There was a big drop in the number of new dwelling consents issued on October, adding further urgency to the government's plans to boost housing construction.
According to Statistics NZ, consents were issued for 2549 new dwellings throughout the country in October, down 8% compared to the 2770 that were issued in September and down 1% compared to October last year.
The decline was mainly caused by a sharp drop off in the number of new apartments with just 78 of them consented in October compared to around 300 to 400 that were consented every month over the previous four months.
In Auckland where the housing pressures are greatest because of strong, migration-fuelled population growth, consents were up overall, with 944 new dwellings consented in October compared with 868 in September and 792 in October last year.
It is estimated that Auckland needs about new 1200 homes a month added to the city's housing stock just to keep pace with its burgeoning population growth, which means the city's housing shortage is continuing to worsen every month by a substantial margin.
Of the 2549 new homes consented throughout the country in October, 1806 were standalone houses, 78 were apartments, 220 were retirement village units and 445 were townhouses or units.
Outside of Auckland there was a big drop in the number of new dwelling consents issued in Wellimgton, with just 162 issued in October compared with 282 in September and 303 in October last year.
Compared to September the trend was largely flat in the Waikato, and Otago, and down in Bay of Plenty and Christchurch (see the chart below for the trends in all regions).
On the non-residential building front, educatuional buildings such as schools and universities were the star of this month's figures, with $190 million of new educational building work consented in October compared to $80 million in September and $87 million in October las year.
But activity was more mixed for commercial buildings, with substantial declines in the value of retail and office buildings consented but increases for storage buildings, and factories.
Overall, the total value of non-residential building work consented in October was $584 million, compared to $546 million in September and $526 million in October last year.
Building consents - residential
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151 Comments
Rasta’s Rasta’s
This is great news Building is slumping It can only increase property values spruikers claim
Everyone knows Auckland property doubles every 7 yrs
It just doesn’t go up linear like
You never know which years will be boom years
It’s a beautiful thing spruikers tell us
The trick is buy and hold and don’t take profits
Hang in there maintaining the properties and topping up mortgage payments to reduce debt
It’s a calling
Yes very much agree with you Rastus. With foreign buyers locked off from China and a ban on foreign investors here, there's nothing to drive the market at the top end.
Even if mortgage interest rates here were to drop to global levels such as 1 or 2%. That still wouldn't help the ALL million plus valued properties for sale. They're just going to adjust to local affordable levels.
Comparing one property price bubble with another property price bubble does not make property prices affordable.
If you're driving down a motorway straight at 100km / hour and I'm driving next to you and using you as my benchmark, it doesn't prevent me from crashing into a bend in the road, or hitting another car in front of me travelling at a much slower speed ...
At any rate, they are not strictly comparable due to the different laws and regulations of each market, lending conditions, interest rates, inflation, central bank policy targets etc ... Also China is a centrally controlled economy, whilst NZ is a free market economy.
But that's not the whole problem.
Over the last handful of "cycles" we have:
- gone to 30 year mortgages instead of 20/25
- base purchasing ability of a home on household income instead of 1 persons income
- massively reduced interest rates
Where to next?
- 40 year mortgages?
- 50 year mortgages?
- you can only marry one person by law, so household income is really hamstrung to 2 people
Could this cycle, the next cycle or even the one after that be different? Eventually it must outstrip what 2 average people can physically earn and pay in a lifetime. Unless someone comes up with a great idea it seems the variables can only be changed so much before it is mathematically impossible for the average or even above average person to purchase.
Up until now, there has always been breathing room. Get the second adult in the house to earn an income, increase the mortgage term, decrease interest rates. However, all three of these variables have a definite limit.
Does anyone have any bright ideas on how the average household will afford a home when it is 20x, 40x, 80x the household income to buy? With the current way of doing things it seems inevitable we will reach an impasse at some point.
Robert Redford, the following is one scenario just for you (of course I hope it doesn't happen):
GFC 2018, builders and developers go under as major banks pull back on lending, house prices drop 50%.
By 2028 house prices have doubled again and we're back to 2018 prices because of extraordinary measures to stimulate spending. Bundles of freshly minted $10K dollar bills are handed out for free!
Seriously though, I think deleveraging our way out of the next global driven mess is going to take a very long time. NZ'rs cannot simply walk away from debt. It's going to require out of the box thinking, some hard to swallow policy and new tools and maybe a heap of debt forgiveness to shove things along.
After the 87 crash, Aust banks saved ours from ruin. In 2008 it was QE and China that saved us from ruin.
What's the quick fix solution next time?
UK finance cash of late 80s, builders and developers went under.
