Nick Goodall: A third of consents not acted on

At CoreLogic, we've also been investigating the supply side of the current property market environment. Photo / 123RF

By Nick Goodall

Statistics NZ recently released a data series for residential dwelling completions, with the aim being to better understand the level of residential construction activity across the country.

The series is experimental at this stage but it looks to be a good progression from the traditional measure of construction which, until this point, has been building consents issued.

The new series provides a useful measure of the estimated lag between consent and completion (10 months on average) as well as the proportion of consents that are cancelled (2 to 3 per cent).

At CoreLogic, we've also been investigating the supply side of the current property market environment.

To provide a deeper understanding of what's going on, we created a measure of net change in residential property stock. Using our rich historical property data, we've created snapshots of how many properties exist(ed) on a monthly basis for the last 20 years.

The results are alarming.

In Auckland we see that while there were roughly 10,000 dwelling consents in 2016 (9000 in 2015), the net increase in stock was only 6000.

A key contributor to this difference is the fact that urban renewal, which is what's required considering the limited amount of land available, requires a property, or properties, being demolished to build more multi-unit properties.

Consents (whether issued or completed), don't take the loss of the original property into account.

At a time where more multi-unit dwellings are being built than before, this shortcoming in the statistics is a significant issue.

Only four years ago, 80 per cent of consents were for single unit, stand-alone dwellings. In June this year that figure dropped below 50 per cent.

So, when you hear about the level of construction getting closer to what's required, keep this in mind. Because, ultimately, it means we're talking about the supply problem being worse than many thought.

And while demand has been reduced lately, mostly due to the unavailability of credit [home loans], it's unclear how long this will last.

Migration is still at record levels and with good job growth in Auckland and a strong outlook for the economy, there will likely be a solid floor under the market, with people continuing to buy for the long-term benefits of property ownership.

We will watch with interest as the political parties vie for votes in the lead-up to the election. But it looks like any proposed changes to the housing market will play around the edges without tackling the problems head on.