Housing crisis in Auckland

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#1621787 3-Sep-2016 08:43

Whinery:

MikeB4: Increases in earnings will not help. This would fuel inflstion, increase unemployment in other words 70s and 80s revisited.

An increase in earnings would certainly help. Greater income doesn't mean inflation. The two are linked by common sense, but no in a real sense. The problem with the "common sense" evaluation is a macro-economic look at the long-term. When 20 years have passed, and inflation was 2%, everything will cost 50% more, and you'll be making 50% more. post hoc ergo propter hoc. But there's a reason that's considered a logical fallacy.

Yes, when wages go up slowly and over time, they seem to correlate with inflation.

But if wages were to go up 10% here one year (with no other significant changes). The inflation would not be 10% that year, or the year after. Some finite, NZ only resources may go up, like land. But not everything, and not the price of building. There are already those that are working on eliminating labour from the cost of housing. So if the cost of building a house went up 10% due to labour, but the materials stayed the same, we'd see a use of the labour-reduced building methods.

What is missed is there's a simple fix to the crisis.

The Government could buy 5000 hectares of land near Auckland. Develop that with 20 homes per hectare, and a target of 50% development (defined by people living in side the homes) in 5 years, and 100% development in 20 years.

Build all the homes to a high-quality 5-star energy long-term eco-friendly standard, and for a target price of $200,000 each. Keep back 10% as a rental stock, and sell the rest to fund the whole project.

Put a rail spur through it, so the detached and self-contained community could easily commute to Auckland.

1) Make a profit

2) Solve a crisis.

But the current homeowners and developers hate that plan. The edge development in Auckland is targeting $1M per house (north, closer to $750k south and west). When they can make so much per house now, blocking affordable housing is in their best interest. And if there was ample housing available, the unsustainable traectory of the current housing market would stall, making the homeowners unhappy.

And there's a perception that this would benefit the immigrants, and poor, so some are against it because it seems "unfair" to someone who just bought an over-priced $500k 15 year old house, now worse than a $200k new house.

There would be enough negativity towards solving the crisis that I don't think it'll be solved. Just delayed. Shuffle credit terms in ways that make no difference, but show an appearance of trying. It doesn't actually hurt anyone or help anyone, but feels like doing "something.

Good to see there is an easy fix!

Wages up 10%. That will affect inflation a lot, including the labour to build, and the cost of materials. There are many people involved in producing materials. Forestry workers, 2x4 makers, transporters, warehousers, and so on. Not to mention export competitiveness.

If the Govt built a town, with smaller, closer homes, it will become a poor area. Maybe a slum town. I cant see how you compare an over priced 500k home to a Govt built 200k home.

To my knowledge, the Govt isn't a national, and nationalised home builder. Why should the Govt solve this issue? Especially by building a slum town. When you tamper with supply and demand thats a problem, its artificial. The Govt can do other things to help, such as better manage consents, give incentives for businesses to decentralise from AKL.

Are house building costs way out of touch with the real cost of building? Or is the issue the cost of land in AKL? Maybe the Govt could become a building company,not for AKL, but to build the same houses everyone else builds, but at a fairer price, if thats the issue, to check excess profit making home builders. Given some builders have gone bust maybe thats not the issue.

If I was the Govt, I would look at measures to decentralise AKL as the place you have to be. I work from home now, push that, as many employers do not need to be tied to an office. Reduce demand for living in AKL. People pay the prices due to demand, if thats the case, let it be, most people can choose where to live by moving away, pocket some equity, and improve their lot. Let supply and demand do that. Should prices ease or fall, so be it. Those that bought on a hot market took a risk. Should their equity be lost or reduced should prices tumble, and by crash we are talking 10 to 20% max, the Govt can underwrite the mortgage, so the homeowner keeps paying, the banks keep getting paid, and in time that is resolved.

Whinery

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#1622057 3-Sep-2016 17:11

tdgeek:

Wages up 10%. That will affect inflation a lot, including the labour to build, and the cost of materials. There are many people involved in producing materials. Forestry workers, 2x4 makers, transporters, warehousers, and so on. Not to mention export competitiveness.

