Archive | Housing

Residential statistics – some taken with salt, some seriously

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.

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Councillors air their views, oh, and agree to housing taskforce steering group

It could have taken Auckland Council’s governing body a couple of minutes yesterday to tick off the appointment of a 10-member steering group to ensure the efforts of the mayoral taskforce on housing isn’t lost.

But that’s not the way councillors work. Their habit is to talk about what they want to talk about, not deal efficiently with the business in front of them.

Their questions & debate, for a couple of hours, had nothing to do with who would be on the steering group, didn’t get to grips with the roles of either the steering group or the taskforce, but did venture near some of the direction mayor Phil Goff wants to lead the council on housing issues.

The steering group members, all but one from with the council & council-controlled organisations, will be: The mayor, Phil Goff, deputy mayor Bill Cashmore and 2 councillors, planning committee chair Chris Darby and regulatory committee chair Linda Cooper; council chief operating officer Dean Kimpton, strategy chief Jim Quinn, finance & policy director David Wood from the mayor’s office, Independent Maori Statutory Board chair David Taipari, and 2 senior managers from Auckland Transport & Watercare Services Ltd.

The targets: council process, and central government

The taskforce, on the other hand, drew a wide range of participants from the private sector who identified 2 council-related issues and another which would take considerable negotiation with central government.

The mayor said that if he’d led the taskforce off on some of his pet housing subjects he would have got nowhere: “I had some battles with the minister of housing development [I think that means minister of building & construction, Nick Smith], he didn’t want people there, but we were able to turn him & the Government around, they were able to attend as active participants and they were very active.”

There was a time when relations between central & local government were abysmal, but since the late stages of the last council term Auckland & Wellington have (almost) stopped talking past each other and have jointly confronted a number of issues – though still with a long way to go before regular sensible discussion & resolution occurs.

For instance, Mr Goff said: “Because we don’t have independent revenue, I keep having to go cap in hand to the Government. But the last council, getting the unitary plan through – that gives us credibility to say we’ve got the planning, let’s get on with the infrastructure.”

Topic was steering forward, but talk was about taskforce

The original recommendation before the council yesterday was for the steering group to report to the governing body “periodically”. This was changed to 6-monthly. The mayor talked about the taskforce being brought together again, which he said participants were enthusiastic about. However, that wasn’t up for debate.

The talk yesterday should have been about the taskforce’s recommendations, and who would be best to advance work on them. Instead, councillors commented on taskforce points – fine, but ultimately useless.

The steering group’s primary tasks will be to lead change in council processes that affect housing, ensure the zoning changes resulting from the new unitary plan are effective in opening up more scope for housing development and – the biggest task – negotiating change with the Government.

Jared Boow, housing portfolio manager in the mayor’s office, said in his report to the governing body on the taskforce, it identified 3 key areas where changes are needed to deliver more homes in Auckland:

  1. Remove impediments to the construction sector developing at scale, including identifying investors who can build through the dips to lift construction in the peaks
  2. Unlock the availability of land with appropriate zoning & infrastructure, at the right price, to enable more development, faster, and
  3. Deliver efficient & certain planning, consenting & risk management to reduce costs, enable innovation in construction & delivery and create communities with high quality built & urban form outcomes.

Tactics & systems

Within each category, he said, the taskforce identified a mix of ‘tactical’ interventions that could be done soon, without significant legislative or policy change, and ‘systemic’ interventions that participants believed might take longer to deliver but which would have the potential to have a large & long-term impact on housing supply outcomes.

“In their view, ‘delivering these interventions will require partnership & collaboration between Auckland Council (and its wider family of organisations such as Auckland Transport & Watercare), central government and the development sector’.

“They also point out that focusing on short-term interventions without addressing systemic challenges will not fully address Auckland’s housing supply challenges. They note that their recommended ‘tactical’ changes ‘can help create the platform for deeper policy changes, but are not a substitute for more fundamental change in a market that has not built enough homes for several decades’.”

The taskforce’s report contains 33 recommendations. Mr Boow said 16 of those recommendations were aimed at the council, and work was underway on two-thirds of them.

