With the General Election to be held on 23 September, New Zealand’s National Government remains under heavy pressure for failing to address the country’s worsening housing shortage, especially in Auckland.
Last week’s dwelling consents data from Statistics New Zealand revealed that dwelling consents across country in July continued to fall well short of population growth, with just 30,404 dwellings consented over the year and a weak trend present:
This level of consents pales into insignificance against the hyper population growth, which has seen New Zealand’s population surge by more than 100,000 people, driven by a record high 72,300 net migration:
In the trouble hot spot of Auckland, construction momentum has continued to slow, with just 10,051 dwelling consented in the city over the year and a weak trend present (see first chart above).
According to CoreLogic, Auckland received 35,772 net migrants over the past year, around half of New Zealand’s total:
Whereas total Auckland population growth was 44,500, again around half of New Zealand’s total:
Auckland’s housing shortage was already estimated to be at least 30,000 homes, with 1250 additional homes need to be provided each month just to keep pace with the region’s migration-fuelled population growth.
So clearly, Auckland’s housing market is set to worsen following the release of these figures, causing further pressure for the pro-mass immigration National Government.
Indeed, Westpac economists today have argued in their weekly commentary that Auckland’s housing shortage is going to get worse before it gets better:
New Zealand is wrestling with a large and growing shortage of houses, with the shortfall centred squarely on Auckland. However, strong headwinds in the construction sector mean that building levels are likely to rise only gradually…
Auckland’s population has risen by much more than expected, and home building has not kept pace. This has seen housing market tightness in Auckland rising to acute levels, reflected in a sharp increase in the average number of people per dwelling.
Looking ahead, Auckland’s population is set to continue growing at a rapid pace, with around 290,000 more people expected to settle in the region over the coming decade. Coming on top of the existing tightness in the Auckland housing market, this signals the need for a significant number of new homes in the region.
Despite the growing need for new building in Auckland, headwinds in the construction sector mean that we’re expecting only subdued growth in residential construction over the coming year. And recent developments indicate that growth in construction could be even softer than we’re assuming.
Several factors are providing a brake on residential construction. First is that developers are encountering increasing difficulties accessing finance. This is particularly important in Auckland, given the greater prevalence of medium to high-density housing developments, for which finance can be a significant hurdle.
At the same time, capacity in the construction sector has become stretched following strong increases in building activity over the past few years. This has resulted in building costs rising at a rapid pace, with the cost of building a new home in Auckland up around 40% over the past five years alone…
Looking at the longer-term trend, annual dwelling consent numbers have essentially flatlined at just over 10,000 since the start of this year. And the most recent figures actually point to some softening in building activity over the coming months. Importantly, dwelling consents numbers have plateaued at levels that are still well short of what’s needed to keep up with population growth. Consequently, it’s likely that tightness in the Auckland housing market will get worse before it gets better…
Last week’s Colmar Brunton Poll showed that Labour had overtaken the National Government for the first time in a decade, running on a platform of fundamental housing reform and lower immigration:
The monthly New Zealand immigration data will be released on Thursday 21 September – just two days before the General Election. If it records yet another record immigration intake, it could prove the final nail in the Government’s coffin.