12 Jun 2018

Auckland's housing crisis forecast to get worse

8:42 am on 12 June 2018

A real estate company is predicting Auckland's housing crisis is set to deepen as some developers choose to sit on land because they cannot turn a profit.

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Photo: RNZ

Colliers International says lower house prices and steeper building costs has put the brakes on development in the city.

It projects that about 15,000 houses or apartments need to be built a year to meet the demand and keep up with growth.

Colliers director Alan McMahon said it was virtually certain the number of houses being built would fall short of this, especially in the next few years.

He said house price inflation had virtually stopped, which was good for affordability, but there was a flipside.

"The other side of the coin is that it's harder to develop new houses because it's harder to make a profit and therefore developers won't build as fast or as many as they would like to."

According to Colliers, construction costs have risen by five percent in the last year alone.

Mr McMahon said it was difficult to buy land, organise consents and construction and sell the properties quickly and cost-effectively enough to secure bank funding and to make a decent profit.

He said there's a risk that some developers will wait to build, "they'll just sit on the land until prices go up, the rate of sales increases and hopefully construction cost inflation settles down a bit before they have another go."

In 2017, 7900 homes were completed, 6000 short of Auckland Council's yearly target.

Housing strategist Leonie Freeman said it was a problem for the city and key workers like teachers, nurses and police officers in the community, and they either ended up living miles out of the city, or somewhere else altogether.

"There's something fundamentally wrong when good, professional key workers in our city are really struggling to buy a house and put down roots if that's what they want to do, and I just think that is hugely problematic for the future of our city."

Six years ago Manurewa's Finlayson Park School bought a local house in order to be able to rent the property's four rooms to its young teachers.

Principal Shirley Maihi said she saw the writing on the wall and needed to get innovative to attract and keep teachers, but the money used to buy the house could have gone to school programmes.

"If we don't have enough staffing our children are not going to be well taught, or taught at the levels that we would expect them to be taught at."

Mrs Maihi said it was almost impossible to attract teachers out of the region, and those already in Auckland were either snapped up or were leaving because it was too hard to find accommodation.

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