Among councillor comments & responses:

Cllr Cathy Casey looked for innovative ways to build cheaper housing: “I don’t see that in here [the taskforce report]. My worry is there’s an awful lot in here to do and no prioritising.”

Mr Boow: “One of the first tasks for the steering group is to prioritise.”

Former deputy mayor, Cllr Penny Hulse: “Is the list of to-dos to be done by the taskforce?

Mr Boow: “One thing we didn’t want to do was reinvent the wheel. 16 of the 33 recommendations are aimed at council, two-thirds are work that’s underway.”

Mr Goff said there were 2 fundamental points: “What we didn’t want to happen was to have a report that came out and everyone said, ‘Yep, great ideas’, and then it sat on the shelf. And 2, to ensure there is advocacy to central government. This was a high-powered group and they have said, can we reconvene in 6, 12, 18 months.”

Cllr Hulse: “The missing piece of the puzzle is still the Government & private sector response to this. Was any thought made to appoint an inter-party group?

Mr Goff: “We have asked the Government to appoint a points person to be responsible for liaising with us, and that should be the minister in charge of MBIE (the Ministry of Business, Innovation & Employment). The private sector is a little harder because there aren’t always organisations available. I think the value of the taskforce is the followup that we have agreed to do.”

Cllr Wayne Walker was concerned at the limited nature of what’s on the table: “’Meets the demands of the rate of population growth’ – what are the demands? What hopes do we have of influencing that? Very long-term assets that are normally funded intergenerationally… I don’t know if we’re going to get anywhere, so I endorse the comments Cllr Hulse made about the involvement of the Government in this.”

Mr Boow: “A role of the steering group would be advocacy to government.”

Cllr Walker: “Is this taskforce going to be making some observations around population growth, because you don’t know what you’re going to be responding to?”

Mr Goff: “I’ve got views on demand management & tax, and I wouldn’t have got anywhere with those because they’re not views shared by the Government. We decided to concentrate on things we could get movement on.”

Cllr Richard Hills: “Greenfield tips the balance away from the unitary plan. I think we need to be a little more creative. How are we going to be able to use the Panuku developments better? What can we do to make sure it’s first-homebuyers or affordable housing only, to make sure it’s not just investment properties?”

Council executive officer Megan Tyler on greenfields: “This report doesn’t sit in isolation of any other work you are doing. Rebalancing will be part of the work you do through the long-term plan. I see a great opportunity for you over the next 12 months to decide where the funding of infrastructure is best put.”

Cllr Casey: “One recommendation I don’t think is housing at all and that’s to implement congestion charging. That’s a long way away from affordable housing.”

Mr Goff: “That’s a recommendation of the taskforce. They are what they are. There was broad support for a fuel tax, broad support for a congestion tax. So the reason that it is in a housing report is to enable affordable housing, you need decent transport. There is currently a joint working group between council & government on transport charging.”

Cllr Casey: “This is a wide-ranging remit for a taskforce. The taskforce wasn’t a council report, even a mayoral report.

Mr Goff: “I wasn’t in the position to say no, you can only recommend what we like. It’s not for us to say what should or should not go into this report.”

Casey: “How do we get involvement?”

Cllr Alf Filipaina: “The governing body will end up deciding what we will be pushing for.”

Cllr Bill Cashmore: “We’ve done some of the work already – the unitary plan, the infrastructure shortfalls have been identified and the highlight numbers have been worked through by our staff.

The insufficient builds for many years have probably created a 30,000 shortfall, and that is causing stress. Immigration has also caused stress. We need to know the tools in the toolbox. What we do know is the investment needs to increase if we are to provide more affordable housing and more housing in this city. The financial arrangements we’ve announced in the last 2 weeks I’m not going to take a set position, I want to understand what all the tools are and what the options are. But the decisions to be made by this council? We will make.”

Cllr Hulse – “having lived & breathed housing for the last 6 years and being somewhat jaundiced” – supported putting the mayoral stamp on the taskforce and said it was well overdue: “What I’m hoping is we might end up with a more sophisticated approach. Deputy prime minister, now prime minister Bill English has had reports like this over the last 2 years and there’s been not a lot of action. What are the key changes that would actually change the central government approach to this? The council has almost wrung the cloth dry. But without the Government agreeing to put some serious building targets in place, and what I think is a seriously marginal Housing NZ building rate, if the Government are to make a serious difference they need to make the funding available for infrastructure.

