Auckland Unitary Plan Update
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Articles by Matthew Gilligan
As we move closer to the implementation of the Auckland Unitary Plan, it appears Auckland Council may have to make adjustments to the proposed rules as a result of analysis and community feedback.
One of the main issues Council will have to address is that the Terraced Housing and Apartment Buildings (THAB) zone has turned out to be uneconomic in some areas.
The upshot of this is that much of the land supply that is anticipated under THAB zoning is unlikely to yield dwellings. If the bulk of apartments won't end up being built because they are not economically feasible, how will Auckland's housing shortage be solved? The anticipated additional 750,000 to 1 million people over the next 30 years need somewhere to live. On top of this, we are starting off on the back foot, with an existing shortage of approximately 35,000 homes.
According to Auckland Councillor Dick Quax, it is estimated that under the current AUP model only 30% of the housing required to address Auckland's shortage will be financially viable within the existing urban boundary. Clearly a re-think is needed.
Implications
If many THAB zones will not proceed as proposed under the draft AUP, Council will need to look for alternative zoning. One possibility is that the prospective Mixed Housing Urban and Suburban zones could be denser, and many properties currently earmarked to be Terrace Housing and Apartment Buildings could end up being zoned differently.
Another possibility is that land outside the current urban limits may end up being rezoned for more intensive development, or earlier development in the case of Future Urban zoning. Plainly speaking, the 'slow release' of future greenfields land for subdivision is looking very inflationary. The land is needed now.
While no one can tell you what exactly will happen, it is important to take all of this into consideration when making your property investment decisions.
To me, the opportunity to buy land that is being rezoned in Auckland (small or large lot) is an incredible, once-in-a-lifetime opportunity. Where else can you find a market with tight supply, epic demand, and vendors that are not necessarily pricing the implications of rezone into their property? I have purchased some great land-rich assets in the last couple of years in Auckland, and I'm still buying. While 'average' Auckland houses look expensive, houses with big back yards and rezone potential look very attractive to me, especially if you have the money to develop them once the proposed Auckland Unitary Plan rezone takes shape next October (2016). Well worth looking into if you have the time.
Check out one of my Property Investment Education workshops for more discussion.
Apartments in particular are expensive to build, costing around $4,000 per square metre. When you add in the land and subdivision costs, it can end up costing more to build them than they can be sold for, particularly in suburban areas. Only small, inner city apartments, and apartments in some prime areas with affluent demographics, appear to be worthwhile for developers to build.
Terrace houses are more cost-effective to build, at around $1800–$2,000 per square metre. However, the draft AUP prioritises apartments – 50% compared to 3–4% for terrace housing.The upshot of this is that much of the land supply that is anticipated under THAB zoning is unlikely to yield dwellings. If the bulk of apartments won't end up being built because they are not economically feasible, how will Auckland's housing shortage be solved? The anticipated additional 750,000 to 1 million people over the next 30 years need somewhere to live. On top of this, we are starting off on the back foot, with an existing shortage of approximately 35,000 homes.
According to Auckland Councillor Dick Quax, it is estimated that under the current AUP model only 30% of the housing required to address Auckland's shortage will be financially viable within the existing urban boundary. Clearly a re-think is needed.
Implications
If many THAB zones will not proceed as proposed under the draft AUP, Council will need to look for alternative zoning. One possibility is that the prospective Mixed Housing Urban and Suburban zones could be denser, and many properties currently earmarked to be Terrace Housing and Apartment Buildings could end up being zoned differently.
Another possibility is that land outside the current urban limits may end up being rezoned for more intensive development, or earlier development in the case of Future Urban zoning. Plainly speaking, the 'slow release' of future greenfields land for subdivision is looking very inflationary. The land is needed now.
While no one can tell you what exactly will happen, it is important to take all of this into consideration when making your property investment decisions.
To me, the opportunity to buy land that is being rezoned in Auckland (small or large lot) is an incredible, once-in-a-lifetime opportunity. Where else can you find a market with tight supply, epic demand, and vendors that are not necessarily pricing the implications of rezone into their property? I have purchased some great land-rich assets in the last couple of years in Auckland, and I'm still buying. While 'average' Auckland houses look expensive, houses with big back yards and rezone potential look very attractive to me, especially if you have the money to develop them once the proposed Auckland Unitary Plan rezone takes shape next October (2016). Well worth looking into if you have the time.
Check out one of my Property Investment Education workshops for more discussion.
Matthew Gilligan
Director
© Gilligan Rowe & Associates LP
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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
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Hello Matthew, I am just wishing you the best of success with your excellent book Property 101. It is very rare that I come across a book on real estate that is in the league of other financial securties writer's. Thank you for taking the time and more importantly writing about real estate in a easy to read manner. I am still learning after 30 years in real estate. I am also a true contrarian like yourself and have learned this art from my favourite contrarian, Jim Rodgers (Former Quantum Fund). I have been preaching this to our Investor net work and corporate clients for some time, but most find it very hard to-do. Thanks again! Kind Regards, - Chris Kerr - The New Kids On The Block Pty Limited - October 2015
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