Budget 2015: Auckland housing – more land for development

“We welcome the Government’s announcement that 450 hectares of Crown land will be brought into play for development of housing,” says Richard Forgan, PwC Budget 2015 Leader and Partner.

This is adding to the toolkit to address the issues of the Auckland housing market, but the underlying issue is population growth. Auckland’s population is surging on the back of movement from the regions and as the preferred destination of immigrants and returning Kiwis.

LVRs, Speculator’s tax
The Reserve Bank’s LVR approach – targeting loans made in Auckland and to investors rather than owner-occupiers – can be expected to contribute to restraining demand although it does so by making property ownership more expensive. Some of the speculation in the current market will also be damped a bit by the new ‘bright line’ tax on properties sold within two years, along with the requirements for foreigners to register with tax authorities. These can act in the short term, but do not address the key population growth which is driving demand.

SHAs, Crown land
On the supply side, Government is continuing to push Special Housing Areas hard and now bringing some of its own land into the frame making it available for developers. This follows models being trialled in Christchurch for accelerating affordable housing developments. It will be useful, but it is not large in terms of the imbalance between
demand and supply.

What else could be done?
Urban regeneration: Significant investment has been signalled via Tamaki Redevelopment Corporation, with the transfer and potential redevelopment of over 2,500 Housing New Zealand properties. Other parts of Auckland would benefit from similar approaches.

Do density better: Restrictive rules around height and density in popular areas limit land supply, push too much responsibility onto greenfields developments to address the problem and actually financially penalise landowners in ‘protected’ suburbs in the long run.

Open up the building supplies market: We are a small market for building products with an NZ-specific regulatory regime for product certification. As such, the costs of market entry limit variety for products and reduce price competition. The food we eat and the medicines that cure us are subject to a joint NZ/Australian standard so why aren’t building products?

Align infrastructure investment with targeted housing areas: The Auckland Council is right. Housing without supporting investment reduces the attractiveness of greenfields sites to developers, which reduces supply. The success of the greenfields areas in the south of Auckland will be utterly dependent of the ability for the transport network to connect people’s homes to their places of work. The capacity driven by the City Rail Link, as well as the Southern Motorway projects are critical to the commercial attractiveness of these developments, yet the CRL is being delivered 5 years later than the Southern Initiative if the Government’s timeline for the project is accepted.

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