North Shore Housing Crisis

What will this year bring us in the property market? It is only a year since all was doom and gloom with no end to the recession in sight. Right now, it seems like we are going to have a great year! According to Alistair Helm CEO at Realestate.co.nz, sales of residential property in New Zealand were up 10% on the previous year and he predicts that there is plenty of scope for more:

“In the last 12 months there were a total of 67,197 residential sales as compared 60,981 in the period to October 2008 – a 10% increase. The good news is there is great scope to see sales rise even more in 2010 – based on a 10 year average of sales as a ratio to the number of houses across the country we should be seeing sales averaging 96,000 a year! – so there is upside growth in sales to come, hopefully we will see some of this in 2010.”

Yesterday I sold two family homes in Milford and Forrest Hill. Both homes had multiple offers within 48 hours of listing, with 9 buyers wanting the  two houses. The were both sold well in excess of the asking price. So what is driving the property market, and more particularly what is happening on the North Shore, the highest value real estate in the country? Why is it so buoyant, why now, and will it last?

Simply; Supply and Demand. Every year the population of the North Shore increases by about 4000 people and that rate gets gets faster, every year. Statistics New Zealand thinks it will be approaching 6000 per year in the next decade. About half that increase is new babies, and the rest is immigration. People just love our climate, our lifestyle and the opportunities for work, education and play. On average there are about 2.8 people living in each house on the North Shore, so every year we need another 1400 homes built to accommodate all those people.

These homes are NOT being built, the builders can’t get the land, the labour or consents quickly enough.

And thats why the price of your home is going up.

The number of building consents has declined steadily from a high of 1300 in 2004 to 950 in 2008. And then in 2009 only 508 homes were built….there is now a shortfall of about 1400 homes. It will take years to catch up. Already in Auckland the number of families without homes is growing, and the New Zealand Herald reports that on the North Shore there is a crisis as even high income families find they cannot afford to buy an average home.

Already, the Herald is reporting that the number of building consents is rising but the lead time for obtaining consent for subdivision, the development of the land, building consents and building is measured in years. It takes far too long to build a home in New Zealand, and most of the time is taken up by these consent processes.

The government, Reserve Bank and North Shore City council have a problem. Homes for families will keep rising in price. The price of a home will not be driven downward or slowed down by arbitrary manipulation of the Official Cash Rate. The price of a houses will only come down when the supply of homes exceeds the demand. And it is the governments red tape that is causing the problem.

The North Shore needs 2500 homes to be built this year. That’s a suburb or two. I don’t see where those suburbs are being built, so you?

In the meantime, if you are selling you can expect to get a great price. Call me and I’ll show you how you can be “overwhelmed” as my sellers said one Wednesday, when they sold for $20000 more than the asking price.

If you are buying, you are making a great investment, and can expect prices to rise in the next few years. Call me and get the inside running on those “hot” homes, before they get onto the market. Let’s see if we can get a great deal for you.