Nope. Not at all. Wage increases will not cause inflation. Inflation correlates with wage increases, but that's not a causal relationship.

If you make 10% more tomorrow, milk on the international market won't care about your $1.50 an hour more income. Your consumption isn't enough to change global markets.

The only reason to claim that common lie is because it fits your political agenda. There's no factual basis in the claim that an increase in the productivity of NZ (demonstrated by, or reflected in increased wages) would have a 1:1 effect on inflation. The USD price of a Samsung S7 will be the same. But if your buying power is 10% greater, then it'll be cheaper, allowing you to buy more.

But the point wasn't that if you increase uying power 10%, you'll solve every (or even any) problem. I was just pointing out the common fallacy that increased wages causes inflation. There is no causal link between the two.

tdgeek:

To my knowledge, the Govt isn't a national, and nationalised home builder.

What does that non sequitur have to do with the issue? You don't like the idea of solving the problem, so every solution must be bad. Got it. The government also isn't a cable company, but managed to pull off UFB. If the government doesn't already do it, it's impossible for them to get involved it in, except for all the exceptions.

Nope, your non sequitur is irrelevant, and demonstrated that you hate the idea, but can't come up with reasons why it's bad, other than you hate it.

And decentralization is hard. The government tried it and failed. The Auckland council has advocated it, and after advocating it, consolidated the council workers from all former cities into the single ASB building, doing the opposite of what they are asking of others. Many organizations have headquarters in Wellington, they also have larger non-HQ offices in Auckland, because that's where the talent and work is. The people want to be in Auckland. There's more to do in Auckland than Timaru.

Don't forget, this problem was created by living people.

When my parents bought a house in the '70s, 2 years salary would buy a near-mansion. The exact same house would go for 10 year salary. Regardless of the cause, there is obviously a problem.

But there is no fix that wouldn't annoy some voters, so nothing will ever be done, especially by a party that targets the affluent for its voter base.

The direct fixes are the simplest and most effective. If the problem is a lack of housing in Auckland, then the fix is more houses in Auckland. That you think a nice, new home, built to a high standard is a "slum" is your personal problem, not a problem with the plan to fix a problem in the most direct and simple manner possible.

tdgeek

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#1622134 3-Sep-2016 20:23

Whinery:

tdgeek:

Wages up 10%. That will affect inflation a lot, including the labour to build, and the cost of materials. There are many people involved in producing materials. Forestry workers, 2x4 makers, transporters, warehousers, and so on. Not to mention export competitiveness.

Nope. Not at all. Wage increases will not cause inflation. Inflation correlates with wage increases, but that's not a causal relationship.

If you make 10% more tomorrow, milk on the international market won't care about your $1.50 an hour more income. Your consumption isn't enough to change global markets.

The only reason to claim that common lie is because it fits your political agenda. There's no factual basis in the claim that an increase in the productivity of NZ (demonstrated by, or reflected in increased wages) would have a 1:1 effect on inflation. The USD price of a Samsung S7 will be the same. But if your buying power is 10% greater, then it'll be cheaper, allowing you to buy more.

But the point wasn't that if you increase uying power 10%, you'll solve every (or even any) problem. I was just pointing out the common fallacy that increased wages causes inflation. There is no causal link between the two.

tdgeek:

To my knowledge, the Govt isn't a national, and nationalised home builder.

What does that non sequitur have to do with the issue? You don't like the idea of solving the problem, so every solution must be bad. Got it. The government also isn't a cable company, but managed to pull off UFB. If the government doesn't already do it, it's impossible for them to get involved it in, except for all the exceptions.

Nope, your non sequitur is irrelevant, and demonstrated that you hate the idea, but can't come up with reasons why it's bad, other than you hate it.

And decentralization is hard. The government tried it and failed. The Auckland council has advocated it, and after advocating it, consolidated the council workers from all former cities into the single ASB building, doing the opposite of what they are asking of others. Many organizations have headquarters in Wellington, they also have larger non-HQ offices in Auckland, because that's where the talent and work is. The people want to be in Auckland. There's more to do in Auckland than Timaru.

