Plan to buy off-the-plan apartments will help housing affordability
The new Government’s proposal to buy off-the-plan apartments as part of the KiwiBuild scheme is more likely to deliver affordable housing if it looks beyond Auckland’s CBD, a Colliers International residential property expert says.
New Housing Minister Philip Twyford this week announced further details on the $2 billion housing scheme, which aims to build 100,000 new residences over the next decade.
KiwiBuild will start immediately with the aim of stepping up the output of completed houses over the first three years to hit the target of 10,000 high-quality affordable new homes per year, half of which will be in Auckland.
Pete Evans, National Director of Residential Project Marketing at Colliers International, says this means the Government is aiming to spend $20,000 per dwelling to reach its target.
“The recycling of this cash injection through the buying and development of properties and on-selling to first home buyers is a promising initiative to help solve Auckland’s undersupply over the medium to long term,” he says.
“To do this, the Government must buy in bulk, enter into partnerships with major developers and develop on its own sites, including Crown-owned land.”
One of the KiwiBuild initiatives announced by Twyford this week is to buy off-the-plan units in developments of new high-rise CBD apartment blocks.
Evans says while this will assist the development of new supply in the CBD, the Government should also look at developments in Auckland’s growth areas of the city fringe and suburban market close to amenity.
A recent Colliers International research report found the CBD represents 59 per cent of current unit supply, and by 2020 will account for just 53 per cent.
Asking rates in the CBD and city fringe are typically $12,000–$14,000 per square metre whereas asking rates for many of the suburbs are around $10,000 per square metre, which is up to 40 per cent lower.
“This suggests KiwiBuild will be much more likely to deliver affordable housing if the Government invests in off-the-plan apartment developments outside of the CBD,” Evans says.
“The Government should look to invest in areas like Albany, Westgate and Onehunga, where good public amenity already exists. Planned infrastructure spend in these areas suggests the amenity is only going to get better.”
Colliers International’s latest apartment research shows the market remains undersupplied despite a record number of apartments due to be completed in Auckland over the coming three years.
“Tighter lending by banks is partly responsible for this as developers and purchasers struggle to get the funding they need, but the Government’s initiative to take off-the-plan units before construction started would certainly assist the supply and would be a win-win for developers and first home buyers,” Evans says.
The KiwiBuild scheme will also invest in already underway developments like Hobsonville Point by securing a large number of the planned new residences there.
“This is positive news, as the Government’s ability to buy in volume will continue to progress the building programme, allowing project’s like Hobsonville Point to deliver a high-class, master-planned community quicker,” Evans says.
The Government also plans to implement KiwiBuild through development of its own sites, including Crown-owned land.
“While this will certainly help to bring on new supply, the lack of resource in the construction workforce and cost of materials remains a barrier,” Evans says.
“Phil Twyford’s plan to boost jobs in the construction industry is very good news for the sector.”
Twyford has proposed a new KiwiBuild visa to fast track temporary work visas for construction industry workers, which aims to help boost the construction industry by 5,000 additional jobs.
Evans also welcomed the Government’s plan to invest in a 20km light rail line from Wynyard Quarter to the International Airport.
“This will certainly assist the supply of new developments by providing much needed amenity and transport options to under-developed areas of the city fringe, and open up opportunities for further densification in areas within walking distance to the new railway’s stops.”
Colliers International’s latest half-yearly Auckland Residential Development Report found there were 17 new apartment projects completed in quarters two and three of 2017, with a further 91 under construction and 46 that are in marketing/design phase.
It is estimated that in 2017 and 2018, 75 projects will be completed, bringing in 5,033 new units to the Auckland market, with an additional 5,922 units in 62 projects to be completed in 2019/2020.
Follow us on Facebook and Instagram.
Get the latest commercial real estate insights and property news.
Looking for commercial real estate? Try our property search or connect with expert commercial real estate agents today.
Need your real estate assessed? Work with our expert property valuation services team.