Supply boost to have limited market impact

Building and Housing Minister Nick Smith announced 36 new SHAs and six extensions to existing SHAs today.

The new SHAs, which are part of the last tranche of SHAs under the Auckland Housing Accord, take the total to 154.

They have the potential to yield approximately 56,000 new houses around Auckland.

Smith said the supply of new sections and houses under the Accord continues to grow, with the latest monitoring report showing they are on target to have 39,000 new houses and sections signed off over three years.

“We have achieved 27,708 as compared to a target at this time of 26,250.

“We are seeing the longest and strongest growth period in Auckland housing averaging 26.5% per year since the Accord was signed.

“We now have an all-time record investment of $3.4 billion in residential housing in the latest annual data to February.”

Positive momentum needed to be maintained to boost the city’s housing supply, Smith said.

“The next steps include advancing new housing on Crown-owned land in Auckland, supporting the council in the completion of the new Auckland Unitary Plan, and reform of the Resource Management Act.”

However, many commentators don’t believe current increases in supply are enough to impact on Auckland’s housing market for the foreseeable future.

This week Westpac economists said the latest building consent data confirmed that Auckland is cranking up the production of housing, with a total of more than 9,500 consents issued for the region in the last year.

But there is still a long way to go, they said.

“We have long forecast that Auckland needs to deliver around 11,000 dwellings a year over several years to eat into its housing shortfall, and strong net migration continues to widen this gap.”

BNZ chief economist Tony Alexander has been outspoken on the impact of the city’s shortage on its housing market performance.

He recently said that Auckland’s demand curve means that at any given average house price more people are demanding houses.

“This is because Auckland’s population is growing by about 3% per annum currently. But house supply is not rising by 3% or 15,200 a year.”

Building that number of houses requires the issuing of almost 19,000 consents - rather than the current running annual total of just over 9,500 consents, he said.

For this reason, Alexander said predicting where Auckland house prices are going to go is still relatively easy.

“Demand is growing near 15,000 a year, supply is rising near 7,700. Prices rise. The rest of the debate regarding Chinese buyers here or not, little interest rate changes and so on is just fluffery.

“Things will get a bit difficult when, and if, supply is rising over 10,000 per annum (consents above 12,000) and population growth has slowed to 2% which it will one day when the migration cycle turns.”