Nick Smith's 2020 vision: Affordable Auckland housing

Nick Smith (Getty)
Nick Smith (Getty)

Housing Minister Nick Smith has named 2020 as the year when Auckland housing will be affordable again.

Speaking to Paul Henry on Wednesday morning, he said construction is set to ramp up to record levels over the next few years.

And he has "quite a high level of confidence" Auckland Council will soon have a new plan in place, with the release of an independent panel's recommendations on the Proposed Auckland Unitary Plan (PAUP) due out Wednesday afternoon.

Yesterday the 2016 National Construction Pipeline Report, prepared by the Building Research Association of New Zealand and consultants Pacifecon, said building work would peak next year at $37 billion.

"Auckland [was] down at building about 3500 houses in 2009," says Dr Smith. "Last year we did 9200, this year looking at doing 12,000. The next four years, that report says we're getting over 13,000."

The report predicts "record levels" of construction in Auckland through to 2022. Another report this week, this one by economists Infometrics, predicts prices will fall about 11 percent between 2017 and 2019.

But it's 2020 Dr Smith has his eyes on.

"Ultimately it comes down to that balance of supply and demand. We've got supply ramping up, you've got demand a little bit unknown. It is a job that is going to take some years. If you look at that report produced yesterday, they say you're going to have supply and demand back into balance about 2020."

While the Government "has got the accelerator flat to the floor on getting new homes built" in Dr Smith's words, he can't rule out the possibility it'll burst the bubble, leaving owners with negative equity.

It's also a risk for property developers, who are taking a "punt" that houses they build today will make a profit for them tomorrow. Despite expecting prices to become "affordable" by 2020, Dr Smith thinks the property industry will continue to tick along thanks to continued strong migration.

"I think the numbers for New Zealand are pretty solid," says Dr Smith. "I think just looking at the world, those strong numbers of New Zealanders that are gonna come home are gonna continue to come home."

But Kiwis coming home make up less than a quarter of people moving to New Zealand, and that share is shrinking.

According to Statistics NZ, the number of New Zealand citizens returning permanently has risen from 23,210 in 2012 to 30,170 last year. Over the same time, total long-term immigration numbers have jumped from 85,255 to 121,937.

Dr Smith says if Australia's mining sector picks up again, the Kiwi share of that inward migration could reverse and see house values plummet.

"The honest truth is, you never know."

The average price of a section in Auckland has gone from $100,000 in 1991 to $450,000 now, says Dr Smith.

"What's gone wrong in Auckland is effectively there have been those that have religiously opposed Auckland growing out. They don't want urban sprawl, so that has blocked new greenfields coming on."

But councillors, backed by property owners, have been "pathologically opposed to intensification", leading to a "Mexican standoff between the two" groups.

The result, Dr Smith says, has been an Auckland that has failed to grow in any direction, leading to artificially high prices for sections. He hopes Auckland Council is able to agree on what changes need to be made to the PAUP so the city can grow in whatever direction it needs to.

"We should make sure that the perfect is not the enemy of the good."


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