Big development opportunities under the 2015 Budget

Considering that PricewaterhouseCoopers has stated that Auckland’s overinflated housing market is currently ‘the most toxic risk to the economy’, it is hardly surprising that yesterday’s Budget addressed housing supply in Auckland.

Of particular interest, some 420 hectares of vacant Crown-owned land is to be made available for development. The Budget allocates $52 million to facilitate the development of this land, in the hope of easing the high demand for housing.

Housing Minister Nick Smith has said that depending on the density of the development, between 4,500 and 10,000 homes could be built. He would like to have the first tract of land identified and development plans in place in the next 6 months. Dr Smith has referred to the Christchurch Awatea project as a possible model, where Fletcher Residential is to build over 230 homes and 40% are to be affordable. Despite his plan to ensure a proportion of the homes are ‘affordable’, no concrete plans have yet been made to regulate the affordability of Auckland’s new development.

Advice from our developer clients reveals that allotting a percentage of housing in a development as ‘affordable’ does not stack up on the numbers. A number of houses would need to have an increased price over and above the market price in order to make it financially viable.

Further, the present plan lacks any controls on purchasers and ownership. Without such controls (eg the purchaser is to be a first-time buyer, or the home will be occupied as a family home for a minimum period of time), property speculators may buy affordable homes and on-sell them or rent them out at high market rates.

Putting aside whether or not this will in effect cool Auckland’s heated market, this presents an opportunity for those in the construction industry to present new and innovative ways of building houses. We have covered in earlier blogs some advantages of prefabricated and modular building methods in recognising economies of scale. To date, New Zealand’s small market has been tough for companies and projects utilising prefabricated construction, where a large amount of capital is tied up in technology. However, the prefabricated industry is certainly something to watch, with its time and sustainability advantages. Perhaps with this level of government support, prefabricated technology could be successfully utilised.

2 thoughts on “Big development opportunities under the 2015 Budget

  1. Pingback: Crown-owned land development controversial | CONSTRUCTION LAW BLOG

  2. Pingback: Draft land use report due 17 June | CONSTRUCTION LAW BLOG

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