Key Facts

  • The number of new homes being built in Auckland is likely to decline by more than 25% over the next two years.
  • The decline is being attributed to increased construction costs, tighter lending restrictions, and falling migration levels.
  • A total of 14,447 new dwellings were consented in Auckland in the year to October, a decrease from 14,634 the previous year.
  • New Zealand’s national construction costs have risen about 26% in the last five years.
  • The Reserve Bank’s loan-to-value ratio (LVR) on bank lending for residential property development has also added to the slowdown.
  • Falling migration levels are expected to reduce the demand for housing.

Article Summary

Based on recent forecasts, Auckland may experience a significant decline in new home constructions over the next two years possibly dropping by more than 25 percent. This marks a setback in the region’s attempts to address housing shortages. This expected decrease is attributed in part to soaring construction costs, stricter lending standards, and a decline in migration.

The year leading up to October saw a decrease in new dwellings consented in Auckland, dropping from 14,634 the previous year to 14,447. For the last five years, the national construction costs in New Zealand have seen a substantial increase – approximately 26 percent. This, coupled with tighter supervision on bank lending for residential property construction imposed by the Reserve Bank’s loan-to-value ratio (LVR) rules, contributes to the projected slowdown.

Adding to these challenges is the expected decline in migration levels. The reduced flow of migrants is likely to impact on the demand for new housing. The precise influence of these factors on market demand and housing prices, however, remains to be seen. These scenarios remind home owners, home-buyers and property investors of a constantly changing market environment.

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