Auckland’s housing market is now ministerially sanctioned as ‘out of control’. Hayden Donnell spoke to Chris Minty from Saba about whether apartments are the answer.
Auckland’s house prices just reached $1 million on average.
As milestones go, it’s like your first catastrophic break-up, or turning 40: no-one feels that good about it. The Government now admits things are pretty dire for people who don’t already own a home. Housing Minister Nick Smith recently conceded the market is “out of control”. He’s gone from telling first-home buyers off for being unrealistic to telling them to give up and move to Christchurch.
The solution, in the main, is to build more homes. Not old-fashioned sprawling Kiwi dream houses, each with a cricket field-size backyard, at least 14 sheep, and several life-size statues of Colin Meads. Instead we need apartments: high-rises and walk-ups, a bit small, quite small and very small, near public transport nodes, in the central city and surrounding suburbs.
They’re in the process of constructing a new development on the edge of the Viaduct Harbour. It’s at the lower end of the upper end of the market. Prices start at $500,000 and go up from there. They’re compact but – and I promise this is my honest opinion – very beautiful.
I spoke to the company’s development manager Chris Minty about Auckland’s dysfunctional housing market, the Unitary Plan, and whether we could still do more to encourage construction.
Do you think apartments get a bad rap in Auckland?
The answer is yes, although there are probably some examples of some not-so-good ones. I think there was probably a period of time where things were a bit ho-hum. I don’t think it’s ho-hum anymore. Maybe I’m a little biased but I think there’s some pretty outstanding looking developments coming on stream. They will be developed, they’ll change the skyline.
When you travel the world, does it seem like we’re a little backward when it comes to how accepting we are of apartments?
Yes, but I think that’s changing. There’s a lot of people that accept that’s the way they want to live or accept that’s the way they’ve gotta live. And it’s probably the two ends of a scale. It’s the younger and the older. The younger are going “well that’s what I get and actually that suits me because I don’t want to have to worry about a garden”, and the older who are saying the same thing but in reverse. They’ve sold their house and want something smaller and tidier and easier.
Do you see future apartment developments looking like [Saba] or is this sort of an outlier? Do you think the design standards will be this high going forward? There’s a lot of people that are worried we’re going to have box apartments again.
I think design will continue to change with new trends and new materials and all that kind of stuff. But I think what you’re seeing now developers paying regard to quality and design. We’re not just trying to build a box and get it through Council and then build it. This is design for people to live in so I think the attention to detail is going in. And I think that’s across the board. Saba is a good example of that approach.
Now the Unitary Plan is passed, what’s the next thing that has to happen to make this city slightly less apocalyptically unaffordable?
I think people have got to get on with it. You’ve just got to accept the Unitary Plan and get on with it.
Buyers or developers?
I think everybody, including Council. Cos I’m sure there’s some people in Council still umming and ahhing. They’ve got to manage it through. The reality is the market just needs to accept it and get on with it and I think they will. It’s just how long it takes.
We have $1 million average house prices now. The Government says it doesn’t actually want those to go down. Are we really looking at prices that high from now until eternity?
It’s hard to see it going backwards. I’m not saying it’s necessarily going to become $2 million dollars in 10 years but it’s hard to see how the market can go backwards. Even if we up the supply, that stabilises prices. You’d have to have an oversupply to get prices to go backwards.
The contention is that a capital gains tax would help, though that’s not always that popular an idea.
No, but never say never. At the end of the day the politicians will do what the public want. And when enough voices go “it’s really good that I made so much on my house but actually it’s not right”, that’s gonna take a bit cos most people like their houses being worth more than they were last year.
I think it should happen.
I kind of agree but it’s all about the detail. You’ve gotta get enough people to convince politicians. It’s gonna take a little bit for that to happen – for that mindset to change.
In this market, is it too hard to put something like the Saba development together?
Too hard? No I don’t think it’s too hard. It’s just time and money. Could it be easier? Yes it could always be easier.
Should it be easier?
Ideally, yeah. It should.
How do you make it easier?
I don’t have all the answers, but my view is they should have specific taskforces for residential development within Council. Special consenting taskforces in the council that basically focus entirely on getting the consents through quicker. The process should be solution-based.
It was something like a year for your resource consent and then you got building consent as well…
Yes. If you’re doing something like this, you can assume you’re gonna chug up 12 months getting your resources. If you were starting this from scratch, you’ve got Geotech reports, infrastructure reports, urban design approvals and more – there’s quite a long process.
Urban design is important. I guess it’s at the council end. If they’re going to invest their money anywhere, should it be in a consenting team and speeding that up?
My view would be yes. And that’s a resource issue, it’s not the people. It’s just they’ve got too much to do. They’ve got so much to do and they don’t have the time to dedicate to you.
You get every mayoral candidate saying “we’re gonna keep the rates to 2% rises” but would we rather have higher rates rises and a few more staff working in consents?
I think there could be more. And I think if it was targeted at specifics, let’s say an apartment team and those are the people that are dedicated to that team and we’re not going to let them get focused into something out in Mt Wellington – that’s going to be the direction they’re given.
Is part of the problem that there’s not enough developers out there?
I think there’s probably enough developers. It’s more that you can only do so much. You only have a certain number of builders so even if there was another 20 developers, there’s another 20 building companies. There is also only so much funding to go around.
The Unitary Plan is mostly three storey walk-ups though. Will there be more people doing those kinds of small developments, rather than your kind of larger scale development?
I think that’s where the difference will be. The Unitary Plan opens up the market to a wider group of potential developers. You wouldn’t get a standard builder saying “Oh cool I might build 115 apartments this week” because it’s just too big a leap. But he might say “Instead of building two houses I might build four apartments.”
How much do you reckon the Global Financial Crisis has to do with our current crisis?
A lot. If you think about it, basically everything stopped overnight. There’s probably three to four years of building that didn’t happen. Also it is a long and expensive process to get a resource consent. Then you’ve got to get it marketed, you’ve got to get it to market, you’ve got to get a level of pre-sales, because you need the level of pre-sales to get funding. All of that just takes time, but if you think about Auckland at the moment, we’ve got unprecedented development. We probably haven’t seen residential development like we’ve seen at the moment.
Absolutely, and yet it’s still not enough to keep up.
That’s just that lag. We’ve probably never built enough.
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There’s going to be definitely a lag before anything starts happening with the Unitary Plan but do you think it will eventually – down the track – make Auckland affordable?
I think the two ends come together. More gets done and there’ll be less demand. Because demand’s going to taper off. I don’t buy into that the market’s going to keep growing at the level it’s growing. It’ll keep growing but it’s gonna slow down at some point.
The crash is coming, that’s what people say.
I don’t know. On the crash, if it happens it’ll be something external to New Zealand. It won’t be what’s happening in this country – it’ll be something happening in the world. Just look out for Donald Trump…