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Are we building too many houses? Obviously rest of the country and not Auckland!

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  • Are we building too many houses? Obviously rest of the country and not Auckland!

    20 February 2017
    Population Growth vs Number of Houses Being Built







    In our January 2016 Blog, we looked at these stats. I have now updated them for the last year.
    Hamilton

    • From the 2006 to 2013 census, the population grew 12,024 to 141,612. This is an increase of approximately 1,700 per year.
    • HCC 10 year plan 2015 to 2025 "projected to grow from 153,000 in 2016 to 174,000 in 2025", or 2,100 to 2,300 approximately per year.
    • Statistics NZ show 1,179 new dwellings from January 2016 to December 2016.
    • From our January 2016 Blog, average 2.65 people per house.
    • New dwellings can house 3,124 new people in the year.

    From this information, Hamilton is building more houses than it requires by around 350 houses or to accommodate 924 people. This could be catching up a shortage. I would, therefore, be cautious buying in Hamilton and make sure the figures really work. It will be interesting to watch rental statistics over the next year to see if there are excess rentals!

    Need 830 new houses per year Vs Building 1,179

    Waikato

    • From the 2006 to 2013 Census, the population grew 22,815 to 403,638. This is an increase of approximately 3,300 per year.
    • Statistics NZ showed 2.3% growth to June 2016 or 10,000 approximately per year.
    • Statistics NZ show 3,552 new dwellings from January 2016 to December 2016. November 2014 to October 2015 was 2,756, so 796 more than around a year before.
    • From our January 2016 Blog, average 2.65 people per house.
    • New dwellings can house 11,903 new people in the year.

    From this information, Waikato is building pretty much the perfect number of houses.

    Need 3,585 new houses per year Vs Building 3,552


    Tauranga

    • From the 2006 to 2013 Census, the population grew 10,905 to 114,789. This is an icnrease of approximately 1,600 per year.
    • Tauranga City 10 year plan 2015 to 2025, 579 growth 2018-2023, or 1,900 approximately per year.
    • Statistics NZ show 1,695 new dwellings from January 2016 to December 2016.
    • From our January 2016 Blog, average 2.6 people per house.
    • New dwellings can house 4,407 new people in the year.

    From this information, Tauranga is building more houses than it requires by around 950 houses. I would, therefore, be very cautious buying in Tauranga and make sure the figures really work. It will be interesting to watch rental statistics over the next year to see if there are excess rentals!

    Need 732 new houses per year Vs Building 1,695

    BOP new dwellings, 2,520 from January 2016 to December 2016. November 2014 to October 2015 was 1,734, so 786 more than around a year before.

    Auckland

    • From the 2006 to 2013 census, the population grew 110,589 to 1,415,550. This is an increase of approximately 16,000 per year.
    • Statistics NZ showed 2.8% growth to June 2016 or 41,860 approximately per year.
    • Statistics NZ show 9,930 new dwellings from January 2016 to December 2016. November 2014 to October 2015 was 8,935, so 995 more than around a year before.
    • From our January 2016 Blog, average 3 people per house.
    • New dwellings can house 29,790 new people in the year.

    From this information, Auckland is not building enough houses to keep up with demand, and is approximately 4,000 houses short in one year! This is similar to the stats a year ago, and Auckland seems to be getting further and further behind.

    Need 13,953 new houses per year Vs Building 9,930


    When you look at this information overall, it is concerning that Hamilton, Waikato, and Tauranga seem to be building considerably more houses than required. This could create a large over supply and a possible 'bust'.

    It appears that a lot of the lift in property prices in Hamilton, Waikato, and Tauranga is due to greed and the ripple effect, rather than being based on the true fundamentals of supply and demand.

    Auckland, on the other hand, has a well-documented shortage, and over the last year the housing shortage has gotten worse by 4,000 houses. If immigration stays high and the Auckland population continues to grow, then I still cannot see Auckland house prices crashing. While there might be a flat period or blip, economics suggest that Auckland house prices will continue to rise.

    Kind regards
    Ross Barnett

    I also had a quick look at Napier, Palmerston North, Wellington, Christchurch and Dunedin. Based on 2.65 people per house, each area is building more houses than are required for the population growth. Napier is the worst by far with 182 consents but only 209 population growth over the last year.
    Ross
    Book a free chat here
    Ross Barnett - Property Accountant

  • #2
    Love the analysis Ross. Really good stuff to see.