8 years later, prices still 40% below peak
http://monevator.monevator.netdna-cdn.com/wp-content/uploads/2011/12/re…
2008 GFC - Irish builders and developers went under
8 years later prices 50% below peak
http://trueeconomics.blogspot.com.au/2015/07/27715-irish-property-price…
Is Australia headed for an 1890s style property crash?
https://www.intheblack.com/articles/2017/05/16/australia-1890s-property…
I agree with the last paragraph as the best scenario outcome for sure:
"The best way to solve it would probably be to have an extended period where house prices were flat and incomes grew rapidly. It would be a good thing if we had a gradual deflation of house prices.”
So pay rises all round for everyone? Um-no, at least not in Australia : http://www.smh.com.au/business/the-economy/rba-governor-philip-lowe-wag…
Speculator cm unwilling Landlords, maintain the houses your bank owns, look after the people that live in them. Capital gains is so "yesterday"
Where australia goes we will surely follow.
I think the scale of what we are currently seeing in Australia is pretty scary. It has the feel of a “once in a 100 years” event. As we have common banks I think we should be deeply concerned about how things play out over there. I think that the forces that which during my lifetime have meant ever deepening ties with Australia will soon go into reverse. Mutual rights of “citizenship” or even residency will fall apart due to our failure to have a common immigration policy. The consolidation of our banking sectors will fall apart if and when (i would say, when) we suffer the fallout from an Australian banking crisis. I really value our ties with Australia. It’s a cultural thing, but also a self interested thing as it let us ride the coat tails of something which is far more on a global scale than we are. But they have real taken a wrong turn over the last 15 years or so, and we need to be prepared to deal with the consequences.
With the Spain and Ireland graphs it's pretty obvious how the deleveraging continues on for many years after the height of the crisis is past. No doubt the banks are behind that by continuing to lend cautiously. As soon as there is any strength in the property market, I imagine people sell into that strength to unshackle themselves. It would appear this behavior will limit full price recovery for decades.
I think is pretty clear where we're heading.....
Retired-Poppy, just a reminder - Ireland and Spain have their monetary policy controlled under the ECB due to the single currency. The ECB actions are strongly influenced by economic activity in the larger nations in the single currency countries - Germany, Italy and France.
US and Japan have floating currencies, as does NZ and Australia and central banks which can focus solely on the issues in their respective economies.
The point is valid, regarding the timing of deleveraging post bubble. The magnitude of a deleveraging would likely be less in a floating currency country when compared to the smaller countries in a large single currency union (such as Ireland in the Euro single currency union).
Bobster, property price bubbles occur very infrequently and the time between property price bubbles can be lengthy - the last time I heard that property prices fell 30% in Auckland was early 1990's - so that is say 25 years ago.
Why is there a long time between property price bubbles? Well those that got burned in the last property price bubble are slow to regain their capital and confidence to invest in property again. It then takes a whole new generation of individuals who have never experienced the pain of a property bubble bursting to have sufficient confidence to invest in property. The stability or upward move in property prices increases their confidence that property prices do not fall significantly, and they become more aggressive taking on additional levels of debt. The longer the period of property price stability, the higher the debt used, and more individuals who were initially sceptical then become property buyers (due to envy - if he can get rich, then so can I). Those that experienced pain or have studied financial history can give warnings but these get ignored, and in the face of upward property prices, these warnings are dismissed as being wrong.
Also this includes the banks. After the property price bubble correction, they usually need to recapitalise and are cautious on their lending after having incurred loan losses. (I remember BNZ requiring recapitalisation in the 1990's, and Westpac had many property related issues at the time). The new generation of bank CEO's, given their profit based incentives, may also become aggressive in their lending in the next cycle. Financial innovation may also add to looser underwriting criteria.
Another contributory factor here has been the record low levels of interest rates which has made it possible to service higher levels of debt. From 1990, the banks have extended loan maturities from 20 years to 30 years, and issued a large proportion of interest only loans which has further increased the levels of serviceable debt by households.
If property prices were more volatile then property investors may not be as so confident to use high levels of debt, as well have an awareness that prices can move downwards significantly.
Many highly leveraged property investors can choose to ignore the lessons of history. I have learnt that when asset prices are highly vulnerable, it is better to learn vicariously than through personal experience.
Anyway to look into to debt default or at this stage overdue repayment trends? Consumer debt is up, some speculation this is being used to fund mortages or get around lvrs. Along with debt/GDP ratio what other indicators would be a sign of stress in the market? Anyone been to some of the big new subdivisions on the outskirts of late, what's the vibe?
Hi TainuiBabe,
Agree that Auckland and Palmy are completely different cities. But both have their charms and attractions.
My basic argument is that if one doesn't have the income to support an Auckland (or Wellington) lifestyle, Palmy is a city with a great deal to offer - including great public/private sector employment opportunities. Housing bargains abound (but that can't last forever).
And by the way, it shouldn't matter to anyone here where I happen to reside. There are far better topics for discussion.
