Small cities have big development costs

Wednesday 17 July 2013

Some of the most expensive places in which to build in New Zealand are not the big cities with highest demand and dearest house prices.

By Susan Edmunds

Whangarei, the Kapiti Coast and parts of Hamilton are charging development contributions on par with those in Auckland and Christchurch.

Each council was asked how much it would cost to create a new property in an area where services were available but not connected.

Whangarei, which has an average house price of $292,500, requires development contributions for a new residential section of $20,834, plus GST.

Hamilton, with an average house price of $325,000, charges up to $30,000.

Auckland developers, who can expect to sell a house for an average of $618,000, pay $21,500.

Commentators say development contributions should be uniform throughout the country if the Government and councils want to improve the supply of affordable housing.

The contributions are paid under the Local Government Act and are intended to make sure councils have the money to pay for infrastructure such as stormwater and transport, open space reserves and community facilities.

Property Investors Foundation president Andrew King said development contributions seemed to be set arbitrarily: "If they can charge, they do."

He said the costs would be passed on to purchasers.

"It has a big effect on the cost of building and on house prices."

The Government is reviewing the contributions, and King said it needed to impose some uniformity.

The cost of the average development contribution has increased 360 per cent over the past decade.

Local Government Minister Chris Tremain said councils needed contributions to provide infrastructure to support new developments, "but we also need to ensure the costs are fair and well justified".

Property Council chief executive Connal Townsend said developers usually did not have a problem paying the contributions if they were going towards projects that would enhance a development and make it more desirable.

He said they should be consistent and it should be clear what they were being used to pay for. "A concrete pipe costs the same whether you are in Gore or Kaitaia, so the development costs should be around about identical."

Whangarei mayoral candidate Vince Cocurullo said the region's high development contributions were a stumbling block for growth.

"I have had several developers who have said to me 'it is too expensive and too hard to develop Whangarei'."

The Hamilton City Council said it was reviewing its policy and reduced charges for higher-density developments were proposed.

Comments from our readers

On 24 July 2013 at 9:48 pm John Paynter said:
Even more interesting, how are they justified for rural properties when you receive 0 services. You have your own tank water, septic system etc. You are levied separately in annual charges for roading. It is unlikely in many instances that you even go to the main town in the District for any services, such as library, as it is often more convenient to head to a city for your needs (as in my case) yet you are still levied annually for the upkeep of that town as part of your rates.

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