The number of new homes being consented in Auckland has hit a record high, with 12,959 new dwellings consented in the region in the August year, according to Statistics NZ.
In the month of August 1298 new homes were consented in Auckland, which was the sixth month in a row that they have exceeded 1000.
The previous annual record for new consents in Auckland was in the year to June 2004 when 12,937 new homes were consented.
"The 2004 peak in Auckland homes consented was mainly driven by growth in the number of apartments," Statistics NZ's Construction Statistics Manager Melissa McKenzie said.
"This new record is also driven by townhouses, flats and units and retirement village units," she said.
Coming on top of the latest migration figures which show the net population gain from migration is steadily decreasing, the latest consent figures suggest some balance between supply and demand could start to be restored in the Auckland market over the next few years.
The biggest concentration of new homes being consented in Auckland is on the North Shore and and in South Auckland, with the Albany Ward leading the way with 303 new consents in August, followed by North Shore Ward 140, Manurewa-Papakura 137, Manukau 118 and Howick 103.
Outside of Auckland, new consent numbers were up strongly in the Waikato compared to last year but remained relatively subdued in Bay of Plenty, Wellington, Canterbury and Otago (see charts below for the regional trends).
On a national basis, 32,759 new homes were consented in the year to August, which was the highest number for that period since 2004 when 38,344 new homes were consented.
Of the 32,759 new homes consented throughout the country in the 12 months to August, 20,862 were stand alone houses, 5980 were townhouses or units, 4025 were apartments and 1892 were retirement village units.
However while stand alone houses still make up the majority of new homes being consented, the trend is towards more intensive housing, with new houses consented in the 12 months to August down 1.8% comapred to the previous 12 months, while consents for apartments were up 33.9%, and townhouses and units were up 28.3%
Building consents - residential
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Building consents - growth
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73 Comments
There are already thousands of new homes sitting empty all across the country. Maybe the reserve bank will have to get the banks to up their lending to support it all. Sounds a bit like Ireland to me.
Nic Johnson.... “sounds like Ireland”.... exactly.... but sadly few people over here and in Australia really understand what happened and how close especially Australia are to a repeat! Martin North covered it a few days ago in his vlog which I’m presuming you’ve also seen. Compulsary viewing in our house!
But surely the only way for most people to be prepared for a housing market crash is to not own housing (either not buy a house and/or sell your house(s)). Anyone in NZ that 'prepared' themselves 10 years ago is probably regretting it.
There are always people at all times predicting a crash. They can always point to some evidence that it is going to happen. Sometimes they may be right. But most of the time they are wrong.
All I'm saying is that you should be putting yourself in a position where your finances could handle a sharp housing correction.
Wishful thinking is wishful thinking, whether it's expecting the market to crash at any second or seeing housing as investment that can only ever go up. Be prepared for a dose of reality you don't like.
That’s a small reason why we bought our first home where we did last year. If we both lost our jobs we could still afford the mortgage on the benefit. The accomodation supplement alone would cover 80% of our mortgage payments. Yeah there’s rates and insurance on top of that but while things would be tight we’d be okay.
BLSH.
Ireland's household debt to GDP peaked in 2010 at 120% of GDP. It was lower than that before the crash began. It's now back to a figure in the 40 %'s. It was never near 400% where did you get that from?
Private debt is different to household debt.
https://tradingeconomics.com/ireland/private-debt-to-gdp
Edit: Cheer up Nic, it's Friday.
'Ireland, with a population of roughly 4 million had enjoyed years of intoxicating GDP growth, reaching nearly 11 percent at the turn of the millennium, before stabilising around 5-6 percent the following decade. And unlike its spendthrift continental neighbours like Greece, Italy, and Spain, which fuelled economic booms with the fiscal dopamine of public debt, the Irish government held back. It ran near consecutive surpluses from 1997 to 2007, reducing its debt to GDP ratio close to the Joycean (Stephen, that is) sweet spot of 23.9 percent.'
https://www.newsroom.co.nz/2017/05/08/25357/kiwis-private-debts-put-the…
The debt ballooned in the final year of the boom but carried on rising afterwards toward your 400%. We don't have an ECB to bail us out BLSH. Government debt in Ireland before the crash was very similar to our own today as percentage of GDP
Have a good weekend BLSH, once again enjoyed your company this week and your blind faith amuses me.
With NZ's private debt of around 150% instead of Ireland's near 400% before their crash, we are in a very different position and won't need an ECB to bail us out.
Have a good weekend. I'll be hitting the golf course. If you do the same, may your miserable attitude bring you many shanks.
Laminar, what? you'd prefer backing a Clown that said "Leading up to crash of the Celtic Tiger, Ireland had a private debt to GDP ratio of close to 400%"?