Don't forget, this problem was created by living people.

When my parents bought a house in the '70s, 2 years salary would buy a near-mansion. The exact same house would go for 10 year salary. Regardless of the cause, there is obviously a problem.

But there is no fix that wouldn't annoy some voters, so nothing will ever be done, especially by a party that targets the affluent for its voter base.

The direct fixes are the simplest and most effective. If the problem is a lack of housing in Auckland, then the fix is more houses in Auckland. That you think a nice, new home, built to a high standard is a "slum" is your personal problem, not a problem with the plan to fix a problem in the most direct and simple manner possible.

Two hints.

1. Don't keep repeating yourself

2. No need for latin phrases, while I don't need to Google what they mean, others may.

What has the international market of milk got to do with a NZ wage increase? Neither has tickets to the Eiffel Tower lift.

There are many people involved in the import and/or manufacture of goods in NZ, the last point being typically retail. While a 10% wage increase wont increase inflation by 10% it will have a marked effect. Everywhere you look, there are people involved in manufacture, distribution, wholesale and retail.

3. You need to stop the negating rhetoric to promote your view. Common Lie. My political agenda. Common fallacy. You don't like the idea of solving the problem. is your personal problem.

Sorry, it's a bit childish. You could perhaps put your points forward, rather than treat another view as rubbish.

I've addressed wages, you don't seem to feel that wage increases have an input into prices.

Productivity? Where has that come from, No one suggest that increased wages are relative to increased productivity. They aren't

UFB. The Govt didn't pull off UFB, it subsidised UFB. Would you prefer the Govt subsidised residential housing?

"That you think a nice, new home, built to a high standard is a "slum" is your personal problem" You compare a privately built 500k home, to a Govt built 200k home. How can that possibly be similar, let alone better? You mentioned smaller, closer, yet you exclude that in your reply. I'm glad the Govt can build a better home for 40% the cost, and make a profit as per your OP

Whinery

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#1622157 3-Sep-2016 22:01

tdgeek:

Sorry, it's a bit childish. You could perhaps put your points forward, rather than treat another view as rubbish.

I have. That you reject them and ignore them doesn't mean I didn't. It just shows your hypocricy, calling others childish, while you do the exact same thing.

My point. The big one you ignore:

The solution to a housing shortage is more houses.

tdgeek:

I've addressed wages, you don't seem to feel that wage increases have an input into prices.

Productivity? Where has that come from, No one suggest that increased wages are relative to increased productivity. They aren't

UFB. The Govt didn't pull off UFB, it subsidised UFB. Would you prefer the Govt subsidised residential housing?

The government pulled off UFB. Would you like me to explain it in detail? I figured that on Geekzone, you'd know what UFB is.

The government created CFH, and specified the mechanisms for the subsidy, in a manner that got a result on a defined timeline, with basic standards and such that would *never* have happened without government control. The government created UFB. Quite literally, UFB is defined by the government. Fiber to a premise may or may not have happened without government involvement (the most proitable 5% or so was covered, the remaining 95% or so ignored). But UFB was a government invention, with a government definition.

I can further expand on UFB, since you seem quite unclear on the concept. It was a way to get private industry to create a regulated product designed to benefit the consumer.

Yet, a suggestion that the government could get private industry to create a regulated product to benefit the consumer is considered by you to be impossible, and absurd that I'd even suggest such a thing.

Reality has proven you wrong. Don't blame me, go argue with reality.

tdgeek:

"That you think a nice, new home, built to a high standard is a "slum" is your personal problem" You compare a privately built 500k home, to a Govt built 200k home. How can that possibly be similar, let alone better?

Just because you can't think of a quick solution is not proof it's impossible. The $500k home is a low-quality $100k build on a $300k piece of land, with $100k of profit. The primary "benefit" to the government stepping in and doing it would be the complete elimination of council cost and paperwork, while complying with all council regulations. The $300k of the land isn't just the value of the land, but that it takes $100k and years to develop a piece of land to something that you can build a house on.

