News & Research

More New Dwellings, But Still Reducing In Size

05 July 2018

Driven by Auckland, new dwelling consents continue to rise strongly. By type, the growth has been driven by apartments and townhouses, with the average size of new dwellings continuing to fall. Given the growing population, a more intensified housing stock makes a lot of sense.

CoreLogic research analyst Kelvin Davidson writes:

Building consent activity remained strong in May with another 3,407 new dwelling units approved for construction. This was the highest figure for any month since June 2004 (3,447 consents). The total over the past 12 months is 32,628, also the highest since mid-2004. As the first chart shows, we’re currently in the midst of one of the three biggest booms for building consents that NZ has ever had.

From 2011 through to about the end of 2016, the growth was spread around the country, however, since then Auckland has been the key driver. Over the past 12 months (to May 2018), Auckland has had 12,274 new dwelling unit consents which is almost 3,000 more than it had in the 12 months to May 2016. Over that period, Auckland’s share of total national dwelling consents has risen from 33% to 38%.

Another shifting dynamic within the building consents data is the move away from stand-alone houses towards apartments or townhouses. As the second chart shows, the number of house consents granted in the past few years has been pretty steady at around 20,000 per year. But with the growth in the overall total having being driven by the smaller dwelling types, the share for houses has dropped from more than 80% in 2013 to only 65% now. That is the lowest share recorded since this breakdown of the data became available in 1990.

Related to the falling share of stand-alone houses amongst new dwelling consents, the average size of new dwellings is also getting smaller. Apart from a few cyclical blips, the average size of new dwellings approved rose pretty steadily from about 110 square metres (sqm) in 1975 to a peak of 200 sqm in 2010. Since then, however, the average size of a new-build has fallen back to around 175 sqm, as shown in the chart below.

So what’s the upshot? The building consents data shows that construction in Auckland is booming (having taken over from the previous earthquake-related surge in Canterbury), while we’re also building smaller dwellings than we were 5-10 years ago, with an increased focus on apartments and townhouses. All of this is welcome and necessary for a growing population who are trying to get into ever more expensive housing.

To that end, the latest announcements from the Housing and Urban Development Minister, Phil Twyford, that he hopes more than half of the KiwiBuild target of 100,000 homes could be pre-fabricated seems to be another step in the right direction in terms of raising our housing supply. However, there are still plenty of concerns about the ability of the construction industry to keep churning out more and more homes. After all, as the fourth chart shows, our own measure of construction costs 

(CoreLogic CHIP index) is showing sharp rises of about 6% year-on-year. This is a product of tight capacity in the industry.

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