Guest Post – Population and Housing

Auckland-Houses--NZ-Herald

Every day someone spouts out verbal brouhaha about the property market not meeting the needs of population growth.

This is a myth. Here is an example of why.

In the month of March long term immigration numbers topped 7,000 for the first time in 10 years according to the Dept of Statistics.

7243 people arrived in our country.

But 7238 people departed the country.

That means the entire country had a net population increase of just 5 people.

Yes you read that right – five (5) people.

So that’s one month and there are eleven other months in a year. Plus we have natural births.

Well lets debunk the birth rate issue up front.

Babies and children don’t buy houses.

Its not until around 2030-2033 that the effects of people born in 2013 will be felt on the property market in terms of demand for houses as those wee kiddies today grow up and leave home. 

What matters today is the birthdate in the 1993-1996 period. In 1993 a total of 58,866 births were registered.

So where are those 1990’s kids now?

The answer – burning couches and spewing up at University and living in rented accommodation like University campus dorms. We see this rate in such statistics as the annual increase in under graduate students at University. Auckland University alone has nearly 1,000 additional students each year.

Students pile into flats so its not likely to create pressure – just yet!

So 58,866 people would potentially mean some 20,298 houses need to be built this year.

But if that pressure actually existed where are all the homeless people, those crammed into houses, those commuting from far off places? Where are the excess of buyers at open homes that would make the news?

As to immigration the year to June 2012 saw approximately 40,000 immigrants add to our population which is a figure similar to 2010-2011.

But there were 43,400 migrations out of the country meaning population decreased overall in the 2012 year.

27% of immigrants in 2012 were Indians and Chinese who bring children and typically populate single dwellings at a higher person density rate to New Zealand born citizens.

Even if all immigrants to New Zealand populated houses at the average 2.9 persons per house (its typically higher) a 40,000 person increase in pop through migration only equates to 13,000 new homes.

But New Zealanders are leaving the country in droves. As noted previously the 2012 year saw more people migrate out of the country.

Consistently migration numbers have been only slightly lower than immigration. In the early 1990’s we saw between 40,000-60,000 people a year leaving reflecting a net loss after inflow of 10-18,000 per annum. That changed in the late 1990’s and stayed that way till 2001 when expats flooded back in. Since then a marginal increase in population has been recorded each year. But its no silver lining of migrants and they are settling in more places than just Auckland.

But here is the telling story and back to births.

For a population to stay neutral it must produce 2 children per family on average. For it to increase it must be at least 2.1 children which produces a marginal increase over time.

Like most developed nations New Zealand families have become smaller and since the late 70’s the birth rate has dropped below 2 children per family meaning the natural population is not gaining but falling. It currently sits at 2.04 births per female. In essence we are as a nation going backwards in terms of population increase if considered in terms of fertility/birth rates.

The department of statistics says that deaths are on the rise and in 2012 approximately 29,000 people died.

So if we consider all of these facts loosely and then focus on 2012 we can get a picture of things.

Long term the population from births is flat or falling. The death rates are increasing.

2012

Migration in 2012 against immigration produced a net loss of 3,400 people.

There were 60,000 births in 2012 reflecting a decline on previous years.

There were just under 30,000 deaths.

Purely on numbers the net population increase for New Zealand was 26,600 approximately.

We can deduce that immigration is not increasing population because we had more people leave than arrive.

Getting to point. The so called housing crisis in Auckland is purported to be 13,000 houses needed each year according to bendy Len Brown and a shortfall of 80,000 homes if we take the former ARC’s word for it.

But if we look at the 2012 year as a snap shot that cannot be true.

All immigrants can be safely assumed to have moved into houses vacated by people leaving the country with some spare because we lost more people than gained.

So we are talking about natural birth rates. Well over the last 3 decades birth rates have been between 1.9 and 2.1 per woman. Overall stagnant meaning deaths should have been equal over those years to births.

Old people don’t occupy houses till death – the majority are stuffed into rest homes to rot by the telly and piss their pants. They create space for younger people to occupy.

What this suggests is that the natural population increase is not really producing much demand on housing – there is sufficient housing stock being freed up by older folk who move to the ‘Sunny Vale Retirement Home’ and younger people are filling it in and renovating.

The immigrants are filling up the houses vacated by those moving overseas.

And a marginal increase is creating just enough demand for houses for permanent residents.

New born children don’t buy houses for another 20 years so they don’t create demand.

We don’t need 13,000 houses a year if 2012 is anything to go by. The 26,000 population increase was births. So that number can be deducted from the total.