TTP
TTP means the circumstances were different. Ireland had 15% unemployment and mass bank failures. Because kiwimm is making an extraordinary claim, that NZ will see a massive correction on the scale of Ireland, she must bring extraordinary evidence. So it is for kiwimm to demonstrate that NZ will likely see massive bank failures and unemployment of ~15%. That is TTP's point, although you'd need to read between the lines and actually bother to have a think about it to get that.
I think the point that kiwimm and others were making is that there are a number of instances where spectacular credit and real estate bubbles have been followed by equally spectacular busts. It would be fair to say that the particular circumstances of those busts were not specifically and widely predicted, but I bet in each of those bubbles there were no doubt people who identified a bubble and asserted the generally unsustainable nature of that bubble. That’s the point they make, and that’s the only point they make, but as you say you need to actually bother to have a think about it to get it.
TTPs rebuttal was that NZ is not in any of those places, therefore......you know, having thought about it as you suggested, I really still can’t work out what he is saying. But it’s good that you can help us to interpret him.
My actual examples are a counterpoint to Robert Redford's assertion that NZ prices will keep on doubling every 8 years. Never in history has a rapid increase in debt which pushes prices out of line with debt-to-income and rent-to-price not ended in a significant price fall. I gave two examples but many others can be found.
If you think NZ prices will just keep doubling then you will be in for a big shock.
The house in pic is not even a NZ Build
Take a look at the wavy pattern cladding & the straight gauge timber without blemishes & the guys wearing gloves and a multi purpose carryall not a NZ builders apron Then there’s the timber and the window frame
It’s from the Northern hemisphere where they can build an entire reinforced concrete apartment building in 6 months
I know for a fact that in Glen Eden prices have grown at 6.5 to 7% pa compound since 1990, that is over 28 years.
That equates to +65-70% over an average 8 year period.
One will find that recent re-zoning of land has given a once-off additional boost to a lot of property in Auckland, which will skew the results upwards over the last handful of years.
There is not many people left who are willing and able to pay for a house at today's price, let alone in 8 years time. Wages won't rise much over the next few years and more jobs are likely to be lost, while the over 50's will be put out to pasture because of ageism and they will be forced to sell at a loss. This time it's different for all of those reasons.
JRSNZ
These are Boom times
NZ is inundated with young migrants
Competition for high paying jobs at petrol stations & takeaways has never been higher
Quality of new builds has been kept under strict controls with Nationals open visas for Chinese family members to come over and help out with the builds Most Chinese have a feel for building like my old doctors wife who was a nurse but turned her hand to block laying
You think I’m joking ? No way ! she was a bit rough but hey she gave it a go and the walls weren’t legal anyway. You have to respect the Chinese for getting the job done
There was a time before BRANZ when NZ actually could build a home that didn’t leak
Rents in Auckland have increased about 2% above wage increases for the last few years. That’s a material but not significant increase. Looking at rents would indicate the rental accomodation market is reasonably well balanced with a weighing towards a shortfall. But that shortfall has produced only limited upward pressure on rents. Rental increases in Auckland do not indicate a “crisis” and rental affordability has been largely static over the last few years. People suggest this is because incomes are “tapped out”, but apparently this is a phenomenon that only affects renters and meanwhile house buyers have been able to pay ever increasing mortgage costs for ever larger mortgages. Very strange and selective logic, otherwise known as BS.
Yes there is a housing shortage, but this is principally a shortage of houses to invest in, not to live in. Strip out easy credit and speculative purchasing and demand for housing as an accomodation asset does not support prices at these crazy levels.
Hi Bobster,
Disagree with you!
Rents increasing 2% above wage increases for the last few years IS SIGNIFICANT - especially if you're on a low wage and have to pay rent!
Further, I note the recent media publicity that rents are set to surge over the next few months......
You may be a landlord who has done well from capital gain and increasing rents - but many people aren't in such a privileged situation.
TTP
Rents in Auckland have increased about 2% above wage increases for the last few years. That’s a material but not significant increase. Looking at rents would indicate the rental accomodation market is reasonably well balanced with a weighing towards a shortfall. But that shortfall has produced only limited upward pressure on rents. Rental increases in Auckland do not indicate a “crisis” and rental affordability has been largely static over the last few years. People suggest this is because incomes are “tapped out”, but apparently this is a phenomenon that only affects renters and meanwhile house buyers have been able to pay ever increasing mortgage costs for ever larger mortgages. Very strange and selective logic, otherwise known as BS.
Yes there is a housing shortage, but this is principally a shortage of houses to invest in, not to live in. Strip out easy credit and speculative purchasing and demand for housing as an accomodation asset does not support prices at these crazy levels.
The constraints are in household income. NZ households are not govts. They're constrained by what they can earn and spend. Furthermore, there is greater obligation on and ramifications for individuals and h'holds to honor their debts in society. This is quite different to a govt or a corporation. These constraints are relatively oppressive for h'holds and individuals.
