Auckland needs to build 1,000 houses per month to meet demand
Auckland Council released its September Monthly Housing Report. The key takeaways were that just 7,056 dwellings had a CCC issued for the year ending July 2017, which is the most accurate measure of how many dwellings (houses, apartments, townhouses and retirement units) are ‘released to the market’.
Contrast with the Statistics NZ figure which is the widely reported number of 10,051 building consents being issued for the same period. That’s a 3,000 shortfall. Interesting.
On the demand side, immigration alone (i.e. not including natural/organic population growth) for the same period, 36,753 net migrants chose Auckland as their home. That’s an extra 3,050 people per month.
1,000 new houses/month needed to meet the demand
On the supply side we have under 600 houses per month being built and released to the market. On the demand side, we have about an extra 3,000 new people per month not including natural growth arriving into Auckland.
That’s 5 people per new dwelling. And we haven’t even accounted for natural population growth. This is alarming, given that the average household in Auckland is 3.0.
To maintain the existing shortfall we needed to have built 1,000 new houses per month at a minimum, just to keep up with the current shortfall.
The implications are going to be more demand for less supply. There is only one way prices can go in the long term. It’s Economics 101. And unfortunately unless we all take ownership and responsibility to solve the chronic shortfall, the situation will only get worse.
Those directly involved in the property development sector, have not only a huge opportunity, but a responsibility to deliver quality, fit-for-purpose and market suitable housing for the growing needs in Auckland.
It’s an incredible challenge yet an exciting one. We have a fantastic opportunity to make a big difference. The challenges with the funding market and affordability are not easy to solve. These are two of the core reasons why it’s a challenge to deliver enough stock to the market.
I expect the numbers to grow even further apart as developers are struggling to get projects to work given the tighter borrowing constraints and a lack of buyers able to secure a mortgage.
The LVR restrictions have certainly tempered the market, but in my opinion, it’s merely a sticking plaster on a festering wound.
I see values continuing to climb in the long term. And here's why.