And builders don't do a very good job. The same builders building that $500k house are the ones that built the leaky homes. They just folded and re-opened 10 times since then, so you can't pin them down. Anyone working in the industry in 2000 built a leaky home. Even ones before and after, outside the "sweet spot" of leaky homes have been shown to be leaky.

The privately built homes you imply are superior are quite inferior to the state homes built in the '70s and '80s that are longer-lived than the private ones from 2000+.

The government, directly or indirectly creating modular homes that are more stable, weathertight, and earthquake safe, would result in a higher quality home created for less than "privately built" homes. Yes, they will not be individually architecturally designed. But have you looked at the new homes being built now? They are all from the same finite sets of plans. There are just more choices than the State stepping in and building 50,000 of substantially similar floorplans. But it worked for the first big build, and they have lasted well. It's time to do it again, and bigger and better this time.

And yes, mass-producing 50,000 homes with modular construction on a large scale will result in a cheaper house that's much higher quality than a "private home" at twice the price. Do you need me to describe economies of scale to you?

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#1622196 4-Sep-2016 00:28

It is all to do with the price of land and stupid council rules. Such as height to boundary and street setback requirements. This means you effectively can't build terraced housing with each house on an individual freehold title. They have to be unit titled (body corporate).

And the trend of building large new houses - that is what the market wants. Building a small house on a new section is not much cheaper than a large house. As the land cost, cost of services, cost of the driveway, cost of council development and watercare development fees ect. Stay the same. So if a Large brand new home sells for 1.5M, a brand new but small home on the same land would cost 1.2M. But a first home buyer would instead buy an existing house for 800K. Even if they needed to spend 100K renovating it, it would still be cheaper.

Large apartment buildings are the most expensive way of building on a $ per square meter basis. So to make them cheap, you have to make them really small. This also means that if you want to own a large home, Say over 250m2. It is cheaper to buy a standalone home, than an apartment. So apartments only make sense in areas where land is really expensive. And bank lending rules mean you need a 50% deposit to buy a small apartment. So of course first home buyers are not going to rush out and buy apartments. When they need a larger deposit than a standalone home to buy. And then there are body corp fees on top of the mortgage payments for apartments.

So for a government building program to build affordable houses. The government would either need to make a large loss somewhere in the process. (most likely on land purchase costs). Or they would need to bypass council rules. Both planning rules, and paying council development fees. But if they are going to bypass planning rules, they should just allow everyone to bypass them. So everyone can build cheaper homes.

And then the new Auckland unitary plan. Which requires things like good urban design. As far as I can tell, it is things like not having all houses in a development the same. Minimum amounts of landscaped areas. Certain numbers of trees which have to be a minimum size. Means of turning cars around on the property. Even if you are a good driver who can safely reverse onto a road, you have to pay more for a house because other people are bad drivers. Restrictions on fencing. So you end up with houses on busy roads, with fences that can't safely contain little kids.

And then there are council rules that are not in the unitary plan. Such as no stormwater pumps allowed on what used to be North Shore City Council area. Neighbour wanted to build a house on the back of his section. Because it slopes away from the road, and there is no council stormwater drain there, he is not allowed to build. But if he had needed a sewage pump it would have been OK. As the council think that a stormwater overflow is far worse than a sewage overflow.

Edited to add.

So the unitary plan effectively doesn't allow you to build rows of houses all exactly the same. So no economies of scale. And far higher design fees. The silliest part about it is when you think about all the old villas in areas like Grey Lynn. And workers cottages in Ponsonby. They don't comply with current height to boundary rules. And often the max building height rules. So someone 50 to 100 years ago decided we were building houses too close together. And made new rules saying they had to be shorter and further away from each over. Yet today we still seem to have these rules in force.

tdgeek

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#1622209 4-Sep-2016 07:38

Not even worth a reply

tdgeek

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#1622211 4-Sep-2016 07:44

Aredwood:

It is all to do with the price of land and stupid council rules. Such as height to boundary and street setback requirements. This means you effectively can't build terraced housing with each house on an individual freehold title. They have to be unit titled (body corporate).