Furthermore, if you consider a h'holds ability to spend into the consumer economy; the more that rents, mortgage repayments, and debt servicing comprise of a h'hold budget, the less is spent elsewhere in the economy. If people only spent on housing costs, bread, and water, the economy would be toast before you know it.
Yes you're right in that property as a "business" is a construct that appears to have been manipulated by institutional (national, local govt, central banks) in tandem with private sector beneficiaries (primarily commercial banks). The sheeple have been led to believe that the construct is "the way it is" and that it is somehow "how the world works".
But in reality, the ability to charge higher rents has massive barriers that the construct has not really thought about until this point.
Rents increasing 2% above wage increases for the last few years IS SIGNIFICANT - especially if you're on a low wage and have to pay rent!
Further, I note the recent media publicity that rents are set to surge over the next few months......
You miss the whole point. Low and middle income h'holds are the drivers of consumer spending. If 2% of their "capacilty to pay" is lost to housing costs, the equivalent amount is not spent on goods and services. This affects the economy, particularly retail, which is essentially the lifeblood of the economy.
That's a limited view. The money doesn't vanish after its taken as rent. Some rent income is spent, some is saved and spent later, some repays debt and some is used to fund more debt. Your 1 step logic above is too limited to make any useful comments on the topic.
When you sum the factors through most of that 2% is recycled back in to the economy, but not all, and so you get a slight shift in wealth distribution towards inequality and a slight reduction in economic activity.
That's a limited view. The money doesn't vanish after its taken as rent. Some rent income is spent, some is saved and spent later, some repays debt and some is used to fund more debt. .
That is correct, but it misses the whole point. Consumer spending drives the economy and comprises approx 60% of GDP. The further down the socio-economic ladder, more income as a proportion of income is allocated towards consumer spending, likely to be close to 100% of h'hold budget. That is the engine of the economy, whether you like it or not. The 8% of households that own rental properties don't support the economy based on their spending nor is it proportionate to their "wealth".
Two cases in point: the U.S. and Japan. Both economies have been ravaged through needless bubbles. The emergence of low-cost FMCG manufacturing has been good for the consumer, but this is "needs driven" not "nice to have." Essentially this impacts business as they've been forced been to compete at lower prices. Many manufacturer simply can't compete. If the cost of housing increases, this simply exacerbates the situation.
You cannot have a rentier economy and remove the people who the consumer economy relies on for the mass of its revenue. Unless of course, you think that the low-income classes are benign on consumer spending.
LOL, Haven't you heard? ... they are working on it, have to set up a committee first then stocktake and count what is needed, then select areas, purchase or prepare land, plan and design then apply for consents - might see something happening end of 2019 if lucky! .... So be patient - Good things take time !!
!00% correct, Banks cut developers off at the knees, Finance companies going under daily and in no position to finance anything.
Council contributions then increased, Timber, Tin Concrete glass and labour increased, Regulations are now thicker than ever, Double glazing and scaffolding on every house cost. Building inspectors who have never driven in a nail in their lives showing up with Ipads to tell builders what they are doing wrong..
RMA adding 2 years to most developments with Nimby's and competitors objecting at every turn.
No investment by councils on increasing infrastructure instead getting involved in BS art installations and Council Initiated projects...
I built subdivisions for over a decade 20 to 30 sections at a time, if you think land is expensive now just wait 2 more years when the rest of the development community retire,,then see what us greedy land sharks were good for,,,supplying land for you, your children and grandchildren...
I know of over 20 building businesses where the primary Director is retiring and no succession plan for employees to take over,,,why because the first words out of your lenders mouth is do you own a house, how much equity do you have "oh no" not $2 million so how are you going to cover 5 houses? the young guys cant even get a $250k account at major building suppliers... get ready for the biggest crisis New Zealand has ever endured,, The Rental Crisis, with so many Landlords getting out and selling to First home buyers etc there will be a rental shortage like never before... from knowing 10 other developers none of them know of anyone building new rental stock....
One of the biggest chunks the GOV pay each week is the Accommodation allowance and the Income Rent Related subsidy ,,,get ready for tenement blocks coming to a city near you,,,oh thats when the Chinese Construction experts can get enough cement,, oh that's right we don't have enough cement at present.
For heavens sake stop asking economists and Professors whats needed, because its going to need one major resource MONEY and Billions of it, if you think it wont effect you ,,,you are in a dream world,,the next biggest investment from Govt (your money) will be the creation of more social housing,,,its pretty simple,,in 1954 there were 65,000 State Homes NZ population 2.2 million today 57,000 state houses population 4.7 million. HNZ has sucked the money and life from a brilliant asset , unpainted and rotting, the state of decay will ravage the current Housing Stock, wooden weatherboards are starting to go on 10's thousands and windows are falling out, roofs need replacing and kitchens and bathrooms rotten out...
