It’s supply stupid!

The Auckland Housing crisis is back in full swing with reports today that investors are in like Flynn buying up more property.

Investors are back in a heated Auckland property market and rapidly rising house prices are fuelling the fire.

A summertime dip, after tax and loan-to-value ratio (LVR) changes were introduced last year, appears well and truly over.

New figures show the median price of the more than 3000 houses sold in the region last month surged $70,000 to $820,000, the first time it’s broken $800,000.

Investors accounted for 44 per cent of the sales and one in three properties went for more than $1 million.

Experts now say predictions the market would cool were premature, as investors found ways to circumvent controls.

The city’s median price was up from $720,000 in January and $750,000 in February, according to Real Estate Institute data.

And the SHA’s on crown land, announced last year, have amounted to nought.

Housing Minister Nick Smith has so far only managed to secure 25ha of spare Crown land for housing in Auckland after promising to deliver 500ha in last year’s Budget.

The plan to find pockets of publicly owned land to turn into housing in Auckland was a key plank in National’s Budget last year which Dr Smith said could result in thousands more houses. Dr Smith later took media on a tour of Auckland to inspect some of the sites. However, he revealed on One News that only 25ha had since been secured for housing and the $54 million budget for the project had been exhausted.

There are three issues at play:

1. Everyone is tinkering with demand, when increasing supply is the solution;

2. Any supply that is greenfield-related is constantly undermined by Auckland Council;

3. The Government refuse to rough arm the Council (theycreated the beast that is now out of control);

Auckland Council want a compact city and are at odds with Government requirements to let the city expand through SHAs in greenfield areas.

So, the whole SHA process has been deliberately undermined by Auckland Council.

Firstly, the process was meant to be quick with no need to undergo a Plan Change. But it’s not. Meddling and the usual issues seeped in quickly and property developers lost their will to live. SHAs are a pain in the arse.

Secondly, Council have a back-door plan to stop greenfield, which they decided was going to ruin the compact city plan. They turned off the capital infrastructure budget and cried poor: no new greenfield areas because there is no money to run pipes out to them. Of course, they hinted that the Government would have to pay the bill for SHAs. Rat cunning.

Now SHA’s are for brownfield areas. Sure, apartment consents are issued in high values, but hardly any work is underway and developers are already under pressure because of rising construction prices. Chances are that many projects will fail to get off the ground. Besides, doesn’t anyone know that getting a consent is an easy way to improve value for a quick flick?

But, the heat in the market is specific. It’s for houses. There isn’t the same kinds of pent-up buyer demand for apartments.

I predicted this early this year. House prices are gonna go nuts. And Auckland is amidst a psuedo-Ponzi scheme fuelled by cheap, easy credit and the assurance that Auckland Council are doing their darnedest to quell supply.

The answer is supply. And lots of it. In the right places.

What surprises me, is that Auckland Council could have their compact city even with greenfield locations. They’re getting exactly that at Hobsonville. So what’s the issue?

Supply more land.

 

– NZ Herald

 


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  • Quinton Hogg

    I don’t know about the apartment comment.
    I had a coffee with a colleague who is involved in the construction and sale of apartments. every unit in every block beng built, in the isthmus is sold. especially if it is in one of the grammar zones.

  • rua kenana

    Driving around Auckland’s Westgate and parts further out there’s a massive amount of subdivision, land developmen, building, etc. going on. Similarly with around Silverdale and areas west and south of it, with suggestions of housing/apartments eventually going all the way across to Helensville.
    No doubt similar is happening in south Auckland, although I haven’t been there recently.
    And all this is seemingly a somewhat futile attempt to satisfy world demand for New Zealand housing.
    Yes there’s no doubt that it’s supply stupid. It’s the supply of massively excessive flows of new immigrants that far exceeds the reasonable capacity and desire of Auckland needing to stretch itself further and further, both financially and physically, to accommodate them. And all for what purpose?

    • contractor

      Yeh, the rest of the world is awash with too many people so they want to come here, and the last Labour govt and now National have the doors wide open. The difference under National is that Kiwis are returning from overseas rather than leaving.

  • biscuit barrel

    Looks like the Unitary plan has the future greenfield land all sorted .

    “it sets a new Rural Urban Boundary (RUB) that includes sufficient land for residential and business development for the next 30 years. Land within this RUB will be rezoned to urban as land is developed and more capacity is needed”
    Council FAQ Housing land and supply.

    Should push ahead with UP now , and put back the rezoning issues for the next few years as its not that important to ‘solve rightway’

  • Justme

    Take into account the problem that 30% (from the news the other night) of the houses being built are failing the inspections, and the leaky homes problem, and the maintenance funds problems with apartments, and the problem with fire safety issues with leaky apartments, the increase in supply isn’t going to be solved for quite a while.

  • D-Rad

    Auckland cannot and never will be ‘compact city.’ Its got a fast growing population, built on a teeny tiny thin strip of land. The only choice is out. Up isn’t the answer because shock horror, people want some personal space. If you spend all day in an office with 5-500 other people, then cram on a train or a bus, or sit in traffic with 1000’s of other cars, coming home to a bit of space isn’t unreasonable. The council also won’t let the city go up anyway, lest we slightly obscure the views of the precious volcanic cones. I am getting closer and closer to moving back to Australia everyday!

  • biscuit barrel

    The Housing minister said he would find 500ha of ‘spare government land’ for housing in Auckland.

    Guess what its only 25ha. So not 10% of what he claimed, but only 5%.
    Why is that all the easy answers are just a lot of hot air ?

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