Developers feel impact of KiwiBuild on market

catherine.harris@stuff.co.nz

The Government’s KiwiBuild scheme might not meet its first-year target, but some economists and developers believe people have been too quick to dismiss its influence.

Housing and Urban Development Minister Phil Twyford said the house-building unit was on track to complete 300 houses by July 1 but that it would miss its first-year target of 1000 homes.

Auckland Council chief economist and former Westpac economist David Norman said that was not surprising because of the time it took to get housing under way.

But KiwiBuild had been useful in creating ‘‘a whole new market segment’’ of lower-priced homes in Auckland where there had been little incentive to deliver them in the past.

Some developers were now targeting the $650,000 KiwiBuild price cap for three-bedroom houses in Auckland, even if they weren’t part of KiwiBuild.

‘‘The fact that this wouldn’t have happened a year and a half ago is the point,’’ Norman said.

Annual Auckland building consents were hovering at about 13,000 in November, up 25 per cent in the past 15 months, indicating that demand was still there, he said.

Phil Eaton, of construction consultancy Greenstone Group, also believed KiwiBuild had been useful in making people think about what a housing solution might look like.

‘‘[O]rganisations are considering the capital it would take to set up factories, improve systems or train new people, all in an effort to change mode for what is required,’’ he wrote in a LinkedIn post.

It had also created optimism in the industry by underwriting developments, he said.

KiwiBuild had shown what a ‘‘basket case’’ the industry was and how difficult it was to develop and build new dwellings, he said.

‘‘There is a lot of room for improvement right across the supply chain. So while these wheels are turning slowly (too slowly), they are turning!’’

However, Eaton said KiwiBuild’s ambitious targets had set it up for criticism, though they had made Housing NZ and the Hobsonville Land Company more focused.

Property developer Matthew Horncastle said he felt the Government should revise the targets. But anything that aided affordable housing was positive, and KiwiBuild’s sluggishness told a story.

‘‘There’s a company that goes broke pretty much every single day in the sector and that’s because we have an extremely complicated industry with lots of moving parts.’’

Horncastle said he believed the Government should leave building to the industry and focus on removing bureaucracy instead. Rezoning for high density, lowering GST and harmonising local body rules would all go a long way, he said.

‘‘There’s no one silver bullet. It’s a mixture of cultural things like car ownership, high density, greater standardisation, bringing down material prices [and] wage growth.’’

It was also something that would take a long time to fix.

Monte Cecilia Housing Trust chief executive Bernie Smith said on LinkedIn that a a 25-year housing strategy was needed to look ‘‘at land, design, procurement and building strong healthy communities’’.

Phil Eaton, Greenstone Group