    I'm personally of the opinion that an equilibrium will be found and the building will slow or stop. The lead time for a residential house or minor subdivision isn't anything like big commercial developments, and there are few barriers to ​stopping building, so the chances of well overshooting the 'right number' of houses in any given area seem low.
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    • #3
      I'm personally of the opinion that an equilibrium will be found and the building will slow or stop. The lead time for a residential house or minor subdivision isn't anything like big commercial developments, and there are few barriers to ​stopping building, so the chances of well overshooting the 'right number' of houses in any given area seem low.
      This is true for houses, but the lead time for subdivisions and apartment blocks is very long.
      Squadly dinky do!

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      • #4
        Good analysis.

        Supply and demand don't go up a smooth elevator hand-in-hand. Once the current rush of building starts to taper off there will be a period where less or no construction happens, the market will adjust to the new equilibrium, people will continue to arrive by some mechanism, factors will line up and we'll be away again.

        Here's the Tauranga report I think Ross referred to http://econtent.tauranga.govt.nz/dat...old_review.pdf

        From page 5 is the number of HOUSEHOLDS (dwellings) projected.

        We're closer to 2018 now, from Ross's well written summary between 2018 - 2023 an increase in dwellings of 5,140 or just over 1,000 per year.

        Ross said last year we built 1,700 new dwellings in Tauranga.

        I went to the stats site and couldn't get at that. What I was trying to find is what we've built every year for the past 10 years. It would be interesting to see how much of current building is to fill the backlog. I'm pretty sure 1,000 houses weren't going up annually between 2008 - 2013.
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        • #5
          I'm pretty sure 1,000 houses weren't going up annually between 2008 - 2013.

          But there were a lot more than were visible. e.g Rhyman added 500 in one lot about 2014 other villages added them blocks at a time. Althorpe was built during that period. Each unit represents a house equivalent and often with only one occupant. The average turnover of these units is seven years and many of the villages have been going for sometime so there is a lot of "house Units" coming on the market during a year. Resales do not feature in any stats. simply not collected because it is not a real Estate sale.

          And I am rather cynical of the population growth estimates that were put out. IMHO the increase was greater than stats guessed at. Tell by the traffic and the schools. Schools are a good measuring stick. Lots of new class rooms. One school that I have a contact with had 45 unknown new entrants at the first day this year and a similar number last year. Most schools have this problem.
          Pillans Point, 8 new class rooms this year. Greerton, Greenpark, Tga south all lots of new class rooms.

          don't think yet that we are over building but it is not that far away.
          In saying that I know of one company with 190 signed builds for this year and am aware of a couple of others where you will not get a house until 2018.
          Tga side you will lucky to get a section with title to 2018 now.
          We were kind of fortunate in that we had a reasonable lot of sections to start with so that softened the rush but not the price gouging of course.
          They were followed up by some subdivisions down the coast way that were easy builds so they have helped fill the gap between the older sections and what is coming up this year and next.Won't last long.

          FWIW

          Comment


          • #6
            And you need to look at markets where replacement value is still far higher than what current stock is selling for.

            If a bunch of 600k houses in Palmy or Napier are being built, there will could exist (and stats show there does exist) big demand and lack of supply for sub 400k houses for example.

            To be honest the worse part of this sort of analysis is you're using last 12 month consent data against old 2006-2013 census data, and a 10 year plan prediction (in tauranga case anyway) - this population data completely ignores the record net immigration we have seen and are still seeing over last few years.


            Summary, if you're going to use last 12 month consent data, compare it to last 12 month population data. Better though would be 5 years or more for both. Then factor house demos or removals.

            .... and replacement cost vs. current median prices in that region (which so long as population growth is at all positive will be an important factor)

            Comment


            • #7
              Lies, damned lies and statistics.

              How are the following two items reconciled, except by a mis-match in the data - as Mark Lowes suggests?

              Originally posted by Ross
              I also had a quick look at Napier, Palmerston North, Wellington, Christchurch and Dunedin. Based on 2.65 people per house, each area is building more houses than are required for the population growth. Napier is the worst by far with 182 consents but only 209 population growth over the last year.
              Housing scarce and homes scarcer
              Last week MSD promised figures would be released this week for the number of Napier and Hastings people staying in emergency motel accommodation.
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              • #8
                Are those stats correct? So you are saying Hamilton population was only in 12,024 and Auckland 110,589 in 2006?!!!

                Comment


                • #9
                  Originally posted by weera2500 View Post
                  Are those stats correct? So you are saying Hamilton population was only in 12,024 and Auckland 110,589 in 2006?!!!
                  That is the growth in that period, not the opening population. Yes correct from Census information.
                  Book a free chat here
                  Ross Barnett - Property Accountant

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                  • #10
                    Originally posted by Nick G View Post
                    Good analysis.

                    Supply and demand don't go up a smooth elevator hand-in-hand. Once the current rush of building starts to taper off there will be a period where less or no construction happens, the market will adjust to the new equilibrium, people will continue to arrive by some mechanism, factors will line up and we'll be away again.

