Property

New homes under threat from overstretched construction sector

While the unemployment rate has fallen to 4.7% it could have an outsized risk for new home building.

Wednesday, May 12th 2021

Resources are short in the construction sector, putting the quality of new homes at risk.

Yet demand for new builds has soared and is soaring again as investors are incentivised to shift away from existing houses.

Independent economist Tony Alexander says throw in increasing government and council efforts to get more and more houses built and there is a problem that will crop up somewhere down the track – builders with little experience becoming involved in the sector because there are not enough qualified tradies.

“Quality, longevity, reputation, and restraint are going to increasingly count as measures of builder/developer success in the next five years.”

Adding to the construction sector’s productivity worries is an aging population renovating their homes to see them through retirement.

“Either people upgrade their houses to make a sale, or they move into a newly bought existing home and upgrade then,” says Alexander.

“Given the shortage now of tradespeople there will be some people getting their renovations planned during the pandemic lockdowns done through the remainder of this year into 2022.”

He says with investors looking at altering the way they manage their residential property investments in light of the Government’s rule changes, it is probable that a number will look to not just raise rents but justify the rent rises by lifting the fitout quality of their houses.

They will also avoid renting to people at the lower end of the socioeconomic spectrum. 

“This is where the Government is highly likely to have a problem as a result of the continued hits they are delivering to residential property investors.

“There will be increasing pressure on Kāinga Ora to provide social housing over and above the underlying pressure which stems from the proportion of such homes sliding below 4% compared with an OECD average above 7%.

“There is some way to go before the Government provides an adequate number of social houses. It is also why new home construction will be strong over the next three to five years.”

Alexander says another interesting aspect of the change in investor rules might be some investors selling, young people buying their houses and moving out from their parents’ home.

“Parents often take this as an opportunity to modernise their home now that big lumps lying around the place staring at tiny screens are no longer contributing to wear and tear.”

Comments

No comments yet

Most Read

SBS FirstHome Combo 4.29
Unity First Home Buyer special 4.29
Co-operative Bank - First Home Special 4.85
China Construction Bank 4.85
ICBC 4.85
TSB Special 4.89
Kiwibank Special 4.89
ASB Bank 4.89
Westpac Special 4.89
BNZ - Std 4.89
AIA - Go Home Loans 4.89
Nelson Building Society 4.93
ICBC 4.95
SBS Bank Special 4.95
China Construction Bank 4.95
Wairarapa Building Society 4.95
TSB Special 4.95
ANZ Special 4.95
ASB Bank 4.95
Kainga Ora 4.95
Westpac Special 4.95
AIA - Go Home Loans 4.95
SBS Bank Special 5.39
Westpac Special 5.39
ICBC 5.39
Co-operative Bank - Owner Occ 5.59
BNZ - Std 5.59
BNZ - Classic 5.59
AIA - Go Home Loans 5.59
ASB Bank 5.59
Kainga Ora 5.69
Kiwibank Special 5.79
ANZ 5.79
SBS Construction lending for FHB 3.94
AIA - Back My Build 4.44
CFML 321 Loans 4.99
Co-operative Bank - Owner Occ 5.95
Co-operative Bank - Standard 5.95
Heartland Bank - Online 5.99
Pepper Money Prime 6.29
Kiwibank - Offset 6.35
Kiwibank 6.35
TSB Special 6.39
ASB Bank 6.44

More Stories

Four decades of 6-7% yearly house price growth ending

Friday, March 21st 2025

Four decades of 6-7% yearly house price growth ending

New Zealander’s reliance on property capital gains in the mid-single digits is at an end.

[TMM Podcast] Yelsa serves up “marine reserve” of property buyers

Friday, January 31st 2025

[TMM Podcast] Yelsa serves up “marine reserve” of property buyers

It’s been years in the making and former real estate agent Mike Harvey is now coming to market with his platform matching buyers and sellers, an offering he says will be a gamechanger for the industry.

Leaving last year's stumbling housing market behind

Friday, January 17th 2025

Leaving last year's stumbling housing market behind

As interest rates ease and job losses climb, New Zealand’s housing market faces a mixed year of modest growth, with conflicting forces shaping the outlook for homebuyers and investors.

Don’t bet on house prices rising faster than incomes

Wednesday, January 15th 2025

Don’t bet on house prices rising faster than incomes

Former Reserve Bank Governor and National Party leader Don Brash says there are grounds for believing that house prices may finally have ended the three-decade period when they rose significantly faster than incomes.