The Housing "Can" has been truly kicked to death up and down the road, National Started with Phil Heatley, couldnt build a house out of lego, Maurice Williamson busy working on a neighbours house, but not the Nations and then a hospital pass to Nick Smith...The Social Housing Unit they set up built 100 homes for $104 million and was then disbanded...
The whole supply side of Housing for Govt needs a very bright light shined on it, especially before the really big investment begins.
Someone needs to be Publicly put in charge and have some serious resources, the ratings agencies have put NZ on watch, remember to remain in the OECD Health, Education, sustenance and HOUSING the populous, what happens when a country cant uphold those conditions,,,down graded with Greece, Portugal and Spain, unstable and expensive mortgages for all.. and with hollow promises made to S&P Moody's(10,000 social houses a year) etc a downgrade isn't far away
totally agree MCNZ - in all the altruistic blue sky bash the developer and landlord thinking - a very important point has been missed - that the building of flats, apartments and larger developments is doen not by FHB"s or MSD - but by Developers who rely on investors to underwrite these developments, buy of the shelf and provide the deposit and operating finance to allow the banks to lend.
No surprise that the consent figures show virtually no new apartments being built- i am currently finalising consent for 8 3 bed flats in a SHZ - which would be for social housing - and the business was considering a further 14 next year on land with a current 3 bed property - but we have shelved those ideas - partly due to the increased costs in consenting and building but largely due to the certainty that whatever changes/ taxes / legislation is passed - it will most certainly be negative for Investors and landlords - and until lthere is complete clarity why take such a business risk.
Even a simple - no changes to legislation for any new build developments and for the first three years of a new builds life - would remove this uncertainty and allow developers and investors to engage in new builds with a degree of confidence
Good post, MCNZ. And where will the New Zealand government find a fairy godmother to lend the billions required to fix its existing housing stock, let alone finance the government or anyone else in the building of new pricey homes?
China? What an opportunity to bring its Belt & Road strategy here. But he who pays the piper calls the tune. And then we'll see Belt & Road turn pretty quickly into a clear if unspoken message to our government - 'Belt up and hit the Road'.
MCNZ, KpNuts and Kane02 are the ones on this 'ere thread worth listening to. Because? They clearly have skin in the game. Most of the rest, even if well intentioned, produce just so much blather and froth. And that includes me....
Interest editiors, it would be worth contacting these common taters and polishing up their comments into an Article, if only for the fact that they are all clearly informed by that stern taskmistress, Ms Market. And that's a rare quality amongst the commentariat here.
the next biggest investment from Govt (your money) will be the creation of more social housing,,,its pretty simple,,in 1954 there were 65,000 State Homes NZ population 2.2 million today 57,000 state houses population 4.7 million. HNZ has sucked the money and life from a brilliant asset..
Couldn't agree more. All resources and effort planned for Kiwibuild should immediately be transferred to the state house building program. The private market for FHB purchasers is resolving itself month by month. The government should target to bring down the Accommodation Supplement costs via a transfer of those private sector tenancies to state housing. The real crisis to my mind is in those families who are unable to self-purchase - housing first and then address all the other problems associated with long term dependency on the state.
Of all the coalitions that could do this - it's this one. They just need to come up with a stock standard design - something prefab and simple like this;
http://classic.realestate.co.nz/3200960
And build tens of thousands.
Granted, AKL will be unaffordable for decades to come unless we see a whole bunch of mortgagee sales (i.e. a US-like crash) - owners of existing over-priced (i.e., over-priced in terms of a price to income ratio) assets will simply hold them... for decades. Hence the need to re-house those current tenancies requiring the A/S into state houses, most particularly in Auckland.
In the longer term, NZ will be much better off building new assets that all NZ owns, as opposed to subsidising mortgages on privately owned assets. Every billion spent on A/S is government money down the drain with nothing to show for it.
Surely, though, Kiwibuild and UDA-delivered affordable housing schemes can realize first homes to FHBs at prices which, while not truly affordable, are significantly 'more affordable' than current market offerings?
ie. two bedroom apartments selling at 500K rather than 650K plus
They may well be able to - but in reading, for example, the NZ Initiative's recent report;
https://nzinitiative.org.nz/reports-and-media/reports/welfare-work-and-…
This being just one example of data comparing statistical changes between 1970s and now;
In 1970, only 2.0% of the working-age population were on a sickness, invalid’s, miner’s or widow’s benefit. In 2012 the corresponding figure was 9.8%. In June 2017, the proportion on a main benefit was 9.8% (276,331 working-age adults).A much greater number (approximately 500,000) received income support from the Ministry of Social Development (MSD) in the year ended June 2017, or nearly 20% of the working-age population.
It seems to me that we need to address the housing crisis from a bottom up approach - targeting effort towards those most in need first.
