Auckland has almost no chance of reaching a housing accord’s target of 39,000 new houses in the next three years, a property developer says.
The accord, announced on Friday by the government and the Auckland Council, allows for the fast -tracking of certain developments while the city waits for its unitary plan to take effect in three years.
It has set “aspirational” of 9000 new homes next year, 13,000 the year after that and 17,000 in 2016.
Building consents in the city remain in the doldrums, with fewer than 5000 being issued in the year to March, equating to only three new houses per 1000 people.
Building boom unlikely
And developer Tim Manning of Norwich Properties says it is extremely unlikely the city will be able to reach the lofty targets included in the housing accord.
He says the accord is a good one and will give a boost to property development in the city, particularly by speeding up the consenting process.
But whether the industry can achieve a big increase in new building activity will come down to factors beyond the control of the government or the council.
“I find it hard to believe it can be realistic. Where on earth is this going to come from?
“The lack of supply is so entrenched with so many reasons, that to say all those will go away and they’ll build 39,000 houses in the next three years is hard to figure out.
Mr Manning says a new build rate of about 6000 houses a year in Auckland is more likely.
One of the major roadblocks is the ability to source finance for big residential property developments.
“The banks have got money and they’re happy to lend but the ratio they’re willing to lend to is not where it was so you still need a big chunk after the bank. The number of places you can get it from has declined,” he says.
“With most of the finance companies gone there aren’t many options for getting $10 million to 20 million. You can try private individuals but they are buying land to land bank and doing their own thing. This is one of the key handbrakes to new supply.”
Another issue is whether the construction industry has enough capacity to lift the building rate in such a short time, Mr Manning says.
“I don’t think so. All the labourers are heading to Christchurch. You’ve got Mainzeal missing and two or three more you hear are a bit wobbly. The sector needs to build up its resources again.
“A lot of those big contractors are just buying low-margin work to keep their staff going. They only have to have a couple of jobs go pear-shaped and they have no slack in their balance sheets. It’s precarious.”
Although the market is difficult, Mr Manning has high praise for Auckland mayor Len Brown, who negotiated the accord with Housing Minister Nick Smith.
“The Auckland Council has been most proactive and helpful, more than I’ve seen in 25 years. There’s absolutely been a change in attitude, it’s really positive.”
“When you ring them and say you’ve got this idea they’re responsive to that. It’s obviously come from Len Brown, who’s told them ‘you have to work with developers rather than against them’.”