What Auckland and New Zealand needed to produce in terms of new housing stock was pretty much nothing. Yes nothing at all.

So who is buying our property and is there really a population increase?

The Dept of Statistics said that 68,800 international students were approved to study here. That’s a very big increasing market it is a massive number of people compared to migration or births. It is more than 2.6 times larger.

Our biggest population increase is in temporary residents.

Overall the point of this blog is to raise a thought about whether there really is a dire shortage of property in Auckland. Whilst I am loose with the numbers they do sufficiently demonstrate that there is a big question mark around Len Brown’s purported shortfall in houses.

We don’t have the population increase in the demographic we need that would drive demand for new houses. That hasn’t arrived yet. Generally speaking not much population increases are occurring in the bracket that counts. Its crying babies and tantrum toddlers not house buyers and renters.

And that demand is spread over the nation. Auckland’s slice of the pie is only part of that – perhaps a third which could possibly equate to around 8,700 people and 2600 houses.

That isn’t 13,000 houses.

All of these statements are consistent when one considers house building.

2012 the highest number of consents were issued since 2008 and averaged roughly 1,500 a month nation wide for 18,000 in the year. But we don’t know if that also included hotel rooms, apartments, holiday homes or other dwellings that may not suit long term dwellers.

Auckland’s share of that is again only a portion of that total.

It is the Property Merovingian’s opinion that demand is flat, its not coming from migrants or births but from students and temporary residents and conflated by consents for other dwelling types.

So Len – where is the demand?

This post was written by the Property Merovingian

 


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  • unitedtribes

    I guess Len would argue that 10000 imigrated from Greymouth and the like and 40000 new residence settled in Auckland none in Greymouth. Len would have a fare argument with this.

    • johnbronkhorst

      Northward migration is the only factor this blog doesn’t mention. However , building houses in anticipation of the intracountry migration, would just make the problem worse.

      • boristhefrog

        how?

        • johnbronkhorst

          Simple…if you increase the supply by more than current demand, you automatically and artificially increase future demand. You end up with an ever increasing and false demand.

  • Whafe

    I hear that the Auckland Council is saying they will need to get through 26,000 consents this year!
    This was discussed on our run this morning, of which got into how to fundamentally shift a culture in a council that is in the toilet. We discussed for an hour of 15 Km’s, but couldnt come up with an answer, except that Lyin Len had no show of doing it

    • lmfbs

      Those 26,000 consents would include new properties (not just residential), as well as renovation consents (ie building decks over 0.9m or whatever it is, removing or moving weight bearing walls etc).

      • Whafe

        Yes for sure, that as you say is not just new proerties…

  • James

    The problem is that the people leaving NZ come from, mostly, outside of Auckland and those arriving mostly come into Auckland. Add to this the general northward migration amongst Kiwis and that is what is gives Auckland its housing problems – it is very much an Auckland thing and not so much elsewhere.
    The solution is therefore not to concrete over Auckland and build slums but to figure out a way to encourage businesses outside of Auckland and migration elsewhere in the country.
    My solution would be variable income taxes – set a base top rate of 25% for companies and individuals and then have variable rates on top of that dependent upon the home residency of the business (a bit like a state tax). Corporates that operate in multiple areas can have a simplified system where they can elect to be taxed at the rate of the area in which they have the most full-time equivalent employees.

    • sheppy

      I reckon you’ve hit the nail on the head there – now how do we get someone in government to listen and stop Len from turning Auckland into just another overcrowded sh**hole

      • Polish Pride

        What do you mean ‘turning into’ an overcrowded shithole? Does it still have some way to go?……

        • sheppy

          Yep, plenty. It will sprawl outwards.

          • boristhefrog

            Metropolitan Urban Limit = brickwall… or whatever the new name for it is…

  • Mr_Blobby

    We have two issues.
    1. I am losing count of the number of friends and relatives who are leaving the country.
    2. The biggest problem to building in Auckland is the Council themselves. I know of several developers who get mugged by the Council with consents, fees, planning changes, council inspectors who what they are doing etc. All this is passed on to the purchaser. Don’t even get me started on the bribes to Maori.

    • Whafe

      It is a huge issue that there is no recourse when the council screws up, of which they do constantly. I agree Blobby, there are developers whom are just syaing it is not worth it, it is to hard dealing with the Auckland Council..
      So I guess it comes down to the council disintegrating, that way people will then except it is incompitant and start again….
      Go back to how do you change a culture of the council….

  • TomTom

    Lol a couple of failed points. Aging population meaning that more older
    people are still living in their own homes at their age than 20 years
    ago. Net immigration for one month is not indicative of net immigration
    over a period.