“If we’re going to get houses built we’re going to have to fund infrastructure. We need to change some of the banking methodology and the structure to do that. Developers – how fine many of them are – are there to make money, and good on them. But if the banking sector will not allow that to happen, actually the banking sector needs to assist with that and the Government needs to assist with that.

“But the bit I’m interested in is, who’s going to be sitting around the tables in Wellington. I hope that is what the taskforce is focusing on.”

Attribution: Council governing body meeting.

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Cabinet approves insulation & smoke alarm regulations

Cabinet has approved new regulations detailing new insulation & smoke alarm requirements to implement changes to the Residential Tenancies Act.

Building & Housing Minister Nick Smith said: “These new tenancy regulations will make 180,000 homes warmer & drier by requiring insulation, and 120,000 safer by requiring smoke alarms. We are releasing the details of these new requirements now to give landlords & tenants as well as insulation & smoke alarm providers as much notice as possible to prepare for the new requirements.”

The Residential Tenancies Amendment Bill was reported back to Parliament on 8 April. It requires rental homes to have smoke alarms by 1 July this year and insulation installed progressively by 1 July 2019.

Dr Smith said the most significant change to the draft insulation regulations was not allowing retrofitting of conductive foil insulation: “The risk with retrofitting this form of insulation occurs when the foil becomes live from accidental stapling into wiring, and has resulted in deaths in New Zealand & Australia. Other changes include expressing the required insulation levels in ‘R’ values rather than thickness, and requiring insulation to be installed in accordance with NZS 4246: 2006.

“The most contentious issue was whether homes that had insulation – but not up to today’s standard – have to be upgraded. These regulations are not going to require an upgrade because the costs exceed the benefits and, inevitably, the costs are passed on to the tenant.”

Links: Tenancy Services: Warm, dry, safer
The Residential Tenancies Regulations(pdf 333.81 KB)
Cabinet paper Residential Tenancies Regulations(pdf 930.3 KB)

Attribution: Ministerial release.

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Fletcher chief’s direction debated hard then supported, one aim is big lift in house & apartment construction

Fletcher Building Ltd chairman Ralph Waters confessed at the company’s annual meeting on Wednesday that there had been rigorous debate among the board about the direction the chief executive of a year, Mark Adamson, was taking the company, but said: “We are all aligned around the direction Mark is taking”.

That direction has 3 prongs to it: continuing to tidy up the operations of existing businesses, lifting their horizons and dismantling the silo thinking.

“We believe the share price indicates support for the platform & growth plans,” Mr Waters said.

One big enabler of change has been the reduction in Fletcher Building’s gearing from 37% to 33%, with further reduction expected, putting the company in a stronger position for capital expansion should the opportunity arise and minimising its exposure to volatile financial markets. At this stage, however, Mr Waters said the company wasn’t looking for major acquisitions.

Mr Waters is in his last year with the company, which he joined 13 years ago as chief executive, shortly after its exit from being part of the Fletcher Challenge conglomerate. He retired as chief executive in 2006, became a non-executive director then took over as chairman in March 2010. He told the annual meeting he was due to retire in 2015, but intended to quit at the end of 2014.

An Australian engineer who came to New Zealand after a takeover ended his time as managing director of Email Ltd, he was appointed chairman of Woolworths Ltd last November and, in March, became chairman of the organising committee for the cricket world cup, which will be held in Australia & New Zealand in 2015. He’s also been chairman of Fisher & Paykel Appliances Holdings Ltd and a director of Fonterra Co-operative Group Ltd & Westpac NZ Ltd.

Mr Waters said Fletcher Building’s outlook for the 2014 financial year was for operating earnings of $610-650 million ($569 million in the year to June 2013), but the strength of the $NZ against the $A could cost $15 million, and more if the kiwi strengthened further.

Mr Adamson’s FB Unite project has been aimed at lifting the group’s technological performance, enabling customers to deal more with its companies online, cutting down the silo walls and opening group companies to more organic growth opportunities. That project is expected to save the group $75-100 million/year pretax by 2015.