It was around 250%; https://tradingeconomics.com/ireland/private-debt-to-gdp
Click historical then max tabs.
Retired-Poopy,
I can assure you, Ireland had a private debt to GDP ratio approaching 400% before their recession.
Edit: Varies depending on which source you use, but by 2009 it was certainly over 350%. Well above what NZ is now.
By the way, this isn't the only thing that differentiates NZ's economy today from Ireland's pre-2009, but I'm not going to get into the weeds with you on a sunny Friday afternoon.
"We don't have an ECB to bail us out"
FYI, in NZ, there is the RBNZ which provides liquidity to the NZ banks. They provide liquidity based on high quality collateral (typically low LVR, high interest coverage mortgages). If there is insufficient high quality collateral (due to low quality mortgages as a result of poor loan underwriting) to provide to the RBNZ, then the banks potentially have a liquidity issue, which might then lead to a capital (and possibly solvency) issue.
A central bank is a lender of last resort for a commercial bank to provide liquidity. The central bank does this in the event that the commercial bank is unable to obtain financing due to market conditions (e.g a depositor run on the bank, capital market access is closed, etc)
Non banks in NZ do not have access to liquidity at the RBNZ, and hence have to ensure that they can manage their liquidity risk.
I mistakenly replied (too quickly) to a BLSH comment earlier believing that he was referencing household debt. I haven't changed the thread because that would be disingenuous.
However with his reference to Private debt levels - they were in fact below 250% at the start of the housing crash in Ireland which began in 2006. They rose significantly thereafter peaking in 2011
Household debt, which has always been the basis of my arguments for NZ being like Ireland had peaked 3 years after the crash started at 120% of GDP. The housing correction however manifested itself when household debt levels went beyond 80% of GDP in 2006 and prices started to fall. If anybody cares NZ household debt levels to GDP went to 92% in 2016 which is when the correction began, they have fallen a touch since and will continue to do so.
https://tradingeconomics.com/ireland/households-debt-to-gdp
https://www.ceicdata.com/en/indicator/new-zealand/household-debt--of-no…
As for experience of Ireland, I enjoyed the Ireland v England games at Twickenham and Dublin throughout the entire period of the boom and recession.
Retired-Poppy
Argentina has a different economic issue - Argentina has a USD currency debt issue. Argentina is reliant upon foreign investors financing its economy. Given the history with respect to Argentina's own currency and previous debt defaults, many foreign investors are reluctant to lend to Argentina in its own currency, Argentina needs to take on currency risk and borrow in foreign currency USD. Also interest rates on USD borrowings are cheaper than borrowings in local currency, so borrowers prefer a lower cost of financing. Most of that USD currency debt has been borrowed by the central government.
With the devaluation of the Argentinean Peso (which has increased the USD debt in local currency terms), there are concerns that the government is over indebted and default again. As a result the government is having difficulty refinancing its maturing USD debt in capital markets, so has had to turn to the IMF for a USD loan. This is the risk when borrowing in capital markets - market conditions can change rapidly and refinancing can become difficult.
Some external event triggered a loss in confidence in the local currency (from memory, it was events and currency devaluation in Turkey that was the trigger), and this resulted with the devaluation of the currency, . In order to stop funds flowing out of the country, the Argentine central bank increased interest rates as an financial incentive to keep those from exchanging their local currency into USD. The unintended consequence of higher interest rates is that those that are overleveraged in the local economy could face financial stress which could result in a economic recession.
The currency devaluation is also likely to result in higher inflation.
https://www.reuters.com/article/us-argentina-economy/argentinas-economi…
Seen it play out before. Similar during the Russian crisis in 1998. It was similar to the Asian Financial crisis in 1998, with the exception that the foreign currency debt was borrowed by companies, rather than central governments. The Asian Financial crisis started in Thailand, however it spread to other countries in Asia. The one difference is that the Asian Financial crisis and Russian crisis in 1998 involved currencies that were managed or pegged by the respective central banks, whilst the Turkey and Argentina situations involve floating currencies.
Sorry Nic, but I have to correct you again. The Irish economy entered recession in 2008, and then depression in 2009. Situation arguably at its worst in 2010, when private debt to GDP ratio was above 350%.
Irish property prices peaked well after 2006 - https://tradingeconomics.com/ireland/housing-index
https://upload.wikimedia.org/wikipedia/commons/thumb/4/40/Government_su…
Pockets of Ireland's market started to correct from 2006. It became a nationwide event from the end of 2007.
NZ - Auckland stopped rising in 2016, volumes have dropped dramatically and prices have now been falling for several months. the rest of the country will follow suit within the next 6-12 months and then we'll get some nice stats to look back on in 2028 and reflect on how stupid everyone was..