    “The Net migration in New Zealand was last reported at 65004 in 2010” – http://www.tradingeconomics.com/new-zealand/net-migration-wb-data.html

    No point in saying that children now are going to be putting pressure on
    the housing system in the 2020s when you’ve just dismissed the children
    that were born in 1990s. And for fuck’s sake, we don’t want to live in
    flats forever – we would like to be able to live in small households
    even if they were apartments. There is a generational change in
    preference of where we live, and some of us would like to live in higher
    density housing that is close to where we want to be.

    I know that some of you despise what’s being proposed for Auckland but hello? It’s a democracy and people voted for Len Brown (and his trainsets) If you don’t particularly like it that much, you do have the option of moving to Christchurch to experience the vast endless flat suburbia.

    • Ururoa

      Agree with TomTom. Do we really want suburbia sprawling all the way across the Hauraki plains or out to Puhoi? The beauty of Auckland is that you can jump in the car and within an hour you can be completely away from the city, whether on the beach at Mahurangi or having a soak at the hot pools in Miranda. What other major city can you do that in?

      Nothing wrong with creating more built up suburban hubs with the links to transport and the facilities/services that only intensification can make financially realistic.

      That’s if the developers can get through the consenting process without going bankrupt.

    • Hazards001

      You miss the point..as your generation often does…for you to get your little high rise so you can live closer to your place of work that you got the necessary education for from our paying for your interest free student loans you now want to build out the homes of the people that:

      1)Supported you in the first place?

      2) Where there first
      3) Never voted for Loopey Len and where in no way aware he wanted to turn THEIR city into his everlasting memorial of a bankrupt unliveable slum!

      God love us…. the generation of the entitled never fails to amaze me!

      • TomTom

        Sounds like you haven’t got the point yourself.

        It’s a free market – if people want to sell their house/land or develop it they should be allowed to do so if it’s in the right zoning. You don’t have to live there – there’s plenty of choice in housing elsewhere and yet you resent giving the people the choice to live somewhere decent at a price they can afford instead of shit uninsulated place out in the crap suburbs.

        Just because you didn’t vote for Loopy Len and his ilk doesn’t mean that they don’t get to exercise their prerogative given to them by the majority of voters. That’s like claiming that National doesn’t have a mandate to do the share sales FFS.

        • Hazards001

          National campaigned on the asset sales…Len never mentioned turning Auckland into a bankrupt slum via a 10 billion dollar trainset or the creation of intense housing that other parts of the world have already tried and are now pulling down!

          • TomTom

            Lol, the train link is quoted at about 2 billion dollars, not ten. This includes the new trains, apparently, because you can’t keep running the old ones without that becoming more expensive than buying new stock.
            Also, I’m not quite sure they’re pulling down all of NYC, yeah? Or London?

            I think the reason why Len never talked about turning Auckland into a “bankrupt slum” is that he doesn’t intend to. He’s been talking about a method to pay for all the future transport projects that are needed, public transport and roads both and he has been talking about the Unitary plans as a way to give people a choice of where and how they want to live.

          • philbest

            NYC and London are exceptions. Read up on the concept of “global cities” (the originator of this term is Prof. Saskia Sassen). Auckland is definitely not one. There are probably 12 in the whole world. These are cities where the primary source of inbound income in the local economy is near-weightless and from the entire world. Therefore the high density is related to high incomes, and high-income low-land-use employment. Most cities most of the time need to realise that they are not just playing a game of “second life”, and just as everyone in real life cannot be a film star or a brain surgeon, all cities cannot be London or NYC.

          • TomTom

            Vancouver? Seattle? San Francisco proper? Boston? Montreal?

            Even Sydney is a good example. They built the City Circle in order to boost capacity on their suburban train system which now carries a million people a day (with a population of 4.5 million). You have to also remember that this is a high number when not a lot of people actually go to the city centre and where they’ve got huge motorways all over the place.

            I certainly did not suggest that all cities be like London/NYC but was pointing out the utter stupidity of saying that cities have tried higher densities schemes and found them to be failures with the result of dismantling them. There are countless further example of liveable higher density cities where people want to live in. Like i’ve said, choice matters. And you have plenty of choice in high quality low density housing.