Couldn't agree more re your last sentence, Fritz - Queenstown is showing Auckland the way in that regard;
http://www.radionz.co.nz/news/regional/305404/queenstown-'in-crisis'-as…
With house prices as high as they are compared to incomes, it is these working/middle classes that need state housing as well. $500,000 is not affordable - it's an inflated noose around a young families neck. In the 1970s many state house tenants were working families - that is very much the trend we are looking at now as well.
Presently these working class families are subsidised into equally unaffordable rental housing by the Accommodation Supplement.
Both their rent money and the taxpayers A/S billions are effectively 'money down the drain' (that is, neither the tenant - nor the taxpayer - has an asset at the conclusion of the tenancy).
I support state housing in some respects but id note that a $500,000 loan is not a noose around many middle class necks in Auckland. A Nurse and a Teacher each on 65K take home 102K and the loan would cost 36K p.a. to repay over 25 years. In reality they will pay it off much faster as wages rise and the debt doesn't. Auckland wont tolerate low incomes soon and state housing is a factor that will try to stand in the way of that 'process'. Ultimately depends on how you feel about market forces shaping a city but ultimately any 'necessary' workers will be paid enough to live in Auckland or else their numbers will drop until their wages rise to a point where they can. It may not look pretty but the free market would ultimately sort Auckland out, what it looks like after may be distasteful to some but many others want it.
Laminar - starting pay for both nurses and secondary school teachers is around $47K pa - and don't forget, both these individuals will also likely have student debt.
So after working for say, three years - and paying rent that is also beyond their affordability (in other words, likely qualifying for the A/S that whole time) - they might wish to own a home. They need a $50,000 deposit if applying via the Welcome Home loan scheme. By that stage both are on a salary of around $50K pa. If no kids, no tax breaks and automatic deductions of 10% (pre-tax) from their salaries to cover that student loan debt.
A purchase price of $500K is a noose around their necks.
And as far as "Auckland won't tolerate low incomes soon" - yeah, right.
Market forces have failed Auckland - that's the problem.
At June 2017, 67,000 had been looking for work for over a year while on the Jobseekers benefit. The wellbeing literature shows that involuntary unemployment is the pits for wellbeing. Our system has passively fostered a self-perpetuating cycle of misery and benefit dependency.
That's depressing. We continue to import people hand over fist for low-paid jobs while we have 67,000 people who have been looking for a job for over a year.
Yeah but most companies especially looking for new staff will not hire someone older than 40 when they have 800 applicants from younger migrants all advertising they will work for significantly less. It is like the discrimination against disabled workers, or married women in their thirties (because they must be suddenly dropping babies). It is there, pervasive and encouraged discrimination, which workers either have to decide to continue without a job in a city with a high cost of living or get out while you can and try to go it alone in a town where the cost of housing & transport is significantly less. It is even more noticeable in STEM fields where anyone without experience can apply for the work. Even seen a few of the companies who had door knockers who offered to work for free (with no idea what they were doing), and some of those companies did end up hiring the 'volunteers' on extremely low wages while turning down NZ applicants. It just makes business sense in the short term, (especially if you charge extra for maintenance and repairs).
MCNZ
As I recall $5Billion was lost with collapse of NZ Finance companies during the last property slump
So if banks put squeeze on there’s no place else to refinance
Unless Finance companies have sprung up again in NZ ?
Remember the Mark Hotchin Paratai Drive foreclosure ?
Land sell offs by cornerstone group ?
How quickly spruikers here forget
@MCNZ, that was a great detailed post , some of which has been said by few of us who have an above average exposure to development and the Investment industry.
I suspect that this Gov ( with its known ideology and approach to the issue) will transform a big part of NZ into state houses and force landlord to quit the business - No one really knows the extent of such a disaster and the long term damage it may cause to the entire economy - they hope to become " A world Class Landlords " ignoring ALL the lessons of the past when the state with all its power failed manage HNZ properties and led most to the extent of damage you correctly mentioned ( let alone the costs of getting rid of the P contaminated ones)...
Thank you again for your thoughts , hope it is an eye opener to all commentators on this site, some of which don't realise what this market is about and are just blinded by emotions and politics.
As soon as the new government gets its immigration changes underway with respect to downsizing the PTE sector, that migration-fuelled pressure on Auckland will ease significantly - and my guess is the current level of build consents will be sufficient. It then boils down to a rent affordability issue, as opposed to a housing shortage - another matter that must be addressed.
They'll do what the coalition agreement says they'll do - if I recall correctly, that's projected to be between 10-30,000 fewer offshore students on the intake annually - and if the points benefits of a NZ qualification are also removed with respect to a path to residency, that will see a lot more departures of those currently here and studying.
Whether it will make a noticeable difference in terms of housing market pressures is anybody's guess, but at least it's a start.
No surprise AT ALL. I've been saying here for months that the front end side of things has slowed significantly, especially with regard to apartments.
In terms of apartments, I suspect most of them are either very high end ones, or Housing NZ. Very little in between - because generally that critical in between space doesn't stack up....
