Making homes affordable for young people is no longer simply a political slogan. New Zealand’s unaffordable house prices are forcing developers to rethink their approach. Whether they change the type of homes they build, reduce floor areas or become more involved in affordable housing construction, being able to sell the homes is what matters most.
Christchurch: builders of large homes are struggling to sell
Recently, Jake, a Chinese developer in Christchurch, sold 18 townhouses to private investors from Auckland. Located in central Christchurch, the two-storey homes have an average floor area of 90 square metres and 3 bedrooms. They sold after two months on the market, at a satisfactory price.
Since June last year, Christchurch’s market has undergone a sharp correction, with fewer buyers and less money in the market. In recent months, however, he has clearly felt money returning, whether for investment in land or purchases of commercial property.
“Christchurch’s residential market has been stalled for a long time, and people feel it has reached the bottom.”
Jake entered the construction industry in 2009, initially building and developing residential property. After the earthquakes, he increased the share of commercial construction in his work because insurance payouts for commercial property were faster than those for residential property. It was also not until 2013 that insurers began to truly understand the extent of the earthquakes’ impact on Christchurch and resumed insuring new homes. Insurers had stopped offering cover for new homes for a time, making residential developments difficult to undertake.
His impression of the market is that Christchurch’s developers and builders currently lack confidence. Workers across various trades are showing signs of moving elsewhere. Against this backdrop, the inflow of money has brought some confidence. “If you don’t keep up, you’ll be left behind.”
Jake has found that those still building large homes are now struggling to sell them. Successful examples tend to be developers who quickly changed the type of homes they offered. Previously, they built for family buyers; now they are targeting wage and salary earners. Many developments are priced in the lower to middle range, between NZ$450,000 and NZ$550,000, with prices trending downwards.
Auckland: more developers seek stability
When Housing New Zealand developed its first stage of land in Takanini, Shane, who had bought land at a relatively low price in 2016, was still hesitant.
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At the time, a new 300-square-metre home on the North Shore could sell for NZ$1,800,000 to NZ$2,000,000. Affordable homes, by comparison, were smaller, mostly around 100 square metres. Housing New Zealand had clear floor-area guidelines to control costs and sale prices.
“When the market was booming, people paid little attention to affordable housing in poor locations,” Shane says. Things are different now. Housing New Zealand’s third stage in Takanini is about to go on sale. But compared with the first and second stages, securing land is now clearly harder and takes longer.
Like Shane, many developers have realised that while developing large homes can lead to losses in a downturn, affordable housing offers stable profits and lower risk. After buying land from Housing New Zealand, they can choose to sell on the open market or negotiate a buyback with the agency.
These projects tie up less capital and offer considerable profits. Having enjoyed success in the first and second stages, existing developers want more land, Shane says. Newcomers are also beginning to enter affordable housing construction.
Interviews and article by Abby Chen (Jake is a pseudonym used at the interviewee’s request).