Brian Gaynor ‘up the Creek’ on Housing
Brian Gaynor ‘up the Creek’ on Housing
Performance Urban Planning
7 March 2015
Within a New Zealand Herald Opinion Building consents highlight Auckland's problems (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11413152 ) Brian Gaynor of Milford Asset Management, with no specific expertise in urban development / economics, comments on the lack of new residential building in Auckland.
Mr Gaynor as a Fund’s Manager, fails however within this Opinion to explain the structural impediments to new residential building in Auckland … and too … the realities of construction performance over recent years within the Greater Christchurch area (that includes Selwyn and Waimakariri Counties).
When housing markets are severely unaffordable and therefore severely distorted (something the Gaynor Opinion does not mention), we should not be surprised construction performance is distorted as well.
Mr Gaynor failed to note within his Opinion that Auckland housing is a severely unaffordable 8.2 times household incomes … Christchurch 6.1 times … with New Zealand’s major metros some 5.2 times overall … according to this year’s 11th Annual Demographia International Housing Affordability Survey .
The Irish bubble burst when its major metros hit 4.7 Median Multiple … collapsing to 2.8 median Multiple … wiping a quarter trillion euros of “bubble value” out of its housing market … noted within New Zealand’s Bubble Economy Is Vulnerable | Hugh Pavletich | Scoop News
Normal housing markets do not exceed 3.0 times annual household incomes.
It is clear Mr Gaynor is not aware of the relative performances of affordable Texas and severely unaffordable New York and California, as explained within the Wall Street Journal recently … Houston housing market losing energy and Falling oil prices threaten Houstons building boom .
Not surprisingly, differences in construction performances of the more affordable and less affordable markets are profound.
When discussing new residential construction performance, the standard industry measure is the “consent / start / completion rate per 1000 population per annum”.
There is no mention of this essential measure within Mr Gaynor’s New Zealand Herald Opinion, likely because being from the finance sector he is unaware of it.
Raw construction numbers with no direct relationship to the underlying population base are of little use.
In using this measure on the housing construction front, the Wall Street Journal articles illustrate that the residential consent rate for Houston (Median Multiple 3.5) through 2014 was 11.04 per 1000 population per annum, with New York (Median Multiple 6.1) at 2.29 and Los Angeles (Median Multiple 8.0) at 1.79 residential consents per 1,000 population per annum.
Therefore, when appropriately measured against underlying population bases, through 2014, New York’s residential consent rate was some 20.7% Houston’s rate … Los Angeles just 16.21%.
If the United States overall was consenting at Houston’s 2014 rate, some 3.521 million consents would be issued in a year. In contrast, with respect to severely unaffordable Los Angeles, the U.S consent volumes would be just 571,000.
A remarkable contrast.
The United States recovery would look considerably brighter if and when they decide to learnt from Houston and Texas.
The second Wall Street Journal article, dealing with office construction performance, illustrates how Houston (again appropriately on a population basis) put in place 9.0 times as much new office space than the rest of the United States.
New York’s new office space construction on a population basis, was just 11.56% of the Houston rate through 2014.
There is no mention within Mr Gaynor’s New Zealand Herald Opinion, that new starter housing stock should be going in n the fringes of the New Zealand metros for about $1,000 per square metre all up (serviced lot and construction costs) … as explained within Focus on Restoring Housing Affordability … and illustrated with the Andrew Atkin THE REAL DEAL .
The fringe is simply the supply / inflation “vent”.
If true market pricing for land is restored on the fringes, all forms of development benefit as true market values for land are restored across the metro.
Mr Gaynor also fails to explain why new starter construction (excluding service lots) costs on the fringes of the affordable or near affordable U.S. markets is about $US500 per square metre, in contrast to New Zealand at in excess of $NZ1,600 per square metre … and too … our current lousy productivity performance … and why.
Instead the Gaynor Opinion simply provides raw (and meaningless) construction industry employment numbers.
There is no mention within the Gaynor Opinion why Christchurch is an exceptional case … and in how the adjoining smaller Counties (part of Greater Christchurch) acted as a “vent” for a number of years following the first earthquake events 4 September 2010.
It is only over recent times, following the Christchurch City Council losing its building consenting accreditation (a truly remarkable feat of bureaucratic incompetence) with the central Government troops being sent in to sort out that specific mess (there are plenty more), that the Christchurch consents over recent times have reached an acceptable level.
It seems likely Christchurch Council elected representatives will be fired before long … and replaced with Commissioners. The former are weak, incompetent and clueless.
The persistent nonsense and incompetence are no longer tolerable.
Enough is enough.
The structural impediments to all forms of residential development and construction are well known … as the Christchurch Independent Hearings Panel recently illustrated … highlighting the Christchurch City Councils planning fiasco … Independent Panel Slams Christchurch Council Planners | Scoop News .
Mr Gayor needs to take particular note of what Mr Sewell, Property Manager of Nagai Tahu had to say about the Christchurch City Council’s consenting “non-performance” to the Independent Hearings Panel (reported within the above article).
It is the same in Auckland.
Following years of research, with intense and healthy public discussion and debate since the time of the release of the Ist Annual Demographia International Housing Affordability Survey early 2005 … the release of the Productivity Commission Report on Housing Affordability April 2012 (followed by the release of the Regulatory Performance Report and the Land Supply Report currently in progress) … the Government made it clear with its October 2012 announcement, the focus is on (access www.PerformanceUrbanPlanning.org ) …
• Land supply
• Infrastructure financing
• Process … and …
• Construction costs
Soon after the release of this year’s Annual Demographia International Housing Affordability Survey Monday 19th January, Housing Minister Dr Nick Smith and this writer discussed progress on TV One Breakfast …
Housing & Building Minister Hon Dr Nick Smith …
Hugh Pavletich ….
Brian Gaynor appears to be unaware New Zealand is the world leader, with its evolutionary and collaborative approach, in getting in place workable and sustainable solutions to the housing issue.