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Does Auckland really have a land supply shortage?

The annual Demographia Housing Affordability report is out – this time with its forward written by Bill English – and just like every other Demographia study it suggests that more land needs to be opened up for urban sprawl in order to bring down housing prices. There are a number of different flaws in Demographia’s analysis (for example it’s based on pre-tax income, it ignores the infrastructure costs of servicing sprawl and it ignores the additional transport costs of living on the urban edge) but I’ll ignore those for now, instead focusing on a pretty simple question – does Auckland really have a land supply shortage?

I think it’s fairly widely agreed that an important factor in Auckland’s rising house prices is a lack of housing supply: simply not enough dwellings are being built. The Auckland Plan talks about the need to build around 13,000 houses a year, every year, over the next 30 years and the fact that we’ve only been building around 3,000 dwellings a year in recent times:dwellings-approvedWhat you can also see in the graph above is that Auckland was able to build its required amount of housing during the middle of last decade (the very years when housing prices increased the fastest from memory) and that the number of detached dwellings as well as the number of apartments built per year has fallen dramatically since about 2004. As large greenfield areas such as Silverdale North, Flat Bush, Hingaia, Hobsonville and parts of Takanini have become available for development over the past six or seven years, it’s interesting that we have actually seen a decline in detached structures built rather than a further increase.

Furthermore, Auckland has a lot of areas for future greenfield development working their way through the planning process at the moment or already operative. This is shown in the Auckland Plan’s development strategy map – with yellow indicating “pipeline” (which I assume means that it’s in the process of becoming operative) and “operative” (ready to go I assume) greenfield land. Operative is shown in red and pipeline land in yellow: future-urban-areasIn fact, the Auckland Plan states that the biggest chunk of growth in the first 10 years of the Plan will take place in these areas:aucklandplan-firstdecade
Personally I think it’s likely that Auckland won’t see anywhere near that amount of greenfield development over the next 10 years – not because there won’t be enough land available (as I said the process for opening up that land is underway already) but rather because there’s unlikely to be the market demand for houses in these peripheral locations.

But in any case, I don’t think that supply new houses in these areas is likely to do much about housing affordability because there’s actually not a housing affordability problem in peripheral parts of Auckland. For example searching Papakura area properties under $400,000 returns not far off half the houses for sale (224 out of 569) in that area:papakura-under400k
Auckland’s average house prices are dragged up by the extraordinary prices paid for places in the inner suburbs because that’s seemingly where people really want to live. If there’s heaps of available greenfield land on the urban edge, a significant number of relatively affordable houses already available on the urban edge and the planning in place for a huge amount more greenfield land on the urban edge, I just can’t buy into the hypothesis of Auckland having a land supply shortage.

What we have is a housing supply shortage, particularly in the inner suburbs where people want to live. And the way to fix that is by making intensification easier through getting rid of minimum parking requirements and getting rid of density controls. It’ll be interesting to see whether the Unitary Plan tackles this real issue rather than the non-existent land supply shortage spun by property developers who want to make a pile of money by bringing their land inside the urban limits.

39 comments to Does Auckland really have a land supply shortage?

  • Riccardo

    How do these right whingers reconcile the desirability of inner suburban land? And continue to deny funding to public transport when it is very clear that much of the capitalised value of inner areas is accessibility (notwithstanding congestion on roads)?

  • Sacha

    Changing planning rules to allow denser housing is crucial, but so is regulating banks and financiers who require higher deposits for attached dwellings than detached ones.

    Addressing our national property fixation that takes money away from productive business investment will take a lot of political will.

    • ahoopernz

      Is that a fact? That one requires a larger deposit for an attached house or apt? Madness!

      And yes, Kiwis really need to think bigger than houses when it comes to investment.

      • It is more or less, generally you only need 5% deposit for a single title house but 25% deposit for a unit title terrace, flat or apartment. The irony there is that you can leverage the crap out of yourself to get into a house that is supposedly less risk for the bank. $50k down allows you to potentially borrow for a million dollar house, but only a $200k apartment. So you have people effectively forced into $500k+ mortgages when something half that size might have done them just fine if the bank allowed it.

        It’s starting to change and the banks are now offering better terms to established property owners looking for investments or with other securities (nominally as little as 5% on a case by case basis), but still much higher for first home owner occupiers.

        I think the banks will continue to ease up simply because they can see that is where the demand is and where they can make money.

      • Greg N

        “And yes, Kiwis really need to think bigger than houses when it comes to investment.”

        Our houses are quite big enough now thank you, we don’t need anything bigger…

        What you really meant was “Kiwis really need to think smaller & other than *just* houses when it comes to investment.” right?

      • Dan

        There are tax incentives for investing in housing that don’t exist for other sectors. It’s not just a matter of people being small minded — change the incentives and people will start changing their investment habits.

        • Greg N

          Dan – If I talk to the property people and they will deny the fact that they get special treatment tax wise.

          But secondly, the small mindedness is not only property only investors, but it starts with the Politicians who enact these laws that allow distortions that favour property investment over other classes of investments.such as those you allude to.

