A recent ‘on-the-ground’ tour around Auckland revealed that new housing construction is moving ahead with infill development a rising trend. KiwiBuild will help to drive even more infill housing, making more efficient use of inner city land (not to mention removing some poor quality housing). However, new sections still seem pretty expensive and transport infrastructure is a problem.

The shortage of housing in Auckland is clearly one of the biggest issues in NZ’s residential property market at present (and it will probably remain one of the biggest issues for some time to come). This Pulse sets out some observations from an ‘on-the-ground’ look around Auckland’s various sub-markets last week; some positive surprises, but also some reasons for concern.

Firstly, contrary to perception that Auckland has been at a supply standstill for many years now, a huge amount of development has actually already taken place, both for standalone houses (e.g. Pokeno) and townhouses (e.g. Stonefields). The scale is huge compared with any other part of NZ and, without it, the housing affordability problem in Auckland would be even worse. The Stats NZ figures clearly illustrate the relative shift towards smaller dwellings in recent years (see first chart), with apartments/townhouses etc. now outnumbering houses.

Graph 1
Auckland dwelling consents, annual running total (Source: Stats NZ)

On top of that, it’s easy to see that infill development is on a rising trend. And that’s backed up by our data. As chart no. 2 shows, five years ago, the change in the dwelling stock in Auckland over a 12-month period was similar to how many dwellings were consented. Lately, however, the stock has been growing more slowly than dwelling consents – illustrating that rising shares of consents have been granted to replace older houses that have been demolished. The pattern in Auckland has been much starker than in Wellington, for example, where the stock change has stayed consistent in relation to dwelling consents (see chart three).

Graph 2
Auckland housing stock change and dwelling consents (Sources: Stats NZ, CoreLogic)

 

Graph 3
Wellington housing stock change and dwelling consents (Sources: Stats NZ, CoreLogic)

The rise of infill townhouse/apartment construction is of course very welcome in terms of making better use of big sections that currently only have one, small (often poor quality) standalone house on them. However, more needs to be done. The inefficient use of state housing land is clear around Mt Albert and Mt Roskill, for example, so KiwiBuild is well-targeted in those areas. It gets harder when the properties are privately owned, and the current owners cannot (e.g. for financial reasons) or will not move elsewhere and free up that land for more efficient use.

But even though there are some positive factors on the supply-side in Auckland, housing affordability is still poor. And that’s despite no obvious physical shortage of land (e.g. look at Pukekohe with its large numbers of new, empty sections). Thus the question naturally arises – why isn’t supply moving even faster? Three obvious hurdles exist here. Firstly, although the land physically exists, it doesn’t seem to be available at the ‘right price’. Sections priced in excess of a hefty $500,000-600,000 were easy to find. Secondly, part of the reason why land is still expensive will be the need to develop the infrastructure to support new housing, especially transport. Finally, it’s the well-known builder shortages and capacity constraints in the construction industry.

On the whole, the worst critics of Auckland’s supply shortfall are probably overstating the problem. The land exists, infill housing is underway and KiwiBuild will help to speed this up. However, there is still a long way to go in terms of boosting the raw numbers of homes in Auckland, not to mention fixing a quality issue (e.g. poor general state of repair, lack of insulation) that clearly exists in many parts of the city.