China isn't the only go to for Finance the USA has some substantial Funds.
What is abundantly apparent is that NZ just doesn't build enough Housing in any configuration. Some of the largest building firms only build 100 homes per year. Now they are building to market conditions, aspirational buyers $650 to $900k sweet spot, as fast as they receive a COC they are sold all day long, enough buyers with pre-approval certificates to take them off the line year in year out,,so whos building the Affordable Homes, entry homes, and social housing, my guys would want the same Hrly rate building $1m home and a $500k home and for building Govt because they are poor payers late with progress payments etc, would want more...
Here's an example, Ellerslie race course ,"Bowl it" smack in the city , 6 entry roads , sewer capacity for 40,000 and enough incoming water mains to supply10 apartment blocks holding 300 families in each , tha'ts about the capacity of the Metropolis in High St central city. Don't ring Fletchers or any of the go to mob, international tender,,open up the market..encourage overseas developers to enter NZ,,,NOW before you head down Tamiki Drive and start telling the homeless that are sleeping in their cars outside the public toilets,,that "they are freedom campers" they are only the tip of the ice berg ....
The Salvation army are full, the Mission is Full, the Diocese is full, Maraes are full, the doorways in the cities are getting crowded,,,watch Tourism take a tumble when Queen street starts looking like cardboard city in East La...The Lag on Housing supply is about 2 to 3 years per subdivision its not like running manufacturing lightbulbs 20,000 overnight... and New Zealand hasn't even started , do you think NZ is bigger and better than UK, USA, Australia they have invested Billions into Affordable Housing and Social Housing,,, NZ well we are going to write another report, maybe like the Home and Housed $2m and the Productivity Commission report on the Building materials and regulatory rort,, Even if you don't think every NZ deserves shelter the UN does and so do the global rating agencies....
the massive drop in number of apartment consents is hardly surprising given the 3 -ring circus we have in power.
they have successfully destabilised the market.
with no confidence all and sundry have pulled back.
the rbnz appears to be in damage control tweaking lvrs to try and instil some confidence, and stimulate activity.
Like these?
http://www.ebay.com/bhp/home-kit
well half what we build with now is from China anyway.
This one is in Virginia
https://www.ebay.com/itm/PREFAB-HOMES-KIT-HOME-2BR-1-5BA-1056SF-SUTTON-…
Where is the house located ? Even double glazing is overkill for Auckland, I have been living in a 1997 single glazed house for 20 years. Stayed in Wanaka in the middle of winter and double glazing was plenty good enough. Didn't even know they made triple glazing we don't live in Antarctic its total overkill.
Interest off $20-30k in the bank can just about pay a power bill on a reasonably efficient modern home in perpetuity. Triple glazed is not an economically rational choice in NZ outside of really cold high alpine areas. Go double glazed and invest money saved in PV or other truly beneficial technologies.
America in 1920s;
Average house only examples here :http://www.thepeoplehistory.com/20s-homes.html
Whats 1920s dollars are worth in 2017 calculate here: https://www.saving.org/inflation/inflation.php?amount=100&year=1920
Sitting in my Delorean at 88 mph.........yeah I know dreams are free!
I have zero confidence the government can fix any of the problems we are facing. I can think of one disaster after another a lot quicker than I can think of successes.
Im thinking of the time the Government purchased St James Station for $40 million, no long term plan and it was pastoral lease, so they then leased it back to the Stevenson family, a win win for the owners, it doesn't get much better than that, along with all the other high country owners that were freehold under the high country tenure review.
Or all that farmland the government purchased out of Taupo to plant in Pine trees which was then on sold to a forestry company then onto an investment company who then leased it back to the government who converted to dairy, which then fell flat on it's face, while still committed to long term lease agreements.
Now we have a billion trees to plant but why where and whats the long term goal, I see another disaster.
So houses are too expensive to buy and too expensive to build, flowing onto expensive rents and insurance.
The taxpayer pays welfare like the solo mum this week ,getting $830 a week on a benefit but most of it going to a landlord. We have high immigration during a housing crisis, go figure.
We have the first year free at uni, so all the kids are signing up, enrolments are going through the roof. Did the government really think free Uni wouldn't change behaviour?
The best way to solve the problem is the one thats least expensive, that is to open the building industry up to competition, cap immigration, reduce and reduce costs across the economy.
Get rid of income taxes, move to asset taxes, change behaviour with a carrot approach not a stick. The extra money will flow into the economy and reduce the will to sit on assets, while expecting tax free gains. We need more disposable income in the middle and lower sectors of the economy, otherwise in a democracy things will get interesting as we revolt at the ballot box.
Very good post.....especially " revolt at the ballot box." brexit was a good example as was Trump.