          But people still need to start thinking smaller houses even if they just buy houses these McMansions that they all seem to want these days are costing a fortune to both build and in lost opportunities for compact communities.

          Time for a dramatic rethink starting with Pariliament on down via the IRD.

  • Gazzamac

    the best way of combating affordability is for another north island city to be competitive with auckland, damping the need and demand for expansion the two most likely candidates would be Tauranga, Thames, or Whangerei. Build a harbour bridge in Whangerei and encourare growth there, Build a harbour bridge to Mt Maunganui to Matakana island and you get oportunity for staggering growth. So inconclusion the solution to Aucklands growth problem isn’t Auckland…

    • JohnP

      Thames? I’m guessing you meant Hamilton? Anyway, Hamilton and Tauranga to a lesser extent are growing pretty fast, but they’re each 1/10th the size of Auckland so they’d struggle to take a big proportion of the growth.

  • Exaucklanderinsydney

    I enjoy reading this blog and I’m not complaining at all, but this site is turning more and more into a housing blog

    • JeffT

      The two are so intertwined though, aren’t they?

      • bored

        feel free to complain, it feels good. you dont have to agree with everything on here..

        i feel the same thing in that this blog is starting to dilute itself with off topic issues that are better served on other blogs. Although i haven’t seen a post regarding Amsterdam or Vancouver for a while…

      • JeffT

        Er sorry. I meant to say transport and housing are entertwined. What’s happened to my brain!

    • Because, more than ever, Transport and Housing are inextricably linked. One decides the other. To see the changes we want to see in transport we have to see the changes we want to see in housing and vice versa.

      • bored

        no it doesnt. housing is only one of the many things that has an effect on transport.

        these are the sorts of transport issues that we should be discussing….

        http://news.sky.com/story/1041571/blast-resistant-train-designs-revealed

        • Mr Anderson

          Would it be possible for you to make a comment once in a while that wasn’t blatant trolling?

          • Bored

            i disagreed with the comment posted by James that stated….. “Transport and Housing are inextricably linked. One decides the other”

            This comment is not quite correct as i stated. Why is that trolling?

            Blast Resistant train design was intended as some light comic relief….. Although on further review there has been a number of posts in the past regarding the design of the new EMU trains and some particular posts spent a lot of time relating to the what the colours would be!!! riveting stuff.

            Do you think that getting blown up on the way to work in the morning commute is a factor for wether or not people use public transport in Madrid or London or Japan? There a number of posts that can be found on the WWW that cover this and could well be discussed on similar blogs as this in those respective areas.

            stop slamming comments just because it doesnt just confirm with the point of view of the ‘click’

        • Matt Lee

          I disagree.

          Living in Sydney, there is a clear choice between living central (and paying high rent) but not needing a car;
          or living further out to save money, but having to drive if u want a life.

          That’s the direction I see Auckland heading in.

          • Driving is a privilege that not everyone has access to – which the crux of the problem. And often, those who can’t drive also can’t afford to pay high rent for better accessibility. What do we do for these people? Forget about them, and let them struggle to access goods and services out in the suburbs?

          • Matt Lee

            Quite right – I don’t think I put that very well. The “necessity” of car ownership impoverishes many people.

  • Greg N

    “…getting rid of density controls”
    Already under way in the UP.

    If you read the CCFAS Supporting Report Section 5.2 – pages 84/85 (paragraphs 244-246), discusses Residential upzoning changes in the Unitary Plan to support increased density.

    In a nutshell it says no density limits on apartment and terraced building within 250m of metropilitan, town and local centres zone, when these are on the Frequent Transit Network.(FTN).
    Height limits of 6 levels if it adjoins a Mteropolitan centre, 4 levels for town and local centres will apply. Apartments and terraced housing is the intended developments here.

    For sites further away from these FTN “centres”, which are on a FTN, and within 250-500 meters of the of centres on the FTN, and to all other areas within 500 meters of a FTN (that don’t have heritage/historic or character classifications) – which are over 1500m2 will not have the standard residential lot density rules applied when 3 or more units are built on the site.
    Height will be limited to 8.5 meters.in these zones. Permitted development in this zone is a mixture of terrace, small lot detached, low-rise apartments.

    So, the ability to do intensive “local” developments appropriate for the market is coming to most of Auckland “near” a FTN whether we like it or not.

    • Greg N

      “In a nutshell it says no density limits on apartment and terraced building within 250m of metropilitan, town and local centres zone”
      Opps, remvoed by mistake this rider – “When site > 1500m2″

    • JohnP

      Thanks for pointing that out Greg :-).

      This really brings home how the Auckland Unitary Plan is likely to direct development close to transport networks. I.e. the path Auckland takes in the future (in terms of housing a growing population) will be determined by our (public) transport routes.

      • Mr Anderson

        Presumably that information is based off a fairly early draft of the Unitary Plan. It’ll be interesting to see whether that’s all still in the discussion document that comes out in March.