He said the group would maintain its focus on Australia & New Zealand, and commented that largescale acquisitions “are not a priority”.

He began simplifying the business, starting with the steel division then moving on to pipes, but the other big local project has been to ramp up Fletcher’s foundation business, house construction.

Mr Waters told a questioner at the annual meeting Fletcher Construction built 300 houses/year, but when Mr Adamson arrived last year he asked: ‘Why not 3000?’ “He’s going to try to have land available for 1000 by the end of the year.”

The company’s most obvious development has been Stonefields, where sold the old quarry, bought back the serviced sections from the developer and has been steadily raising a mix of houses. It’s just completed the Saltus apartment complex and expects to build more.

“We have several more apartment buildings planned for Stonefields and we see further opportunities to expand in the housing market in Auckland,” Mr Adamson said. “Bringing new housing solutions to the market will be critical. Auckland is going to need new standalone communities with a mix of terrace & standalone housing.”

One development already lined up outside Stonefields is on the Manukau golfcourse. The club is moving to a new course on cheaper land and Fletcher Construction will build 1000 homes over the next 6 years.

“Golf clubs are struggling to keep their membership. They are sitting on huge tracts of valuable land. This is not the only golf club we’ve been talking to in Auckland. The clubs don’t disappear – they move somewhere else where there is less demand for housing.”

In Christchurch, he sees construction lifting as the repair programme slows.

Attribution: Annual meeting.

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Quantity surveyors offer help with new insurance form

The Institute of Quantity Surveyors has launched a residential “reinstatement estimate” form in response to high demand from homeowners seeking accurate rebuild costs by construction cost specialists in the face of new house insurance policies.

Homeowners are now required to provide “reinstatement valuations” for the new “capped-sum” house insurance replacement policies – the maximum the insurer will pay if the home needs to be repaired or rebuilt.

Institute chief executive John Granville said today the form, endorsed by the Insurance Council, was designed to provide homeowners with an assurance of best practice in the calculation of a correct reinstatement cost estimate on their residence. While all NZIQS-qualified quantity surveyors are construction cost specialists, the form is sanctioned for signature only by an NZIQS-registered quantity surveyor.

Some insurance companies also offer online calculators to work out reinstatement values. However, Mr Granville said it wasn’t a simple process and didn’t cater for many homes with special features.

The institute’s website has the reinstatement estimate form and also lists registered quantity surveyors available to undertake residential work.

Link: Institute of Quantity Surveyors

Attribution: Institute release.

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UK cheap quality homes contest launched

Published: 2 April 2005

English Partnerships has launched a design for manufacture competition, selecting 4 sites for the pilot programme to build sustainable, well designed, good quality homes for around £60,000.

The redevelopment agency will invite organisations to bid for the right to build on one or more new developments on sites owned by English Partnerships and other public sector partners. About 470 homes will be built on the initial pilot sites.

“This competition will stimulate fresh thinking in the way we construct our homes and demonstrate how we can build more cost-effectively without sacrificing quality,” English Partnerships’ corporate strategy director, Trevor Beattie, said.”Construction costs have continued to rise above the rate of inflation at a time when we need to be building more homes for our money, not less. By using public sector land to provide the sites, developers will be able to focus all their efforts on achieving cost efficiencies and increasing design quality. Once we have established how these efficiencies can be made we expect them to be adopted across the whole supply chain.”A minimum of 30% of the homes will be built for a target cost of £60,000. The remainder will comprise larger & smaller units which will be built using equivalent processes & cost efficiencies. The figure of £60,000 is a target construction cost only, not a development cost or sale price.The competition will be open to all types of building methods, suppliers and per cent materials but, as a minimum, all homes must follow the principles of the Urban Design Compendium which English Partnerships & the Housing Corp published in 2000, and achieve the BREEAM Eco Homes standard of very good or equivalent.The initial pilot sites are mainly in South-east England growth areas and are part of larger schemes where infrastructure is already in place. Each competition site will include a range of housing types & tenures.As part of the process, English Partnerships will also be seeking opportunities for public participation & debate. It expects work on the first homes will start in the first half of 2006.

Websites: English Partnerships design for manufacture page



Earlier story:

19 March 2005: English working hard on good regeneration design


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