The Summer Weekend Analysis: Housing

The march of housing in Auckland continues

 

M Central mixed use tower - due to open 2015
M Central mixed use tower – due to open 2015

 

The Herald ran a thoughtful but half analysis into the sudden housing supply boom under way in Auckland. Of course there looks like a bias behind it with it emphasising single standalone housing in place of apartments but, there is more to Auckland’s housing situation than what the piece was letting on. Bob Dey of his Property Report blog did pick up on the latest statistics from Statistics NZ on consents up to November last year.

An extract:

All construction up $2.6 billion/year as home consents hit 7-year high

Building consents for new dwellings hit a 7-year high in November – 2420 new homes, including 474 apartments.967 of the consents were in Auckland, 726 in Canterbury, and all the apartment consents were in those 2 provinces – 442 in Auckland, 32 in Canterbury.

The previous monthly high was 2465 consents in August 2007. The November consent figure was up 6.7% from the 2267 a year earlier.

…..

Full post and source: http://www.propbd.co.nz/construction-2-6-billionyear-home-consents-hit-7-year-high/

 

So if and when our resident Councillor of no logic pipes up either on Twitter or Facebook sometime this weekend about housing remember 442 of 967 consents for housing were apartments.

In short both stand alone housing and apartments are in demand and supply in Auckland. That said regulations around Body Corporates with apartments needing cleaning up along the way.

 

To the Herald article at hand on the boom in Auckland house building. Rather than podcasting it I will go through the article block by block where relevant.

The opening lines:

Pushing the boundaries

By Geoff Cumming 5:00 AM Saturday Jan 10, 2015

Auckland’s headstrong home-building market continues to defy the whims of planners and politicians by spreading out — but attempts to turn things around are ramping up.

Housing crisis – what housing crisis? Drive around Auckland’s outskirts and you’d be forgiven for thinking the home building sector was ahead of the game as thousands of new-builds come on stream.

Swathes of plush new houses are nearing completion daily on all the city’s boundaries.

The biggest of the new neighbourhoods, doing their best to look like communities but scarily homogeneous in character, include Millwater (Orewa), Long Bay, Hobsonville Pt, Flat Bush, Takanini and Hingaia (Karaka). The march of houses on greenfield sites amounts to the biggest expansion in a generation, spearheaded by Flat Bush where 36,000 people are expected to live by 2025. The sole brownfields development where housing is rising en masse is at Stonefields, the former Mt Wellington quarry.

The peripheral developments seem to fly in the face of efforts to rein in sprawl for a more compact city more suited to fast and frequent public transport than private cars and motorway crawls. But planners say they were all allowed for in the regional growth strategy agreed over a decade ago (albeit after court battles) and the goal remains to contain 60 per cent of future population growth within established suburbs.

For now, though, the distant neighbourhoods hold a disproportionate share of location choices for those looking for a new build, largely because apartment construction and urban renewal on brownfield sites in established suburbs have lagged.

……….

 

Right the Herald has picked up the large upswing in housing construction out on Greenfield sites that are mostly standalone or the odd terraced piece. Now to be fair the Herald has noticed the lag in building on Brownfield sites as well as apartments. However, as the Stats NZ figures above pointed out more apartment consents have been granted and there are quite a few cranes floating around the skyline as apartments get built and come on stream. We have also had some higher profile apartment complexes complete such as the 18 storey apartment tower in New Lynn and the smaller mixed use (apartment, retail, and hospitality) M-Central complex in Manukau City Centre.

As for efforts of the Planners and Councillors being defied? Yes and no. The Unitary Plan does not go live until late 2016 and that plan puts into effect the Auckland Plan’s 60:40 Greenfield:Brownfield urban development split. At the moment legacy pre Super City development rules apply unless it is a Special Housing Area then the provisions under the Unitary Plan are in effect (confusing I know). Also and this is the big BUT (and the Herald does allude to it) most of what we are seeing being built now is the continuation of what was planned pre Global Financial Crisis now coming to its natural completion.

For example Addison north of Papakura. When we bought our first house down the road from Addison in 2012 only Stages 1 and part of stage 2 was complete. Stage 1 was fully done pre the GFC bust up in 2007 and Stage 2 was under way. With no money around the development stalled. Cue 2012 onwards and New Zealand doing well again (relative) there is money, there is jobs, there is people entering the country, and so housing construction is now ramping back up to finish what is started. This includes the first houses going down in the big final 500 housing block piece in north Addison which will include a new Local Centre on Porchester Road.

Looking at where this Greenfield housing is happening and mentioned in the Herald, even the SHA stuff at Hobsonville Point is supply catching up from the GFC hiccup.

 

That so many houses are coming on stream now is in part thanks to a lag effect following the credit crunch and subsequent global financial crisis (GFC). House building flatlined for three years after 2008 – a combination of finance companies collapsing, banks refusing to lend and buyers sitting tight.

“One day the phone was ringing, the next day it stopped,” says Andrew Olsen of Jalcon Homes, one of several builders working across the big subdivisions. It takes time between buyer (and lender) confidence returning and houses getting out of the ground, Olsen explains. Right now, the residential building sector is at full tilt and the challenges include skill shortages and capacity to expand.

Jalcon expects to build about 170 homes this year, about four times the number in 2011. Olsen says the difference is confidence – low-interest rates, record immigration and a relatively buoyant economy mean homebuyers and lenders are willing to take more risk.