    • Interestingly I went to a council forum thing on the unitary plan a few months ago and every single person at my table, who seemed to have came from pretty much every walk of life said we need more intensification and that 250m from a metropolitan/town centre was far to small with most suggesting 500-1000m as more ideal.

      • Greg N

        Matt L,
        In the CCFAS supporting document, they talk about an example study of looking at GI town centre and how big a area you make the distance, 400m, 800m etc for intensification.
        [see section 5.2, page 86, paragraphs 253-257]

        They comment that taking a 800m “walking radius” distance (note this is “distance walked” at street level not everything within a 800m radius of the town centre as as not everything inside a 800m circle can be walked to in only 800m, so the “edge” of the circle is quite ragged and uneven – because it based on the actual track you have to take and the street layout you can walk in 800m), and going 50% more distance (800m -> 1.2km) they capture 145% more properties compared to a walking radius of 800m.

        This simple study does ignore the major fact that for GI,the north/western quadrant of the circle of the area is almost all uphill as its heading towards St Johns Rd/College Rd.
        - whereas the south half/eastern and north eastern quarters is almost all flat, so a 1.2km walk from GI to the western or north western edge is quite an uphill hike for most people, whereas its a mostly flat stroll for the folks on the eastern and southern sides. [sure the downhill walk is better, but again it may be too steep for many people to feel confident doing].

        So its a simple “make the waling circle of intensification larger” idea, that may not work as well for GI, but may work well for Panmure or other “flat” areas like say Newmarket where by encouraging a longer walk distance the catchment is increased a lot..

        However,the key idea is to have combination of quite compact town centres of up to 4 storeys and town houses/terraced houses – built around stations
        Rather than some hotch/potch and middle density “sprawl” over a 1 or 1.2km radius.

        The areas outside the immediate 250m-500m “centre” out to the walkable radius distance are intensified as well – but to a lesser level and only 2 two storeys height.

        By using that concept for all walkable station catchments that by 2041, the CCFAS study says 120,000 more people can be accommodated along the rail stations as centers for development.
        The bulk of these on the Western and Southern rail line stations..

        So thats what the UP talks about in the CCFAS document. Whether it comes to pass is another thing.
        Ones thing for certain the Urban Design rules for intensification have to be top notch for every development – with no exceptions – to ensure that the crappy looking and shoebox apartments downtown don’t infest these areas too.

  • Sacha

    “Whether it comes to pass is another thing.”

    Quite. This government is giving every sign of incentivising sprawl instead, and making threatening noises about what will happen if the Auckland Council does not bend to their will.

  • NCD

    Disagree. The strength of this blog is that the writers & readers see the bigger picture.
    If you’re bored, go read http://aucklandblog.co.nz for a change.
    You’ll be back real soon.

    • NCD

      Sorry, that was supposed to be a reply to @bored: “i feel the same thing in that this blog is starting to dilute itself with off topic issues that are better served on other blogs. “

  • Bryce P

    And from the Herald this morning:
    http://m.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10861066&ref=w7app

    45 Hectares of low density homes.

    • Greg N

      This deal has been in the pipeline for some time I think.

      The development density using the numbers the Herald talks about is about 22 houses per Ha, (if you assume 10ha of the 45 taken for roads, parks and other things, meaning buildable land is 35Ha)
      - which is not UP style intensification by any chalk..

      Average lot size at 35Ha/800 = 440 m2, if you build less homes = higher lot sizes, higher prices and probably more profit for the developer..

      Using the Heralds figures the “raw” land cost at $40m over 800 houses for each house of the “land” (before services and council levies/development contributions) will be $50K per house.
      [raw land cost is just under $1m per Ha).

      For comparison – Fletchers paid way more for similar size land at Stonefields (they paid about $400m for just on half the 110Ha quarry floor way back in the ’90s – mind you that included fully serviced land, consented, with roads, services etc

      If we assume the $50K per house land cost for this development is then doubled once the development, roads, services etc are all put in – so the “buildable” section price is $100K a section “cost” to Fletchers before buidling. Then a house on top of that, at what $250K? so total “cost” for the land + house would be $350K.

      Still be interesting to see how the UP will affect this developments eventual houses as the traditional detached houses may not be desirable to either AC or the market by the time the land is handed over for building.

      • I noted the concerns from the Conifer Grove residents assoiation on the loss of green space however that only really affects a small number of properties near the golf course itself, the rest it won’t make much difference to at all. One potentially positive outcome is that Conifer Grove could be connected directly back to Gt South Rd which means it wouldn’t have to rely solely on one bridge across the motorway for access.

        On the issue of the houses though, I think we need to be careful about complaining about intensification here as there simply isn’t the nearby services to support and its not like we are going to see a town centre pop up to support it. I realise it can be a bit of chicken and egg but again I’m not sure this is the right location.

  • Craig

    The property shortage fallacy is the product of a massive propaganda campaign by banks, realtors, property investors and other self interest groups. We do not have a shortage as such but a distribution problem where too much land is owned by property investors and developers and Government policy that restricts the supply, use and development of land. Most Kiwis are still in the denial stages as to the extent of this massive fraud.

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