          • philbest

            Check out, besides “Global Cities”, the paper “Superstar Cities” by Gyourko, Mayer and Sinai. Density and commuter rail advocates love being selective with their choices of cities. I repeat: we are not playing a game of “second life”. Looking at the urban form and transport systems of “successful cities” and emulating that, is like assuming anyone can be George Clooney or Jennifer Lopez just as long as they use the same beauty therapy and follow the same diet and exercise regime. Cities have “genes” too – decades or centuries of historical accident, the kinds of businesses that located there long ago, etc. Boeing would NEVER have chosen to locate in Seattle NOW. Bill Gates and all the other whiz kids of the 1970’s would NEVER have set up anywhere where there are policies like there are in Silicon Valley NOW. Check out the paper, “Driving Productivity and Growth in the UK Economy” (1998, McKinsey Institute). Central conclusion: the UK’s Planning system and high land costs are the reason that nothing like Silicon Valley could ever evolve anywhere in the UK. Also, use the data set of ALL cities in the UK, as evidence of what growth containment urban planning does to cities. London succeeds “in spite of” this stuff. Also, what is the cost of subsidies of those commuter rail systems even in your examples which are utterly invalid as a comparison to Auckland? And don’t kid me that these subsidies just “level the playing field” with the “subsidies” of driving cars. No-one pays for my car, running costs, insurance, etc etc – the “subsidy” is PART of the costs of the roads. I don’t mind levelling the playing field by subsidising PART of the cost of the rails your train runs on – but you pay a fare that actually pays for the train and its running costs and we will start to talk about “level playing fields”.

          • philbest

            From one of Colin Clark’s seminal books, “Regional and Urban Location” (1982).

            (Page 231)”….If rail and subway services to the centres of large cities were charged at full cost, including interest and depreciation, two consequences would follow. The employers of the lower paid service workers in the city would have to raise their wages, in some cases reduce the services offered, or move to suburban locations (for example,
            some of the retail businesses still carried on in city centres).
            Meanwhile the higher paid salaried and businessmen, who in most cases could not change their workplace, would have an incentive to move their residences closer to the centre (while at the same time having less incentive to reside close to railway or subway stations).

            These movements would have their reflections in the price of urban land. They would reduce the demand for and the price of business land in the city centre, and of residential land in the outer suburbs, particularly land now high priced because of its proximity to railway stations. There would be countervailing movements raising the price of business land in the suburbs and of residential land nearer the city
            centre; but these would probably be of a lesser order of magnitude. In net effect, the subsidies on rail and subway suburban transport are subsidies to the owners of certain types of land – for which there is no
            social justification….”

            In case you are wondering who Colin Clark was:

            http://en.wikipedia.org/wiki/Colin_Clark

            The transfer of wealth from taxpayers to property owners is
            surprisingly quantifiable in terms of capital gains reaped by the conveniently placed property owners. These people, of course, become a natural lobby group in favour of transit subsidies, and the whole thing becomes another example of the old, old story where the great majority of people have a little to lose “each”, but not enough to turn any one
            of them into a lobbyist. Sickeningly, commuter rail is the one thing that would be most appropriate to pay for by way of “development contribution” type levies on CBD property owners, but it is the last thing actually suggested to be paid for in this way. (If it was, the “support” for fat pork-barrel projects like the AKL CBD rail loop would evaporate).

          • TomTom

            Lol if you were to charge the cost of roading at full costs, the same poorer people wouldn’t be able to afford using it either. Roading isn’t free – and it no where near being covered by any of the current road taxes. Which is why (as much as I fucking despise the idea of it ugh) the petrol and RUC taxes should be reformed into one singular tax at the pump where people more fully realise the costs of their travel on the roads and therefore the system is user pays ad the same goes for public transportation – at the same time general tax should be reduced by the same amount that was subsiding both. I think you’ll find public transportation through it’s efficiency will end up being cheaper.
            No one seems to like it when tolling or congestion charging is suggested either – it’s a bit hypocritical to demand those levies you suggested and not demand that new suburbs that rely on motorway access for quick trips to the city do the same.
            You also have to recognise the appropriate use of mode of travel for the context – but that is where all the contention comes in I guess.

            In the case of Sydney, transportation is so important to Sydneysiders that it was a big part in the huge crash at the polls of the previous Labour state govt – because the current Liberal govt promised to deal with the problems facing CityRail. Expensive rail projects there will win/lose elections. People there scream when the system shuts down or jammed, but relatively don’t care if the motorways get jammed up and frozen.

            Again, you’re avoiding the point I made about choice. People should
            have the choice of where they want to live – you shouldn’t get to decide
            that someone should live an hour or two away from work by car in a
            crappy suburb when they want to live in a modern small apartment down
            the road from the bars/cafes/whatever. People have different values and
            ideals and you should respect that.

