year.
In Wellington only 120 new dwelling consents were issued in April, down from 204 in March and 149 in April last year.
The Waikato held on to recent gains with 220 consents issued in April compared with 219 in March and 261 in April last year. and in the Bay of Plenty, 118 consents were issued, down from 134 in March but up on the 89 issued in April last year.
However although the rise in dwelling consents issued in Auckland will be welcome news for people looking to buy a home, neither the council nor the government can afford to ease back on the housing accelerator.
With population from record migration levels putting ongoing pressure on housing and other infrastructure in the region, it is estimated that 13,000 new homes a year needed in Auckland just to keep pace with rising demand.
Even though the number of new consents issued in April was up strongly, it is still not enough to meet current demand and well short of the numbers required to meet the backlog of demand that has pushed up house prices in the region to what many believe are unsustainable levels.
"Going forward, Auckland requires a further increase in the number of dwellings constructed to keep up with population growth and existing under supply," ASB senior economist Jane Turner said in a Quickview newsletter about the latest consent figures.
"Given the rising cost of land in Auckland, this lift in housing construction is more likely to come through denser housing solutions such as townhouses and apartments," she said.
The total value of residential building work consented throughout New Zealand in the year to April $8 billion, up from $7.01 billion in the year to April 2014 and $5.43 billion in the year to April 2013.
There has also been strong growth in non-residential building consents issued, which rose to $5.28 billion in the 12 months to April compared with $4.5 billion the previous 12 months.
Consents for $1.18 billion of new office buildings were issued in the 12 months to April, followed by $797 million of educational buildings, $727 million of retail premises, $605 million of storage buildings such as warehouses, $565 million of factories and other industrial buildings, $453 million of hospitals and related services buildings and $403 million of social and cultural facilities.
See the charts below for details of consents issued in all regions of the country.
Building consents - residential
Select chart tabs
23 Comments
Councils don't issue property titles, the government does.
Once a s223 Certificate of Completion is issued on the subdivision the council then has to authorise the official plan of the subdivision. It's one of those oddities that has to go to a Council meeting. Once that is done it's up to the developer to send in the official plan to LINZ and ask themto issue the new titles.
Could be slackness anywhere along that chain.
If, as everyone seems to be saying, that demand is as much from non resident investors as it is migration trends and domestic investor speculation, then it's hard to see any reasonable increase in supply will dent it. Put it this way, no matter how small the percentage of people in the world who can afford, or want to buy, a property in New Zealand, it's still a big number as far as NZ is concerned!
What we amateur economists (and many pros as well) tend to forget is that residential housing can't be taken anywhere else and it makes no sense for anyone to buy residential property unless it is going to be occupied. These two facts place some limits on how much scope there is for "investment" (gambling) in the Auckland residential property market.
Bear in mind that if the number of dwellings came closer to servicing the real housing need there would be little prospect of anyone bidding up property out of desperation and all speculative activity would come to an end naturally.
True, of course you are assuming investors, let alone owner-occupiers or permanent resident visa seekers are rational, making decisions on fundamentals such as underlying demand. Once there is the belief that prices can only increase and there is cheap leverage and insatiable speculative demand from offshore, things can depart from fundamentals a long way and for a long time.
Buying behaviour in Auckland is both irrational and rational at the same time. Of course the current numbers make no sense in the context of buying a roof over one's head (renting is economically way more sensible) or investing in a property rental business (low return on capital deployed). So to quote Paul Krugman talking about the US housing bubble in 2005:
"{I]t makes sense to buy in San Diego only if you believe that prices will keep rising rapidly, generating big capital gains"
But it does make sense...sort of. And it only makes sense if the speculator believes that someone else will buy the property back off them for a higher price than they paid.
Personally I think you would need nerves of steel right now but there is one thing you can bank on: the perpetual excess of demand over supply of housing. It is the official position of the government of NZ that Auckland is short 20,000 houses and that that number has got higher in the last 2 1/2 years. In reality the number is way higher but these government figures will do.
As yet there is no sign of a credible increase in supply of housing that would close that gap. The Housing Accord has been sputtering along at about 62% of the pace required to not only meet new demand but also make a dent in that shortfall. This mediocre performance has been compounded by the tanking of the Australian economy encouraging Kiwis to stay at home and occupy dwellings that a couple of years ago would have been sold to visa-based immigrants.
The development of surplus Crown land in Auckland is unlikely to have any significant effect. The maximum number of dwellings they might squeeze into the land is about 10,000 which just won't be enough. In reality I think they will do well to get 6,000 unless they deliberately build some new slums.
So at the end of the Housing Accord it is likely that the housing deficit will be worse than when they started.
That should help the speculators sleep more easily at night.
BTW if the foreign speculators do keep bidding Auckland property up and up to the point where no actual Auckland residents are buying we are all in deep trouble. A house of cards that will fall over with one puff of breath. Until then it is a gamble but a well-informed one.
Auckland can be grateful that in housing they are now, like Solid Energy, only bleeding instead of gushing the old claret.
Put into perspective, April's result is 55 fewer than last November. That month's 967 collapsed by January to half (482) and is now climbing slowly back up where it was 6 months previously.
A little more sobering is the fact that the building of actual houses (Mum, Dad, the kids and a dog) is going nowhere. April's 387 houses consented is spot on the average for the last 12 months.
The variation is all in apartments, flats and retirement village units. In the last 12 months that number has fluctuated up and down from as low as 122 to as high as 534. The high, again, was last November and this result is only regaining lost ground.
912 dwellings consented is 16% short of the minimum required to stand still.
The number of consents does not necessarily mean that the same number will actually be built
Many consents simply lapse.
You would be lucky if half of them actually end up as dwellings, and of that number many will be small over priced apartments only suitable for midgets or beneficaries.
Since the 2004 amendments to the Building Act the time and expense involved in getting a building consent is significant. I assume that no-one would apply for a building consent without being 99% certain of going through with the project.
Sadly I have to agree with your second sentence.
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