And the trend of building large new houses - that is what the market wants. Building a small house on a new section is not much cheaper than a large house. As the land cost, cost of services, cost of the driveway, cost of council development and watercare development fees ect. Stay the same. So if a Large brand new home sells for 1.5M, a brand new but small home on the same land would cost 1.2M. But a first home buyer would instead buy an existing house for 800K. Even if they needed to spend 100K renovating it, it would still be cheaper.

Large apartment buildings are the most expensive way of building on a $ per square meter basis. So to make them cheap, you have to make them really small. This also means that if you want to own a large home, Say over 250m2. It is cheaper to buy a standalone home, than an apartment. So apartments only make sense in areas where land is really expensive. And bank lending rules mean you need a 50% deposit to buy a small apartment. So of course first home buyers are not going to rush out and buy apartments. When they need a larger deposit than a standalone home to buy. And then there are body corp fees on top of the mortgage payments for apartments.

So for a government building program to build affordable houses. The government would either need to make a large loss somewhere in the process. (most likely on land purchase costs). Or they would need to bypass council rules. Both planning rules, and paying council development fees. But if they are going to bypass planning rules, they should just allow everyone to bypass them. So everyone can build cheaper homes.

And then the new Auckland unitary plan. Which requires things like good urban design. As far as I can tell, it is things like not having all houses in a development the same. Minimum amounts of landscaped areas. Certain numbers of trees which have to be a minimum size. Means of turning cars around on the property. Even if you are a good driver who can safely reverse onto a road, you have to pay more for a house because other people are bad drivers. Restrictions on fencing. So you end up with houses on busy roads, with fences that can't safely contain little kids.

And then there are council rules that are not in the unitary plan. Such as no stormwater pumps allowed on what used to be North Shore City Council area. Neighbour wanted to build a house on the back of his section. Because it slopes away from the road, and there is no council stormwater drain there, he is not allowed to build. But if he had needed a sewage pump it would have been OK. As the council think that a stormwater overflow is far worse than a sewage overflow.

Edited to add.

So the unitary plan effectively doesn't allow you to build rows of houses all exactly the same. So no economies of scale. And far higher design fees. The silliest part about it is when you think about all the old villas in areas like Grey Lynn. And workers cottages in Ponsonby. They don't comply with current height to boundary rules. And often the max building height rules. So someone 50 to 100 years ago decided we were building houses too close together. And made new rules saying they had to be shorter and further away from each over. Yet today we still seem to have these rules in force.

Yes, there certainly needs to be changes to fees and consents and rules, simplification and efficiency to save costs, to encourage new builds. Incentivise builds over renovation as renovation doesnt increase the housing stock. Mandate that immigrants must build, than buy existing. However, while its obvious we need more houses, having a Govt build mass produced boxes at 40% the price of current homes, which are better quality, and make a profit, is a great idea, albeit misguided.

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MikeAqua

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#1622917 5-Sep-2016 10:18

Whinery:

The people want to be in Auckland. There's more to do in Auckland than Timaru.

If urbanisation is the dominant cause, then there isn't a problem at all as people are choosing to be in Auckland, despite housing prices, traffic etc. Let them stew. No intervention required.

I'd actually argue there isn't more or less to do in the province or a major city, just different things to do. Fortunately you can have both. Live in one visit the other, whichever way floats your boat.

Mike

Geektastic

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#1622951 5-Sep-2016 11:06

I'm actually going through the sub-division process at the moment, albeit not in Auckland.

What really messes it up IMV is the requirement for the landowner to do so much before he can get title and sell it.

We have consent to divide 18 acres into 3 plots, being 10 with the existing dwelling and (approx) two new plots of 4 acres each.