          • philbest

            You are not clear about the realities of what you are talking about, and you have missed my point. The status quo involves that the cost of road expansion IS being charged in “development contributions”, plus motorists ARE paying taxes on petrol. Plus, who pays for the “subsidies” anyway? The taxpayer/ratepayer, most of whom are drivers anyway.
            Have you got a clue about the true systemic cost of commuter rail? Per passenger km, it is actually close to the cost of running an average car, let alone a small one. It is only “cheaper” to the fare payer because the TOTAL COST is subsidised by something like 70%. SEVENTY PERCENT…!! Or more. For “subsidies” on car driving to be remotely similar, car drivers would have to have their car itself paid for, and their petrol, and their insurance, and their repairs, and their parking; and be charged a fee for road use that was only about 30% of the true total cost.
            In those European countries, especially Germany, you are correct that poor people cannot afford to drive because petrol taxes and other fees on driving are so high – but they actually are so high, they cover the cost of roads and externalities several times over. Yet something like 70% of total travel is STILL by car. This shows that there is a massive “consumer surplus” in driving (Google it if you don’t know what it means). There is no such consumer surplus with public transport. The price of a ticket would have to rise threefold to actually cover systemic costs, and how many people would keep using it? But charging motorists the true cost of roads, would only add to their systemic costs by less than 5% because they are already paying for everything else.
            A similar comparison, is public telephone boxes and cellphones. The cellphone allows you to communicate to anywhere, from anywhere. Imagine if the government told us we should stick to landlines, and to public telephone boxes when we were not at home or work. So many people are so stupid about the “enabling” role of automobility in the modern economy. There is nothing to match it (except perhaps the motorbike). It gets you anywhere, from anywhere. This is of exponentially greater value as an enabler of economic interactions between participants in the economy. Hence the massive “consumer surplus” to driving.
            Investment in roads and urban expansion actually LOWERS the “economic rent” (i.e. zero sum wealth transfer) to all property owners. If there are no regulatory growth boundaries and fringe developers are in competition with each other, they and the original vendors of land make next to no capital gain over and above rural land values, in contrast to the obscene racket that occurs under both UGB’s and commuter rail “investments”. This is why all cities with urban growth containment have housing median multiples of 6 and over, for far less space per person; and those dreadful uncontained low density sprawled cities in the USA have housing median multiples of around 3 (and far more stability in the prices), for far MORE space per person. BTW, LA is the USA’s highest density urban area, is growth-controlled, and has the USA’s most unaffordable housing.
            If we look at examples of low density cities that NZ could emulate, we will find that their traffic congestion is lower than ours, commute to work times lower, housing half the price for several times the space per person, and local fiscal sustainability far ahead of us. The growth containment and rail-investment people are flat-out LYING to the public regarding alleged outcomes of their policies, and the public support for these lies merely indicates a propaganda victory, not reason or common sense. I am referring to US cities like Raleigh, Charlotte, Des Moines, Indianapolis, Jacksonville, Kansas City, Omaha, and numerous others. Look at “median multiple 3” cities in the annual Demographia Report.
            It is just typical Kiwi “playing first world countries” nonsense, to think we can model our policies on New York, London, Paris, Hong Kong, or even Vancouver or Sydney. Actually most cities pursuing these “copy London” or “copy New York” or “copy Vancouver” policies are completely ruining their economies and most of society in the process. So are we.

  • AXjarv

    I’m hearing that the huge demand for property in Auckland and principally in inner city suburbs is from “non-resident” buyers from off-shore looking for a safe haven for funds.
    It is not local population growth.

  • philbest

    I am not a regular on this blog, I want to know if ANYONE is looking at the kind of house and section Len Brown himself owns; is his area targeted for intensification under his pet plans, and is his support for major road projects connecting Redoubt Road with Drury, and the Onehunga Corridor, connected with his own convenience? Surely the electorate would find these matters relevant?

  • boristhefrog

    Congratulations on an idiotic post – its not just Len… its economists and researchers across the board that are saying that there aren’t enough houses being built… the immigration argument is a real one but its more complex that the Property frencher is making out – and the birth argument is complete rubbish.

    A baby any not need an extra house today, but the birth rate encourages the parents of said babies to find bigger houses (going from 2 bedroom to 3 bedroom etc) – and there are real substitution effects for the death rate – which means that those wanting bigger houses don’t necessarily buy from those who no longer need them (birthers vs deathers…as it where)…

    as and for the ‘foreigners’? well that’s a handy trap – how do you know they are ‘offshore’ buyers – they may well be NZ residents with non-resident accents…. how can you be sure the buyers aren’t locals with funny names??

    The demand is there because…. oh look house prices are going up and the supply is not changing very much….

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