This year will see the highest number of new apartments hit the Auckland market in over a decade. Colliers International’s Auckland Residential Development Report found 2770 new apartments are due to be completed this year, and a record-breaking 3840 apartments are due to be completed in 2018.
The previous record was 3600 apartments, which were finished in 2005. Colliers research director Alan McMahon said it was a challenging time for residential development and this peak came in spite of high building costs, a tight labour market, and more selective bank financing to developers. The report found 31 Auckland apartment projects were completed so far this year, 68 were currently under construction, and 53 were in the marketing and design stage.READ MORE: * Warning that NZ is heading for peak construction as banks tighten purse strings * Is it the Kiwi way? Over 1000 apartments planned for Auckland’s North Shore * Reserve Bank warns house prices could resume climb on supply shortage * Hot housing market prompting ‘risky’ behaviour McMahon said the vast majority of those in the marketing and design stage would be completed, but less experienced developers may see their projects get less funding from banks and the projects could fall victim to rising construction costs. McMahon’s division often consults with developers to help them forecast house and apartment pricing. He said developers have told him banks were being more selective in the projects they would help to finance.
“The overall effect is that at the margins some developments won’t succeed and that won’t help the current situation, because we need as many new dwellings as we can get.”
McMahon said the surge in development was not surprising given the demand for housing.
“What’s surprising is the speed at which suburban development projects are being accepted by the public… more and more people are prepared to live in apartment buildings in the suburbs.”
The Colliers International report found the average asking price for a one bedroom apartment in the CBD developments was $676,100, while apartments closer to the suburbs tended to be cheaper.
McMahon said while CBD developments tended to be bigger and higher, the majority of the new developments were on the city fringe and suburban areas, and were largely pre-sold. A monthly suburban performance report on realestateinvestar.co.nz found Parnell in Auckland was seeing the steepest median growth for studio units, up 143.4 per cent from last month. Auckland Central, Browns Bay, and Eden Terrace were seeing the next highest growth in unit housing, but at less than half the level Parnell was. There are plans to build 1000 new apartments on the North Shore between now and 2019. The Stonefields neighbourhood has several apartment developments under construction as part of a $2 billion project to create a new suburb in East Auckland. The Bellus Apartments are being built within Stonefields and will have 80 apartment units complete at the end of the year. Another source of the supply would come from large CBD developments like The Antipodean which would bring over 160 new apartments to the market next year, with units costing up to $1.8m. Massey University banking expert David Tripe said banks could be taking lessons from the Australian market and applying them to Auckland projects.
Tripe said there have been suggestions the private housing market has “overheated” in cities like Brisbane and Melbourne because of too many housing developments.
“Certainly there has been a bit of a pull back by the banking sector as a whole and it certainly isn’t so they can finance projects in Australia instead, it’s probably because they’re a bit nervous about projects in Australia and there’s some nervousness about projects in New Zealand as well.”
Tripe said lenders were understandably cautious about the huge bubble in property prices that would eventually burst, and that bubble was sustained by a shortage of housing.
McMahon said the reduced capacity of the high rise construction industry has contributed to the shortage.
By tightening financing, banks would “partially ease the escalations of construction costs” but do nothing to address the imbalance between supply and demand of residential housing, McMahon said.