Home building stacks up: ANZ

Property prices are so high that building a house is now a costeffective route to home ownership, ANZ’s team of economists say.

But the challenge of finding land to build on remains, said ANZ economist Liz Kendall.

This would require land being made available on city fringes, and permitting greater housing density within current city limits.

There was some indication that was already happening.

Reporting on the state of the housing market, Kendall said: ‘‘Despite rising construction and land costs, high existing house prices have made building attractive relative to buying.’’

But capacity in the construction industry was constrained and labour shortages were acute, and ANZ did not expect KiwiBuild, the Government plan to build tens of thousands of ‘‘affordable’’ homes, would have a great impact on the level of house building.

The bank also had doubts KiwiBuild would affordable homes.

‘‘Even if the Government’s targets are met, the houses will still be unaffordable for many, with $600,000 just under six times the average income in Auckland. Compared with a median price of $900,000, this is certainly an improvement.

‘‘With a 20 per cent deposit, this equates to 33 per cent of disposable income going to mortgage payments, rather than 50 per cent. But $600,000 is ambitious, given high costs and strong demand.’’

Because of the limited impact expected of KiwiBuild, ANZ did not expect big house price falls, or large rises.

Housing demand was finally driving innovation in the building sector, which is often criticised for low productivity.

‘‘Use of prefabricated housing and modular units at scale could provide the productivity kicker that the residential construction sector so desperately needs, if it is consistent with buyers’ preferences,’’ Kendall said. deliver truly