….

The above illustrates the point I was making

 

But different dynamics drive the timing of construction. Large-scale subdividers such as Todd Property and Fletcher Residential try to anticipate market demand and time construction accordingly, says Todd’s managing director Evan Davies. The pair are partners at Stonefields while Todd is behind Long Bay and the mixed-use Ormiston town centre at Flat Bush.

Elsewhere, there are fewer spec builds – construction begins after homes are sold off the plans.

“The New Zealand property market runs through cycles,” Davies says. “You have to keep an eye on how the cycle is going and we are a lot further through this one than three or four years ago. But there continues to be an excess of demand versus supply and we’re confident it will continue for some time to come.”

The new subdivisions are rising independently of the newly declared SHAs which stemmed from government alarm over the growing gap between housing supply and demand in Auckland. The Government blamed the Auckland Council’s anti-sprawl policies for restricting land supply, with other obstacles such as consenting delays and lack of infrastructure. But the surge of stock coming on stream now predates the accord and SHAs and shows the slump in building was down more to demand factors – chiefly financial – than land supply.

At Hobsonville Pt, progress was slowed by the downturn but last year nearly 300 homes were sold. Hobsonville Land Co commercial manager Mark Fraser says strong market conditions have given builders the confidence to build high volumes.

“It’s demand-driven – the passing of the GFC and improved economic fortunes have had a huge impact.

“Things started to recover in 2012 and there’s been a massive change in sentiment since. But there’s always a lag effect in the time it takes to get approval and build.”

Fraser says even before the GFC, housing supply was not keeping pace with Auckland’s population growth. “Current consenting activity is still less than it was at the last peak and now we have this migration surge – we actually are still not going fast enough.”

….

Again the point of catch up and completion after a stall made by the GFC is what is driving the current boom. Finish what they started and preferably before the Unitary Plan goes live with the new rules.

 

As for planner and Councillors struggling:

Achieving a more compact city is the challenge eluding planners and politicians, particularly given the opposition to high-density development in established suburbs. The proposed unitary plan, SHAs – where objection rights are narrowed – and council-led initiatives all promise to stem the outgoing tide.

Auckland Council chief operating officer Dean Kimpton predicts the development focus will gradually turn inwards: “We’ll have an Auckland that grows vertically as well as horizontally,” Kimpton says. “We can’t just keep going out – we need to do both.”

Two-thirds of the 4200ha of land given SHA status lies within the existing urban boundaries. The biggest of these include swathes of Otahuhu, Glen Innes-Tamaki, New Lynn and Albany, with smaller pockets in Takapuna and Northcote. The selected areas typically are close to public transport and motorways and have the necessary infrastructure – not just utilities but parks and libraries – in place, Kimpton says.

In Otahuhu, the council recently gave consent to a 36-unit terraced housing project in Atkinson Ave and an office building conversion in Park Ave into 82 residences.

The council’s Housing Project Office says the Otahuhu coastal SHA (around the Tamaki River) has potential for 1000 new dwellings over time.

Council estimates show residential completions rising to 10,000 this year, 15,700 in 2016 and 21,000 in 2017. The 80 SHAs declared so far are tipped to provide up to half these new homes. Kimpton says around 77,000 new dwellings could be built within existing suburbs in the next 10 years.

There’s enough available land to meet forecast needs for another six years and district plan variations could free up a further three years’ supply, he says. “If we can keep up the momentum around variations and planning, the land supply issue should come off the table.”

…..

 

The 60:40 development provision of the Auckland Plan (which went for somewhat a compact city) arguably is still being met. Also based on the upswing in apartment construction as well as Brownfield SHA’s slowly starting their builds that provision is not going to be put in a bind any time soon. However, the big factor not mentioned is what will our existing and new-to-be-built employment centres do to influence where housing goes. If our existing employment centres such as heavy industry, the Metropolitan Centres, and our two City Centres under go large redevelopments then people not wanting to cross city commute will tend to pick housing in existing areas thus giving a catalyst to more Brownfield developments. HOWEVER, if we get large employment centres being built on our fringes then it could also act as that same catalyst for more Greenfield development of people want to stay close by.

 

Of course it all comes down to the whale in the room: infrastructure and transport

That leaves roadblocks such as consenting delays, infrastructure provision and the industry’s capacity to boost production.

Todd’s Davies says consenting processes have improved, but there’s room for improvement. And he’s worried about the impact of “severe budgetary constraints” on the council’s ability to keep pace with underground services and other infrastructure. Last month the council formed a new agency, Development Auckland, which aims to work closely with developers to ease redevelopment of brownfield sites. Examples outlined by council chief Stephen Town range from co-ordinated planning and infrastructure provision to site amalgamations including council land and financing help. The council also promises to help with provision of affordable houses by guaranteeing bank loans for community housing providers.

…..

 

Council was long warned about infrastructure provision and that maybe it should be proactive rather than reactive and get our infrastructure in such a way we could run short-term surpluses for a while. That way it is set to go when the next development phases kicks off and we are not always in a scramble position as now. I also note that Council via the Long Term Plan debate is looking at slashing 40% in departments such as Parks and Recreation, and transport (which are two of the three biggest needs in any urban development situation) which only puts Auckland in a very fragile position.

 

And so if you have noticed that Auckland is undergoing a boom, well it is. How Council copes with it as well as the City? Yet to be seen.

 

Source for the Herald quotations: http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=11384375

 

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