Statistics – be wary of them.
Colliers issued its latest figures on the residential markets yesterday, and on Auckland in particular. The first statistic was population growth, and it turned out to be first in a series of national statistics, this March & last, not Auckland statistics.
It concerned me because it showed net migration down 5.5% (71,932/year down to 67,984/year). But for Auckland, Statistics NZ put the fall in net migrant inflow at 3.7% (35,772/year down to 34,448/year, a decline of 1324/year). That is also an uncertain figure, because Statistics NZ has started trying to map movement of immigrants to see where they actually end up.
So, first statistic on which to base conclusions raises an alarm bell.
After that, it looked best to ignore the prognostication and stick to statistics of what has happened.
Except, Colliers’ statistics include a construction cost index rise of 4.6%, which Colliers national research & consulting director Alan McMahon told me was national.
According to Statistics NZ, the construction cost index rose 4.7% nationally in the year to March, but only by 0.3% in both Auckland & Wellington. Auckland’s rise was the smallest for the region since December 2012.
That puts paid to some of the assumption on which Mr McMahon based a broad commentary about market constraints: “Slower presales & rising construction costs make achieving a positive feasibility more difficult and bank funding harder to secure. If sale prices are steady and building costs go up, the only variable left to balance the equation is land cost. The problem is that a lot of land sold in Auckland between about 2013 & 2016 was priced on the assumption of continuing house price inflation. Since then, house price inflation has slowed, while construction costs have increased by 5% in the last year alone. As a consequence, some landowners can’t sell for a profit, nor can they develop at a profit, so they are essentially sitting tight for now.”
The Colliers chart shows residential consents for Auckland at 11,629 for the 12 months to April, which was up from 10,226 in the previous 12 months, a 13.7% rise. Statistics NZ’s breakdown of residential sectors is national, so I can’t show a comparison for apartments in Auckland.
The apartment sector
However, Colliers has monitored the supply of apartments, a sector in which it has become more active in the last 3 years.
It shows 10 apartment projects completed in the December 2017 & March 2018 quarters, 75 under construction and 28 at the marketing & design stage.
Looking forward, Colliers estimates 57 projects completed in 2018 & 2019, resulting in the addition of 4534 units. For the following 2 years to 2021, it estimates 46 projects & 4122 unit completions.
The notable feature of this is the decline in the central city’s dominance of the apartment market – down from 59% to 55% of supply by 2021, while suburbia rises from 16% to 21% of supply and the city fringe slips a point to 24%.
It puts the median apartment sizes at 97m² for 2 bedrooms, 146m² for 3 bedrooms and median asking prices at $10,955/m² for 2 bedrooms, $11,877/m² for 3 bedrooms. Those figures are for “all individual developments tracked”.
Colliers has identified 31 apartment projects that won’t proceed under original plans. 6 of those sites are being remarketed for sale or have sold, 10 have been abandoned under current proposals and 15 have been deferred.
Colliers also looked at suburban growth areas Hobsonville Point, Manukau & Mt Wellington and found median floor areas for terraces & detached homes of 113m² for 2 bedrooms, 162m² for 3 bedrooms, and median asking prices of $7462/m² for 2 bedrooms, $6571/m² for 3 bedrooms.
Attribution: Colliers report & release.