However in order to get title I have had or will have the following expenses:

1) Initial surveying and consent application - $10,000

2) Secondary surveying for Section 223 consent - $10,000

3) Build new access and form highway entrance - $65,000

4) Sundry fencing - $25,000

5) Bring power to the plot boundaries - $25,000

6) Bring copper phone to boundaries - $6,000

7) Drainage survey - $3,000

8) Council fees - $17,000

9) Agent's and lawyers fees for sales - $30,000

So as you can see, I have to find a large pile of cash in order to get to the point where I can sell the plots.

How much easier if there was an alternative method thus: once the consent is granted, I can immediately draw lines on plans and sell, passing the legal duty to carry out the work to the buyer.

I'd probably get less for the unserviced plots than the serviced one but if I am prepared to do that then why can I not do it?

If you look at this in the context of selling a larger site to a developer in somewhere such as Auckland, the developer usually has lines of credit at the bank or cash in the bank to cover these costs, as well as possibly his own workers and machinery for the road construction, fencing and so on. He is far better equipped than a person who may be a farmer or other landowner whose only relevance in this scenario is the happenstance that he owns some land that can be sold.

If you multiply the costs up for a significant site, you will soon be into the millions of dollars and very few owners of land (which they may have inherited or bought in 1970 for peanuts by comparison) would have access to the necessary funding to do the works required in order to release that land for development under the current system. This means less land is available only because of the cost of making it available, not because it is unavailable per se.

Whinery

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#1624345 6-Sep-2016 07:35

tdgeek:

Mandate that immigrants must build, than buy existing.

That will have no effect on housing availability. I have seen multiple developments that would happily sell you a completed house as the builder of it. NZ Invest will claim that status for you on a thrice owned house, and puts that in their sales pitch, improperly claiming that that status confers special tax privilege.

Perhaps as an anti-immigration mechanism, it would have value, but placing artificial hurdles on <1% of the population would have absolutely no effect on the "housing crisis". Perhaps there'd be more scams and fraud (from the NZ based companies, like NZ Invest, not the immigrants), but that seems like a poor result. Being the first buyer from a developer wouldn't improve housing stock.

thinus

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#1625070 7-Sep-2016 13:52

Whinery:

tdgeek:

Wages up 10%. That will affect inflation a lot, including the labour to build, and the cost of materials. There are many people involved in producing materials. Forestry workers, 2x4 makers, transporters, warehousers, and so on. Not to mention export competitiveness.

Nope. Not at all. Wage increases will not cause inflation. Inflation correlates with wage increases, but that's not a causal relationship.

If you make 10% more tomorrow, milk on the international market won't care about your $1.50 an hour more income. Your consumption isn't enough to change global markets.

I read somewhere that a healthy business has a wage cost of 15-30% of the total revenue. Let's look at a local retailer/builder. To keep everything else in balance, a 10% wage increase results in a direct 1.5-3% increase in total revenue. Then it comes down to how much of your total revenue is spent locally, let's say another 20% which means your total revenue could go up another 2%.

How can you claim that there is no causation? If the company wants to keep selling at the same prices (to avoid the inflationary impact) then the 10% increase in wages needs to be cut elsewhere. I can agree that the employee might still be better off as the inflation is likely to be less than 10% but there are other side-effects.

- If it becomes cheaper to import rather than source locally due to wages then it can lead to job losses

- Export businesses may become unviable due to the wage cost and competing against cheaper international offerings which can lead to job losses

The only reason to claim that common lie is because it fits your political agenda. There's no factual basis in the claim that an increase in the productivity of NZ (demonstrated by, or reflected in increased wages) would have a 1:1 effect on inflation. The USD price of a Samsung S7 will be the same. But if your buying power is 10% greater, then it'll be cheaper, allowing you to buy more.

You are right, it is not 1:1. The inflation increase will be based on how much the wage cost is of the total revenue of NZ based businesses and an additional factor based on the portion of the total revenue that is spent locally. Can you explain how my understanding of the correlation between a wage increase and inflation is wrong?

