A housing viability problem
Paula ter Brake’s Irish experience has given her a fresh perspective, writes Susan Edmunds.
Auckland’s property market is spookily similar to Dublin’s just before its crash, says the chief executive of a property development firm.
Paula ter Brake, 41, recently returned from 20 years abroad to take up the role with Development Advisory Services, which offers consultancy and advice to property developers across the public and private sectors.
Ter Brake said it was a challenging time to take up a role in the property market. Turnover had dropped and Quotable Value reported this week that there was less demand for new subdivisions in parts of Auckland.
She said, having lived through the Irish collapse, she was more risk-averse and sensitive to market conditions than some.
‘‘The collapse of the Irish market was so significant and unexpected,’’ she said.
‘‘We had talked about a soft landing for years. There’s a lot about New Zealand that will ensure, to a certain degree, that we don’t have that type of catastrophe in our housing market.
‘‘But at the end of the day, we have to stop thinking 10 times median income is an appropriate place for our housing to be priced. In nobody’s books is that in any way reasonable or affordable. Right now, I don’t see robust plans coming through from the private sector or the public sector as to how we are going to resolve that.’’
She said stock was a big issue and there was a risk that the rate of construction slowed further. Banks were out of sync with the market, she said, as they held back on funding new developments. Construction costs for developers were increasing.
‘‘Developments are only as good as the sales that are funding them. Look at the data over the last year, the performance of house sales in Auckland – where we are largely active. When stock doesn’t sell or doesn’t sell at the pace you previously predicted, that has massive ramifications for the viability of developments,’’ she said.
‘‘There are 100 different reasons why confidence is being depleted in the construction market,’’ she said. ‘‘We don’t have enough large, robust building contractors to start off. There’s a massive dependency on a few, significant-sized building contracts. That’s never a good thing.’’
There was too little governance around those contractor firms, she said. ‘‘Right first time is critical when the market is under pressure. We don’t want any part of the market to be exposed to shoddy management within a building firm.’’
Ter Brake said there were opportunities in the construction sector for a multi-disciplinary business such as hers, if it was willing to take a fresh approach.
‘‘One of the things I have come into the business looking at is what the opportunities are. Not just managing developments out of the ground, but thinking strategically around what is the right timing, how do we need to go about it and structure it completely differently so the delivery of housing isn’t stalled by market conditions.’’
Another key focus in her role will be looking for ways to help with social housing development initiatives - a major interest for ter Brake.
The collapse of the Irish market was so significant and unexpected.