Auckland Council have analysed the supply and demand drivers at play in our market. They believe we have a shortfall of 15,000 dwellings now (I suspect this is at least 5,000 light but lets run with this analysis), and the other key assumptions are population change and that 80% of building consents issued are used for housing and rental stock (as opposed to bachs and other secondary housing, and consents which are not built).
Auckland Council’s Cumulative Housing Shortfall Table
So this analysis peaks in 2018 at 24,467 dwelling, and falls back with population reducing (not sure why they modelled this) to an estimated 11,533 dwelling shortfall by 2028.
My Criticisms of this Model
This is an economic model, so as usual it will not be perfect. It is a good guess, not a great guess. We start with 15,000 dwellings as the shortfall in 2014, which I consider to be light. I believe from talking to real estate company directors, owners, and leading agents in their sub-regions of Auckland, that the shortfall is under-recorded. We have far more buyers than sellers, over-crowding is becoming more prevalent.
I suspect the aggregation and globalisation factors will drive Auckland to have population growth averaging at least 30,000 per year over the next 25 years, so the demand side will be greater than Statistics NZ’s median projections.
The difficulties in obtaining resource consents, with NIMBYs being pandered to by overly conservative Council planning staff in certain areas, have not been fully thought through either. The Unitary Plan will help this – by how much who knows.
No thought given to modelling property cycles
My biggest criticism on the supply side is that little thought given to the fact that the property market is cyclical. After this current boom phase of the property cycle ends (which Auckland Council join Fletcher Building in believing it is going to be in 2018), there will as surely as night follows day be another downturn phase of the property cycle, before a recovery, then another boom and so forth. In downturns building consent volumes have always crashed – why will it be different this time. Are banks going to lend more easily when a property market is gripped with fear? Are Auckland Council going to abolish both their unpopular Watercare Infrastructure Growth Charge and slash Development Contributions? I would put as much chance as the USA have of winning the Rugby World Cup later this year.
Census under-reporting in Auckland
This will probably be brushed under the carpet, but I suspect Auckland will have a slightly higher incidence of under-reporting than other parts of NZ. Aucklanders tend to move around more than other parts of NZ and have the most internal and external (overseas) migration, meaning that there is not a habit of filling in a census form. They are not enjoyable and if you are not being nagged, as you cannot be easily tacked down, then you can see why people don’t do this. At a banking function last night there were five bankers admitting that they and their families didn’t complete the last Census. These aren’t as well followed up and are under-recorded in Auckland with people moving around, using work addresses/parents addresses/old addresses to make things harder so the less sophisticated Census collectors. One issue here is how to record how many (tens of) thousands of Aucklanders didn’t fill out their census forms? That is a hard statistic to record.
