New building trend easing

This week the focus has been on potential demand side measures that might help to alleviate the pressures in the country’s housing market.

However, when it comes to Auckland, it is widely acknowledged that a severe shortage of housing stock is one of the main contributors to the pressure in the market.

That’s why the latest building consent data from Statistics New Zealand is a concern.

Once seasonally adjusted, the number of new dwellings consented nationwide fell from 2379 in February to 2315 in March. This was a drop of 9.8%.

It followed a 10% rise in new dwelling consents in February, which came after a fall in January,

The number of new dwellings consented nationwide was up 1.9% (or by 44) year-on-year.

But Statistics New Zealand business indicators manager Clara Eatherley said the trend shows signs of easing – although it is still near the highest level since mid-2004.

“New dwelling numbers grew strongly in the upper North Island and Otago, but were down in Canterbury compared with March last year.”

The regions with the largest year-on-year increases in new dwelling consents were Waikato (up 26%), Bay of Plenty (up 35%), Otago (up 34%), and Northland (up 38%).

The Auckland region saw increases in new dwelling consents year-on-year and in March – but they were minimal.

There were 788 new dwelling consents issued in March, as compared to 787 in February.

In March 2015, there were 756 new dwelling consents issued, which means Auckland saw a year-on-year increase of just 4.2%.

Eatherley said Auckland’s trend recently reached its highest level since late 2004, but it appears to have tailed off in the last few months.

Auckland’s new dwelling consent figures fall well short of the numbers needed to address the city’s supply shortage, particularly given its strong population growth.

Estimates of the number of new buildings Auckland needs per annum vary, but the figure tends to come in at 13,000 to 14,000, which equates to 1,100 to 1,200 per month.

Further, the number of new dwelling consents issued does not necessarily tally with the number of new dwellings built.

Property commentators agree there are simply not enough houses being built and, until that issue is addressed, the pressure on the Auckland housing market will continue.

However, many of them suggested that various factors were conspiring to prevent building activity to ramp up to the level Auckland requires.

Veteran property investor Olly Newland said the country’s building industry simply doesn’t have the capacity to build as much as needed.

Auckland Property Investors Association president Andrew Bruce pointed to ongoing regulatory and consent issues – and costs.

“The costs of building often just don’t work out. All too often, the margins involved with building are simply not high enough for many potential developers.”