KiwiBuild unlikely to reduce prices
As the Government reveals details of KiwiBuild homes, Susan Edmunds asks: Who will the scheme help?
The Government’s announcement that it plans to build up to 4000 houses on just under 30 hectares of Unitec land in Auckland’s Mt Albert has done little to comfort sceptics of its KiwiBuild programme.
It has been revealed that 30 per cent to 40 per cent of the homes the Government planned to build on the land bought from the tertiary education provider would be ‘‘affordable’’ – costing $500,000 to $600,000. That would include townhouses, apartments and flats.
It is the first announcement of the KiwiBuild programme, through which the Government hopes to build 100,000 new houses over 10 years, half of which will be in Auckland.
Economist Gareth Kiernan said earlier this month that the programme could add as few as 9200 extra properties to New Zealand’s housing stock over the next four years, outside the existing crown building programme and off-plans purchases from other developers.
He said it was ‘‘a little reassuring’’ that the Government had secured some land in Mt Albert.
‘‘Talking to various people over the last couple of weeks, there was some doubt whether they’d even made much progress in that area.
‘‘Ultimately, though, labour resource constraints around construction remain one of the biggest impediments they have to overcome so, no, no change in my view.’’
He said, given the concentration of houses required in Auckland and the labour shortages there, it was difficult to see how the industry there could provide an extra 5000 more houses in Auckland each year.
‘‘There’s an under-supply in Auckland. Based on population growth, we need 14,000 [new houses] a year and we are only doing 10,000 or 11,000. If labour resource is the problem, no matter how much money you pour in, it’s not going to be resolved.’’
John Tookey, head of department of built environment at AUT University’s school of engineering, said the Government could not just ‘‘wave a magic wand’’ and get thousands of new homes.
‘‘At the same time we’re cutting down on immigration. A hundred thousand homes over 10 years would require a 30 per cent increase in the size of the industry unless we invest in a major way in prefabrication.
‘‘To pretend you can have this done with a wave of a wand is laughable. If it could we would be out there waving like crazy.’’
But David Kelly, chief executive of Master Builders, said capacity was not necessarily static.
‘‘If you ask a builder could they build 200 housing units a year they might say not under the current situation. But if you ask, ‘What would it take for you to build 200?’ you get a different answer.’’
He said that if the Government offered multi-year arrangements, builders would then be able to structure their businesses on the basis of certainty.
Professor Laurence Murphy, from the school of environment at Auckland University, said the Unitec development was unlikely to affect the prices of surrounding houses. Cheaper apartments and townhouses were not direct competition for most of the Mt Albert stock, which was standalone houses on their own sections.
He said there was a question about whether the scheme would help those who were regularly struggling. A mortgage on a
$600,000 house would still cost
$35,000 a year to service on a 5 per cent interest rate.
‘‘That’s a lot of money. The people buying into this are not going to be low income. We’re not talking about the unemployed.’’
With no other debt, an individual would need $80,000 to qualify for a debt that size.
The development was still aimed at people who were working in at least average-income jobs, and two-income households. If interest rates were to rise, it would make those ‘‘affordable’’ houses less affordable still, he said.