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Opportunity in Wellington (again)

Building consents by Region

In my last post I compared building consents with a past average. I thought that comparison could be improved so here is one based on the number of households in the 2013 census. ie for most regions, there were less than 1.5% consents per household. That was clearly low compared to the last 20 years which seems to sit about 2% for most regions - recall that in 2000 I am comparing to households in 2013, so this number is slightly depressed, making the 2013 number look even smaller. I was able to do this for all of NZ, so that also gave me a usefull total NZ line.

BTW, I had to remove Queenstown from this chart to bring the scale down - it sits at close to 10% and follows an independent pattern.


Wellington is different

The standout is still Wellington. Recall that this is consents, so Tauranga and Hamilton are showing a recent large increase, but the construction has not yet finished so the increase in supply to match demand has not yet happened. Christchurch on the other hand is winding down and so are prices as supply starts exceeding demand.


Wellington Urban Areas

This led me to wonder where in Wellington, since I am local and could expect to know about any changes - and am only aware of increasing apartments in Petone (part of Lower Hutt). Apartment building in Wellington appears to be running at about the same level as in the past and the chart supports this.

Wellington Urban AreasThe chart below shows the city compared with urban areas. - there is no outstanding area, lack of growth seems to be consistent across the board. However, there is a sudden change in Lower Hutt, but that is after a long period of almost no growth - a feature locals are very aware of due to a council intent on doing nothing to save money.

These charts strongly suggest, along with the charts on rental listings here, that there is an excellent opportunity for development in Wellington right now

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Wellington Building Boom Yet to Start

Building consents published by MBIE show some interesting numbers. It would appear to be a great time to invest in Wellington.

The post earthquake Christchurch building boom is obvious, and is well over the top now but remains well above the building levels prior to the earthquake - despite rentals falling!

Hamilton & Tauranga are well into a building boom, and considering the real shortage of rental properties in these areas it is about time, but is the boom overblown? Actual housing coming on to the market could change the situation dramatically in the near future


Auckland on the other hand is just ticking along, pretty much matching construction in the past, hinting that the market is not calling for more private housing. It’s not that clear the the index base is good for Auckland, maybe it needed to be higher. Maybe the Housing Corporation will be able to build enough low rent housing in this lull.

Wellington on the other hand is at least as short of private housing as Hamilton and Tauranga, but consents are only 90% of the long term average prior to 2007. That suggests to me that the market is not being met with new housing.

Why use 2000-2007? I don’t have enough data yet for a better index. Once the 2018 census data comes out we will be able to see where all these immigrants have gone, but I suspect they have followed the available accomodation, the work may also follow them. I will re-index then to find out where the Auckland average should be.


Rental Yields

An article on NBR that claimed the current simple yield has dropped to 3.5% caught my interest. The writer said that he read the figure from MBIE in the past but no better reference. So I investigated

He was right, but the devil is in the detail. I pulled data from the five main cities and there is a clear difference between the northern cities and southern. in the north the current rate is 3 to 3.5%, but Wellington and Christchurch are sitting at 4.1%. The total is a weighted average of these cities.


Wellington has been different in the past, but the beginning of the last boom resulted in a bit of a merger. Tauranga has usually had a very low yield, but is about the same as Hamilton now. Since the earthquake property prices appear to have impacted yields in opposite directions for Auckland and Christchurch.




Comments below please

Jonette 2011