The problem is someone is going to get hurt and the Government of the day wants no one hurt as that costs votes. This problem goes back at least 15 years ie if HC had had any balls this could have been fixed in her term but the problem wasnt big enough to worry about but the potential votes were.
ie we really need to get past Pollies who only think about the next election which comes back to us the voter who is to blame as that is what we vote for. Want some fixes? no, proof? well TOP only got 2.4% of the vote so that shouls tell you no one wants to pay, so it wont get fixed until it breaks which brings us to breexit and Trump.
And yet the past government was as responsible as leaving a chronic alcoholic with a bust liver in a liquor store with a credit card and then trusting them to drive home after a night out. Yeah somehow at least the next govt components recognised there was a problem and is taking any steps to fix it. Even if it is just providing the sober driver who does not stop by the liquor store on the way.
Now I agree there needs to be more competition on building processes, but without a set standard even the current ones ride roughshod over consumer rights and quality. Australia can have that better competition but that is mostly the scale of their market. NZ is still building the same old and same old for increasing prices with a couple of providers able to lock down the larger contracts. Even if we had exactly the level of materials and international providers we do now the designers who choose the materials and structural components will still choose those giving them a bigger cut for the least work. All the building franchises today are almost carbon copies of each other, to the point that the designs are just iterations of the same house with a different layout. The sad point is where there is no real choice for the consumer in that regard without going into the multimillion dollar home category. Which also means having that choice becoming economical is also out of the picture. If the options were there for buyers to select the varied material home builds sure but that is not the case in NZ. At best you can play around with the interior aesthetics for builds under a couple million.
Materials costs even on the same level is allowed to be monopolised because the competition who have boots on the ground for the small market is limited. When would it ever be economical for any company to enter a small market, having to setup a costly logistics chain, going against design base, to supply for home builds under a couple million, when not one of the major builders support buying the product from overseas even on the basis of quality. It would be far easier just to have the higher level customers trade directly and ship for individual contracts at a cost to the consumer.
Here's a factor that is unique to NZ.
Lets use a Nationwide average of building of $2600 m2 .
A brand new house should be valued at that figure $2600 m2 not a 1930's bungalow that cost $1200 to build all up and is now at the end of it's material life.
Houses aren't built to last forever , especially NZ with wide varied weather conditions Hot,cold,dry damp etc made of wood.
In the united States if you tried to explain to someone looking at a 50 year old house its worth the same m2 rate as a brand new house you would be committed.
The scary thing is there are no young Developers,,, and no experience = No Money. For the first time in a decade my house isn't being used as security so I could build other people homes??? Good luck and believe me,,if you think its expensive now,,get ready cause in a couple of years the last of the private developers will be retiring...and there aren't any replacements....
They have a decent fault line running through the place.The quake in Nappa did very little damage. They use so much ply it's hard not to believe they are stronger than anything here, our timber is utter rubbish, from the top of the tree, they export the pruned log. The wood is about 12 years old and hardly treated.
Ebay has prices
http://www.ebay.com/bhp/home-kit
https://www.ebay.com/itm/PREFAB-HOMES-KIT-HOME-2BR-1-5BA-1056SF-SUTTON-…
we could do solar panels t the same time.
Sorry about that but..
These guys don't ship from the UK. I just tried the quote and it gave no results. Standard shipping container prices for a full 20ft container (which also included the lorry delivering the container for loading, delivering it to the nearest UK port and then delivering it you in NZ and usually unpacking too) costs between £4-7 GBP if you load the container yourself at originit's nearer 4/5k GBP. I got 10x quotes in 2016 and know lots of peeps who have done similarly.
A business will get better rates if they are shipping pre-fab houses no doubt.
Only way to break the stalemate and get some motherflippin' accommodation for those who need it is for government to step in and kick aside some of the network of vested interest impediments, perverse incentives and counterproductive laws, and build it.
All very well for De Beers to keep the price of diamonds up by artificially restricting supply, but we shouldn't tolerate this kind of distortion with something as vital as shelter.
We could ship entire houses already built, but the problem is, are we Importing for "Capital Gain" cos we just might have to bypass the "Land Bwankers", and Rental Mental...lots. so will need some "dirt cheap " land too
And a few people to do the hard graft.....ooops...perhaps wrong choice of word.
The knobs already got that sussed.
Did the new Gov stop paying for the motels housing the homeless since it took office?
We did not hear about any serious efforts ( crash projects) to repair abandoned HNZ homes and get the homeless in there quick smart. Logically, that would have been the cheapest and fastest way to provide thousands of homes ...
In fact, we are not talking about them anymore...so Why?
Oh, and good luck in going behind the back of big boys in NZ construction business - that ring will be the most funny to watch!
I've just been to Ireland for 2 weeks, and the relatives tell me that prices are now up to the level before the market dropped (2008?) . They are increasing in Dublin about 1500 Euro's per week and about 7-800 euro's everywhere else. Ireland is looking really good, nice clean well maintained villages everywhere. That economy is travelling well. The real estate cycle is alive and well.
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