                    Here's the Tauranga report I think Ross referred to http://econtent.tauranga.govt.nz/dat...old_review.pdf

                    From page 5 is the number of HOUSEHOLDS (dwellings) projected.

                    We're closer to 2018 now, from Ross's well written summary between 2018 - 2023 an increase in dwellings of 5,140 or just over 1,000 per year.

                    Ross said last year we built 1,700 new dwellings in Tauranga.

                    I went to the stats site and couldn't get at that. What I was trying to find is what we've built every year for the past 10 years. It would be interesting to see how much of current building is to fill the backlog. I'm pretty sure 1,000 houses weren't going up annually between 2008 - 2013.

                    Building consents Tauranga
                    Year ending 31/12
                    Consents
                    2016 1695
                    2015 1380
                    2014 1024
                    2013 798 multiple 2.6
                    2012 687 2007 to 2013 4740 12324
                    2011 596
                    2010 496 Census populatin gain 10905
                    2009 429 2006 to 2013
                    2008 741
                    2007 993
                    2006
                    2005
                    Book a free chat here
                    Ross Barnett - Property Accountant

                    Comment


                    • #11
                      Agree with Ross on oversupply of homes during last year. My first hand experiance tells me rental demand is softer in january this year than any other year.

                      Lot of the new builds around hamilton during last year were townhouses in traditionally less desirable areas of Frankton,Nawton, Ham East, Dinsdale, Glenview. My property manager tells me these townhouses are harder to rent even at lower prices. Owners have paid $400-500k for brand new townhouses and they can't get $450 bucks in rent. No good in my books.

                      Also at the higher end of property market. Speculator purchassed a property for $895 in Flagstaff in June. He was getting $550 in rent. He sold the property in December for $875k. Possible loss of $50k considering agent fees and holding costs.

                      Comment


                      • #12
                        Originally posted by Beginner1 View Post
                        Agree with Ross on oversupply of homes during last year. My first hand experiance tells me rental demand is softer in january this year than any other year.

                        Lot of the new builds around hamilton during last year were townhouses in traditionally less desirable areas of Frankton,Nawton, Ham East, Dinsdale, Glenview. My property manager tells me these townhouses are harder to rent even at lower prices. Owners have paid $400-500k for brand new townhouses and they can't get $450 bucks in rent. No good in my books.

                        Also at the higher end of property market. Speculator purchassed a property for $895 in Flagstaff in June. He was getting $550 in rent. He sold the property in December for $875k. Possible loss of $50k considering agent fees and holding costs.
                        Who would have thought it?
                        Hamilton has plenty of room for real houses on real sections and tenants prefer them so won't pay enough for a town house.

                        A stupid speculator it seems. $895k for a rental in Flagstaff - smoking some good stuff!

                        Comment


                        • #13
                          Originally posted by Wayne View Post
                          Who would have thought it?
                          Hamilton has plenty of room for real houses on real sections and tenants prefer them so won't pay enough for a town house.
                          Well you guys would know how I'd blame.... the council of course! I bet they're restricting land supply.
                          Squadly dinky do!

                          Comment


                          • #14
                            Originally posted by Davo36 View Post
                            Well you guys would know how I'd blame.... the council of course! I bet they're restricting land supply.
                            I don't know that they are.
                            They're doing pretty well with opening up areas, building new water reserviors, water and sewer mains.
                            They have a plan to open areas up on 3 fronts to ensure there is competition in land supply so any one developer can't hold everyone to ransom.

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                            • #15
                              2 Palmy rentals I rented within last few months.

                              1. 3 bed highbury, rent was 290, up to 320, over 100 enquiries, around 20 applications filled, tenanted immediately.

                              2. Few weeks ago. 2 bed unit. Was rented at 200 a week. Increased to 260 a week. Multiple enquiries again, not at much as the highbury house but 260 is way above the 220 median for 2 bed units based on bonds from last year, the demand has come from nowhere and all at once, nurses from Auckland were among applicants, families moving from the large rural communities around PN as they age and can no longer maintain lifestyle/farmlets. International students (quality Chinese with money going to massey and IPU) also under pin Palmy even in periods of higher unemployment.

                              Rents were going up faster than prices, now prices catching up fairly quickly, 4% every 3 months, 16-18% per annum, with still a large gap between replacement costs of new builds (often in developments with covenants (sp) saying only owner occupier, only houses of a high (expensive) standard can be built there. These new builds are generally owner occupier, can't be rented, and do absolutely nothing toward "swamping" the market with supply as 80% of the population are not looking for this, they want a first home or an improved second home, reno it, raise a family in a lifestyle friendly, top school city
                              Last edited by marklowes; 22-02-2017, 09:09 PM.

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