Land rush points to housing boost
Developers and home builders last year spent an extra $800 million buying vacant land in a spending splurge that pundits hope gives a much-needed boost to the nation’s housing supply.
New Zealand’s long-running housing shortage has played a key role in sending house prices soaring to record highs.
However, developers also spent 2020 rushing to finish new-build housing developments while demand was red-hot, before also buying new blocks of city-fringe land for future projects, the latest Real Estate Institute data showed.
Vacant land sales across the country totalled $2.7 billion in the first 11 months of 2020, which was $770m or 38 per cent higher than the same period in 2019, the institute said.
That equated to 7372 vacant sections selling, or 25 per cent more than a year earlier.
“When the going is good and the market is hot [as a developer] you want to get those sites to market as quickly as you can,” said James Wilson, director of valuation for analysts Valocity.
“Overall, that is a good thing, it means the stock of housing will increase because people are looking to buy and build in new areas.”
New Zealand’s median house price leapt to a record $749,000 in December, while Auckland prices hit a record $1.03m. To help meet buyer demand and drive prices down, analysts Infometrics estimated Auckland needed another 30,000 homes, while 10,000 were needed across the rest of the country.
Other pundits say even more are needed.
Auckland planners have consequently turned to apartments and townhouses. Not only do they tend to be cheaper than traditional homes, but more can be squeezed on to each parcel of land.
Law changes were designed earlier to encourage the city to build up rather than sprawl into its suburbs.
That led smaller developers to be especially prominent during 2020 as they sought out and paid big bucks for homes on large blocks of city land that could be demolished to make way for apartments and townhouses.
Developer Williams Corporation was among them, saying it set a company record of $314m worth of
townhouse sales in Auckland and Christchurch during the year.
It also had 577 properties due for delivery in 2021, it said.
Yet despite the focus on so-called infill housing to create more city apartments and townhouses, Auckland Council’s future land supply strategy also included plans for up to 137,000 homes to be built on now vacant land.
Real Estate Institute chief executive Bindi Norwell said the total value of vacant residential land selling in the first 11 months of 2020 jumped 38 per cent compared to 2019.
That was a sharper increase than in the booming housing market when the total value of homes sold jumped 25 per cent compared to 2019.
As well as highlighting the need for new land for development, the figures also suggested “that some land banking activity may be occurring in the market”, Norwell said.
Ray White Manukau director Adam Thomson said new-build homes were being released into the market in high numbers, with up to 80 per cent of the homes listed for sale in some suburbs being new houses.
“Yet despite that, demand was still far outweighing the supply,” he said.
Valocity’s Wilson said families wanting to build a home were also in a frenzy to secure a vacant section.
Whereas in the past, they would likely organise their builder and building plans before buying the land, a “fear of missing out” was now driving them to buy the land first and organise the build later, he said.
He also said that while the push to build new homes boded well for helping ease the housing shortage, there were questions marks over what type of housing was being built.
Developers and builders tended to
When the going is
good and the market is hot [as a
developer] you want to get those sites to market as quickly as you can. James Wilson, director of valuation for
analysts Valocity
make greater profits from building more expensive townhouses and homes and so favoured building them.
Yet much of the housing shortage was related to a lack of affordable homes for families and first-home buyers, Wilson said.
“It takes a really strong master plan to properly incentivise developers to focus on both larger homes and your more affordable or smaller housing,” he said.
“So there still needs to be a focus on what is actually being built over just solely the number of homes being built.”