ANALYSIS: News that the Government plans to fast-track consents for up to 55,000 houses will in some quarters raise the question, “Will this create an oversupply of homes in New Zealand?”
Housing Minister Chris Bishop revealed at the start of the month that the new homes would be delivered through the 44 housing developments listed as projects in the Fast Track Consent Legislation.
The legislation is the product of National’s coalition agreement with New Zealand First and their commitment to establish a fast-track one-stop shop for consents and permits.
It’s worth considering what impact the legislation will have on housing supply. Over the last 12 months, 33,000 dwellings were consented. So 55,000 new properties approximately equate to one year and eight months’ worth of new housing supply.
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If 55,000 homes hit the market all at once, the impact would be huge. The market would be flooded. However, a more likely scenario is that the new homes will gradually appear over the next 10 years, which would boost the current number of consents by 15%.
Where might these new houses be built?
Unsurprisingly, Auckland has the highest number of houses that could be built under this regime. Up to 17,530 more houses in the city could be fast-tracked through the consenting process. In Wellington, the tally is 8690 and in Canterbury, it’s 8385.
That makes sense since Auckland, Wellington and Canterbury are New Zealand’s three most populous regions.
But even though these three areas will get the most houses, that doesn’t necessarily mean they will reap the biggest benefit.
Opes Partners economist Ed McKnight: "55,000 new properties approximately equate to one year and eight months’ worth of new housing supply." Photo / Fiona Goodall
The figures show Otago will get the biggest supply increase per person, with a ratio of 26 houses built per 1000 people (in Auckland it’s 10 houses per 1000 people). Wellington and Bay of Plenty have the next highest house per population ratio.
It’s also apparent that some regions won’t see any lift. In West Coast, Southland, Gisborne and Marlborough, there are no housing projects eligible under the fast-track legislation.
Another way to get a sense of where an over-supply could occur is by looking at the location of the new houses within each region. In Auckland City, there is only one large project on the list, in Mount Albert.
Most other projects are set to be built in new suburbs on the outskirts of Auckland. Some of the largest projects are in Rodney district, around Milldale, Orewa, and Warkworth, but there are also developments planned for South Auckland and in Ardmore and Beachlands.
This pattern is repeated around the country. Most of the projects on the list in Hamilton are spread around the outer suburbs.
These projects will increase housing supply around the outskirts of our major cities. That’s because the projects are primarily greenfield developments, rather than the brownfield developments favoured by the previous government.
That means that any potential supply impact will more likely affect outer-city suburbs than inner-city suburbs.
- Ed McKnight is the economist at property investment company Opes Partners
