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Govt Inaction Collapsing House Building Industry

New Zealand Government Inaction Collapsing House Building Industry

Hugh Pavletich
Co author
Annual Demographia International Housing Affordability Survey

July 29 2008

The June 2008 Building Consents Issued Release by Statistics New Zealand state that in June 2007 there were 2574 new residential building consents issued, which had slumped to 1362 consents in June 2008 – some 1212 less than the same month last year.

Nationally – the June 2008 results are 53% of those of June 2007.

Christchurch has slumped from 209 consents June 2007 to 98 in June 2007 ( Refer Tables ).

The Real Estate Institute of New Zealand (REINZ) June 2008 Residential Market Report released 11 July ( with Markets Facts Graph ) illustrate that in June 2007 there were 7474 transactions with a median house price of $347,500 and a monthly dollar volume of $3.099 billion. In June 2008 there were 4305 transactions, a median house price of $340,000 and monthly dollar volume of $1.740 billion.

Monthly transactions had peaked in May 2007 with 10,989 transactions and a monthly dollar volume of $4.534 billion.

This destructive and unnecessary urban housing bubble has been caused by Local Government not ensuring the provision of adequate land and appropriately financing infrastructure and Central Governments persistent unwillingness to address the issue.

New housing with sections / lots should be being built on our urban fringes for around $140,000.

As the Annuial Demographia International Housing Affordability Surveys illustrate – normal urban markets housing should not exceed three times household income ( example - Houston Association of Realtors June 2008 Report ).

The international measure for building performance is the “build rate per thousand population”.

With just 1362 building consents issued in June ( expressed on an annual basis -16,344 ) and with a population of 4.3 million – this indicates that New Zealand’s build rate per thousand population has slumped to 3.8.

The major “bubble markets” globally are the California and the United Kingdom – where build rates per thousand population have now slumped to 1.9 ( 68,400 ) and 1.6 ( 97,600 ) per 1000 population annually respectively.

If New Zealand’s residential building levels fell to Californian and British levels – less than 8,000 new residential units would be put in place on an annual basis.

ENDS

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