I can understand when the 10% wage increase is due to businesses making additional profit (productivity gains) and they then decide to pass some of the profit on to the employees and that the government with the additional income tax take then pass it on to public sector employees. But, a business with a sudden jump in profit will most likely not be passing the profit on to employees. You will pay your employees enough to have acceptable levels of staff retention (a bit above market rate). You will use additional profits to reward stock holders or grow/secure the business. Unless you believe the increase to be sustainable in the long term you will not pass too much on to employees in the form of wage increases.

thinus

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#1625075 7-Sep-2016 14:08

MikeAqua:

Whinery:

The people want to be in Auckland. There's more to do in Auckland than Timaru.

If urbanisation is the dominant cause, then there isn't a problem at all as people are choosing to be in Auckland, despite housing prices, traffic etc. Let them stew. No intervention required.

I'd actually argue there isn't more or less to do in the province or a major city, just different things to do. Fortunately you can have both. Live in one visit the other, whichever way floats your boat.

I live in Auckland for mostly these reasons:

Work availability (50+ job listings for my skills, Wellington/Christchurch about 10 each, rest of NZ 1 or nothing)
Education / Opportunities, not just for me but also for my child
Access to Services

Auckland workers contribute more tax. Unless you want your government services to be affected it is actually in your interest to keep Auckland functional. I don't think anyone in the country would not be impacted if there is a serious downturn in Auckland.

I do agree that the Government should be doing a lot more to establish additional business centers on the fringes of Auckand. There just doesn't seem to be enough incentive for businesses to shift anywhere else.

mattwnz

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#1625104 7-Sep-2016 15:19

Geektastic:

I'm actually going through the sub-division process at the moment, albeit not in Auckland.

What really messes it up IMV is the requirement for the landowner to do so much before he can get title and sell it.

We have consent to divide 18 acres into 3 plots, being 10 with the existing dwelling and (approx) two new plots of 4 acres each.

However in order to get title I have had or will have the following expenses:

1) Initial surveying and consent application - $10,000

2) Secondary surveying for Section 223 consent - $10,000

3) Build new access and form highway entrance - $65,000

4) Sundry fencing - $25,000

5) Bring power to the plot boundaries - $25,000

6) Bring copper phone to boundaries - $6,000

7) Drainage survey - $3,000

8) Council fees - $17,000

9) Agent's and lawyers fees for sales - $30,000

So as you can see, I have to find a large pile of cash in order to get to the point where I can sell the plots.

How much easier if there was an alternative method thus: once the consent is granted, I can immediately draw lines on plans and sell, passing the legal duty to carry out the work to the buyer.

I'd probably get less for the unserviced plots than the serviced one but if I am prepared to do that then why can I not do it?

If you look at this in the context of selling a larger site to a developer in somewhere such as Auckland, the developer usually has lines of credit at the bank or cash in the bank to cover these costs, as well as possibly his own workers and machinery for the road construction, fencing and so on. He is far better equipped than a person who may be a farmer or other landowner whose only relevance in this scenario is the happenstance that he owns some land that can be sold.

If you multiply the costs up for a significant site, you will soon be into the millions of dollars and very few owners of land (which they may have inherited or bought in 1970 for peanuts by comparison) would have access to the necessary funding to do the works required in order to release that land for development under the current system. This means less land is available only because of the cost of making it available, not because it is unavailable per se.

The SW is actually cheaper than most areas to do a subdivision, and they council are really helpful. There are a lot of blocks of lifestyle blocks that have been chopped up into smaller parcels in the area. But you do build those costs into the sale price. And some of those costs maybe able to be delayed until you have an unconditional offer. That is why you often see land sales as STFS. You should talk to your Lawyer or expert as to the best way to minimise costs, as they look very high. I have investigated a sub division in the area myself, and in my case it didn't stack up, and I didn't want to wait potentially years to sell the parcels.

mattwnz

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#1625106 7-Sep-2016 15:29

tdgeek:

Yes, there certainly needs to be changes to fees and consents and rules, simplification and efficiency to save costs, to encourage new builds. Incentivise builds over renovation as renovation doesnt increase the housing stock. Mandate that immigrants must build, than buy existing. However, while its obvious we need more houses, having a Govt build mass produced boxes at 40% the price of current homes, which are better quality, and make a profit, is a great idea, albeit misguided.

