By 2027, Wellington’s housing shortfall will be as big as . . . x5
Five-and-a-bit Karoris worth of people for Wellington City? About a Hutt’s worth of newcomers for the entire region? What could possibly go wrong?
The Wellington region won’t be able to keep up with new housing demand for an expected surging population under current rules, a council-commissioned assessment has revealed.
The year of reckoning is 2027. After that year, according to the assessment, council rules would begin to smother the ability of developers to supply enough new homes, leaving an up-to21,000-plus shortfall by 2047.
The assessment’s 30-year modelling punches in the current development rules for each of the region’s five councils, along with factors such as commercial feasibility, and shows the number of new homes that might be built in each area.
Wellington City alone could face a shortfall of between 4600 and 12,000 dwellings.
It comes as the region faces a population surge.
Wellington chief city planner David Chick said, under a high growth scenario, the city would need to accommodate an extra ‘‘five-and-a-bit’’ new Karoris worth of newcomers, or 74,484 people.
The region would also need to find homes for about a Hutt’s worth of new residents, or 137,757 people.
Over the short and medium term, until 2027, council rules could provide enough capacity. But not in the long term. Chick said Wellington was already under pressure, regardless of the rules, with housing. ‘‘We are short at the moment.’’
Wellington had started early consultation to mitigate potential angst in a planned 2020 review of its development rulebook, the district plan.
‘‘Do we protect all of our greenfield and natural areas? But if you’re going to do that, then that means that we have to grow our centres, and there are going to be pressures in our suburban centres.’’
He said the council was ‘‘very confident’’ its plan review – while not necessarily satisfying everyone – would allow new housing development needed for the city and region.
The assessment was a collaboration by Wellington, Lower Hutt, Upper Hutt, Porirua and Ka¯piti Coast. All councils were required to assess whether they could meet urban development demands.
Independent economist Benje Patterson said an ongoing shortfall of housing in the region would keep house and rental prices higher.
‘‘This squeezing of the budget for households will push those that are starting out, or those on lower incomes, further from their places of work and study than they would ideally choose to live.’’
More people would end up living on the region’s ‘‘periphery’’ and into Manawatu¯ , he said.
‘‘We are already seeing the effects of these factors, with house prices running hotter in the Wairarapa and Manawatu¯ than urban parts of Wellington region.’’
Developer Malcolm Gillies said the region was already falling short in
meeting housing demand because of a lack of planning and foresight by councils in the past.
Councils had to take the initiative to identify areas with development potential so planning could begin sooner rather than later.
Gillies and business partner Kevin Melville are responsible for the upcoming Plimmerton Farm development in northern Porirua.
Work on the first of a projected 1500 sections and 60 lifestyle blocks was expected to begin next year.
He said councils were becoming more proactive in expediting development, as in the case of Plimmerton. However, more needed to be done to streamline the process of making changes to land-use rules.
What are they doing?
Porirua mayor Anita Baker said the city had identified the potential for up to 10,000 new houses by 2048. It was reviewing its district plan: the draft identified significant areas of new land for housing, and contained new rules that would allow greater intensification in existing residential areas. A plan change was under way to allow the Plimmerton Farm development.
Upper Hutt mayor Wayne Guppy said the assessment’s findings showed the city’s decades-old district plan, like those of other councils, was out of step and a big shake-up was required. The council was starting the process of reexamining the district plan and he expected rural and urban zoning, largescale developments, subdivision sizes and housing intensification to be major talking points.
Ka¯piti Coast chief executive Wayne Maxwell said the council faced ‘‘opportunities and challenges’’ from growth, along with the rest of the region. ‘‘We will need to think about how we manage this in a way that meets the needs of communities, protects the special natural environment that draws people to Ka¯piti, and is supported by suitable infrastructure.’’
Hutt City Council city transformation acting general manager Helen Oram said the city was well placed to manage demand. A recent plan change had opened more of the city to medium density and infill housing, and about 1300 additional dwellings were expected be included in the RiverLink project not accounted for in the assessment. Additional capacity would be identified in a district plan review and spatial plan.
Rising property prices could be another blow to inter-generational relations, bringing with them a risk the recent trend toward an improvement in housing affordability is coming to an end.
Figures published by the Real Estate Institute of New Zealand show the nationwide median house price was 8.2 per cent higher in October than it was a year earlier.
That rise took the median to $607,500, the first time it has topped the $600,000 mark.
In Auckland, where the trend in the median price has been flat for the past two years, the median was up 0.8 per cent from a year earlier to $868,000 – its highest level in 19 months.
The REINZ figures build on data from QV last week, which showed the average value nationally was up 2.8 per cent in the year to October, with a rise of 1.4 per cent in the past three months.
QV general manager David Nagel said even markets that had been struggling, such as Auckland and Christchurch, were showing a resurgence in prices.
But he also noted strong property market drivers were being countered by affordability challenges, with prices in several places up to a ‘‘level many New Zealanders simply cannot afford’’. QV put the average value in the Auckland region at $1.03 million.
Back in May, Westpac predicted annual house price inflation would accelerate to 7 per cent during 2020. That was on the back of the Government’s decision not to go ahead with a capital gains tax, along with falling mortgage rates.
On Thursday, Westpac chief economist Dominick Stephens said the recent data supported the prediction: ‘‘I think it is pretty clear house prices are going to get a bit of a lift over the next year or two.’’
While the Reserve Bank held off cutting the official cash rate for a third time in 2019 on Wednesday, he thought there was one further cut to come.
‘‘But the main point is we are starting to get toward the end of the Reserve Bank’s easing cycle, therefore we are not far off the bottom of fixed mortgage rates.’’
For the next couple of years he expected house prices to lift, and for there to perhaps be a small lift in mortgage rates.
The tax system had an influence on house prices and some kind of tax reform was still needed, Stephens said.
It was a ‘‘tragedy’’ that many people were not able to afford to buy a house. ‘‘We have created a situation in New Zealand where some people are just never going to be able to muster the deposit required to get into the housing market.’’
He was not convinced that just building more houses would be a solution. ‘‘How do we know property investors aren’t going to buy them up the way they have previously.’’
More housing would bring rents down but would not change access to home ownership much because first-home buyers would remain in competition with investors.
He was dubious about some of the measures used to try to assess housing affordability but thought the debt servicing to income ratio was one of the better indicators.
‘‘Those levels of affordability are at their lowest now I think. Affordability has improved. I think over the next two years it is probably going to get worse.’’
Affordability was also becoming more of an issue in some of the smaller centres, compared with the problem previously being more restricted to the most expensive markets, such as Auckland and Tauranga, Kiwibank senior economist Jeremy Couchman said.
Now quite big increases were being seen in, say, the house price to income ratio in some smaller places, such as Manawatu¯ / Whanganui and Hawke’s Bay.
A key issue was that house-building had not been keeping pace with population growth. While construction was getting to levels needed to address the shortfall, activity would need to remain at current levels for some time.
Addressing the supply shortage was one way to improve the situation but there was no easy answer, Couchman said.
The data published by REINZ on Thursday put the proportion of homes sold nationwide for under $500,000 in October at 33.9 per cent, down from 41 per cent a year earlier. In Wellington, the proportion of homes sold for under $500,000 is down from 47 per cent to 23 per cent.