Retired-Poppy: Unfortunately those FHB's that prepared themselves 10 years ago by not buying a house may have missed out on ever owning a home. They have missed out on hundreds of thousands of dollars of free equity. Preparing yourself for the small possibility of economic disaster is a fools game (unless you are rich enough to do so).
Central bankers and commercial bankers are generally conservative and cautious in nature. When they have a message it is worthwhile to really take notice. The one that really caught my attention was David Hisco as he was speaking out against his own interest.
1) Don Brash - former RBNZ Governor - https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11672584
2) Arthur Grimes - former RBNZ Chairman - https://www.stuff.co.nz/business/money/81853314/auckland-home-owners-who...
3) Bryan Gould (former British politician living in NZ) - https://www.stuff.co.nz/business/81379799/housing-bubble-about-to-pop-br...
4) David Hisco (current CEO of ANZ NZ) - https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116...
5) Dr Michael Rehm (Auckland University property department) - https://www.nzherald.co.nz/university-of-auckland/news/article.cfm?c_id=...
The message given by these people with well informed viewpoints (and no financial interest in doing so) has been drowned out by the numerous and repeated messages of those with a vested financial interest in property such as real estate agents, property mentors, etc.
Note also that these messages have been made in the last 2 years or so, not 10 years ago.
The other thing that has changed dramatically in the environment is that the credit environment is vastly different now. Banks are much more tighter in their lending standards, particularly on their debt servicing calculations. As a result, many interest only borrowers may have a difficult time refinancing into another interest only loan. If they are unable to refinance into another interest only loan and have to begin paying based on a P&I loan, they are potentially facing payment increases of 30% or more - this could put these borrowers under financial strain .
Another observation is that John Key sold most of his home in Parnell in Auckland in the last couple of years and kept only a small section to build a new house. That action says a lot.
Each geographical property market in New Zealand is unique and all highly leveraged owner-occupiers and all potentially highly leveraged owner-occupiers should be aware of the messages from the above people and the associated risks. Make sure you have a fully informed opinion.
1) David Hisco link - https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11…
Here is a video of an interview - https://www.youtube.com/watch?v=jY1bZil2KbY
2) Dr Rehm link - https://www.nzherald.co.nz/university-of-auckland/news/article.cfm?c_id…
Interview with Don Brash
1) https://www.radionz.co.nz/news/political/308991/labour-and-national-%27…
2) video link - https://www.youtube.com/watch?v=_e7ZY7nLT74
Excellent work CN... That's a fair appraisal of a warning light flashing red.
What I find quite scary is that only 1500 people have viewed Gareth Vaughan's interview of David Hisco... He's there 2 years ago pretty much highlighting there is a problem that no individual bank can address on it's own (I guess without shareholders ditching the banks stock if they made an individual decision to be uncompetitive in the housing market).
Gareth should re-post this interview. The warning signals were being given by a CEO of a major NZ bank towards the end of the last administrations tenure and around the escape date of Mr Key from his office.
Nic Johnson.... “sounds like Ireland”.... exactly.... but sadly few people over here and in Australia really understand what happened and how close especially Australia are to a repeat! Martin North covered it a few days ago in his vlog which I’m presuming you’ve also seen. Compulsary viewing in our house!
The little snip of the Eastern European construction workers in Ireland pre-crash was the most telling. Paraphrasing "while there is work we will stay. If the work dries up we are off". So they not only leave the rented property they are living in empty. But also all the units and houses they have just built. Then all of the Irish nationals with transportable and marketable skills bugger off as well. Nek Minnit.
Could become like China Ghost Towns, LOL.
https://www.youtube.com/watch?v=5ePmC87aiaw
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12133411
An Auckland landlord has applied for a court bailiff to remove illegal occupants from her $2 million St Heliers rental property. Nina Zhao, 34, property is unlawfully sublet with the four-bedroom property being let to four different families - each occupying a different room. Over two years, Zhao did not make any property inspections because she didn't think it was necessary.
34, couple mil sloshing around, don't care about a return. Living the dream.
The interesting thing about that is, there are carpenters looking for work in Auckland right now. I also know for a fact that some plumbing type importers are way down in sales yoy right now (20% ish)
Consents dont mean houses - also my wee anecdote above leads me to having sinister thoughts as to where this ends, Im picking badly in a race to the bottom.
50% of this years Auckland consent activity is occurring the sprawl areas of Rodney, Albany, Waitakare, Manurewa-Papakura and Franklin. Auckland under Phil Goff is one great big new sprawled out mess of a town.
Get ready for more endless long commutes and LA type traffic.
Hopefully some of the consents are for intensification in the middle. Would not be suprised if a good number are for people modifying existing vs moving, which is limited by expectations of those sitting on larger family homes.
I think there is really an option for medium appartments like you see in the Australian cities. These have larger floor plates vs the shoebox that has been popular with students used to that option.
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