In the UK, they make new builds GST free. This is why people are more likely to demo an old house over there and build new. This also means that the country ends up replacing their old building stock. NZ does have a significant amount of old poor housing stock. So I would like to see a 'conversation' (the current buzz word politicians use) into whether we should make new house builds and materials GST free. NZ also doesn't want to end up with bland boxes. There are some terrible developments in Auckland, that I am amazed have been allowed. But some developers will take liberties with the district plan, to see what they can get away with, as they want to spend as little as possible to maximise their returns..

Although that really has nothing to do with Aucklands problem, as property prices will go up no matter what the condition of the house is, as the price is based on the land opportunity price with the unitary plan.

Geektastic

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#1625142 7-Sep-2016 16:01

mattwnz:

Geektastic:

I'm actually going through the sub-division process at the moment, albeit not in Auckland.

What really messes it up IMV is the requirement for the landowner to do so much before he can get title and sell it.

We have consent to divide 18 acres into 3 plots, being 10 with the existing dwelling and (approx) two new plots of 4 acres each.

However in order to get title I have had or will have the following expenses:

1) Initial surveying and consent application - $10,000

2) Secondary surveying for Section 223 consent - $10,000

3) Build new access and form highway entrance - $65,000

4) Sundry fencing - $25,000

5) Bring power to the plot boundaries - $25,000

6) Bring copper phone to boundaries - $6,000

7) Drainage survey - $3,000

8) Council fees - $17,000

9) Agent's and lawyers fees for sales - $30,000

So as you can see, I have to find a large pile of cash in order to get to the point where I can sell the plots.

How much easier if there was an alternative method thus: once the consent is granted, I can immediately draw lines on plans and sell, passing the legal duty to carry out the work to the buyer.

I'd probably get less for the unserviced plots than the serviced one but if I am prepared to do that then why can I not do it?

If you look at this in the context of selling a larger site to a developer in somewhere such as Auckland, the developer usually has lines of credit at the bank or cash in the bank to cover these costs, as well as possibly his own workers and machinery for the road construction, fencing and so on. He is far better equipped than a person who may be a farmer or other landowner whose only relevance in this scenario is the happenstance that he owns some land that can be sold.

If you multiply the costs up for a significant site, you will soon be into the millions of dollars and very few owners of land (which they may have inherited or bought in 1970 for peanuts by comparison) would have access to the necessary funding to do the works required in order to release that land for development under the current system. This means less land is available only because of the cost of making it available, not because it is unavailable per se.

The SW is actually cheaper than most areas to do a subdivision, and they council are really helpful. There are a lot of blocks of lifestyle blocks that have been chopped up into smaller parcels in the area. But you do build those costs into the sale price. And some of those costs maybe able to be delayed until you have an unconditional offer. That is why you often see land sales as STFS. You should talk to your Lawyer or expert as to the best way to minimise costs, as they look very high. I have investigated a sub division in the area myself, and in my case it didn't stack up, and I didn't want to wait potentially years to sell the parcels.

You can't build your costs into the sale price per se - the sale price is dictated by the market and what you can realistically achieve depends on the going rate for comparable sites more than your costs. I could (and would love to!) decide I want $500,000 for each plot but I'm fairly confident that I will still be the owner 10 years from now if I ask that much.

I've had the surveyors alter the site plan as part of the 223 to shorten the access road by 100m or so and the length required for power etc. Those figures are recent quotes and of course you are limited in your choice of contractor for power and phone. The road quote is a bit out of date now and may be a bit lower as the road length is shorter.

Fencing is a guesstimate based on the last quote I had from a local contractor for stock fences. It may come in a bit lower when we actually get the contractors on site to quote. Agents and lawyers fees are what they have quoted, ditto council fees.

We are delaying all the costs other than (1) & (2) which have already been incurred until sale contracts are signed and deposits held in lawyer's trust funds.

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