More land 'not the answer'

Monday 30 July 2012

More land won’t mean cheaper housing, the chairman of the Environmental Defence Society says.

By The Landlord

Gary Taylor told the NZ Herald today that Fletcher Building chief executive Jonathan Ling was thinking only of his firm’s own pockets when he said expanding Auckland’s urban limits to create more housing would lower prices.

"Fletcher, with its market dominance, stands to make a fortune out of building more houses. But that won't make housing more affordable. It will, however, contribute to Fletcher's excessive profit-taking, which is a big part of the problem," Taylor said.

Taylor told the paper it was an urban myth that more land brought cheaper houses.

"It won't make any real dent on cost because raw land value - a greenfield site before it's subdivided and developed - is only around 10 to 15% of the total value of a new house and land package," Taylor said.

He said it would be better to create a more competitive market for building supplies, reduce development levies and the costs of consents, tighten up infrastructure spending and improve labour inputs.

But Philip King, Fletcher's investor relations manager, referred to his company's submission to the Productivity Commission and said land prices made up about half the cost of new houses.

"Land price rises have outstripped other building costs by a factor of more than two to one over the past two decades. Construction materials have increased by around 70% whereas section prices have gone up fourfold in nominal terms or threefold in CPI adjusted terms," King said.

He said the reason houses were more expensive in Auckland than in a city such as Invercargill was the cost of land.

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