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  1. #1
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,592

    Default 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
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    Ross Barnett - Coombe Smith Property Accountants
    Proud to give the best property advice for over 13 years.

  2. #2
    Join Date
    Oct 2013
    Posts
    1,613

    Default

    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. #3
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    8,305

    Default

    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!

  4. #4

    Default

    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. #5
    Join Date
    Sep 2008
    Location
    Tauranga
    Posts
    1,518

    Default

    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

  6. #6
    Join Date
    Mar 2014
    Posts
    362

    Default

    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)

  7. #7
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    14,835

    Default

    Lies, damned lies and statistics.

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

    Quote 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.
    Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

  8. #8

    Default

    Are those stats correct? So you are saying Hamilton population was only in 12,024 and Auckland 110,589 in 2006?!!!

  9. #9
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,592

    Default

    Quote 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.
    More Profit from Property? TEACH ME MORE
    Ross Barnett - Coombe Smith Property Accountants
    Proud to give the best property advice for over 13 years.

  10. #10
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,592

    Default

    Quote 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
    More Profit from Property? TEACH ME MORE
    Ross Barnett - Coombe Smith Property Accountants
    Proud to give the best property advice for over 13 years.


 

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