New Zealand Housing and Construction Quarterly June 2014 Contents 2 Quarterly Highlights Housing Market 3 House Values by Region 4 Rents by Region 5 Rents by Bedroom and Price by TA 6 Price and Rent Comparisons 7 Housing Affordability Construction 8 Construction Sector Performance 9 Residential Construction 10 Non-Residential Construction 11 Building Activity 12 Construction Costs Social Housing 13 Affordability for Low-Income Households 14 Low-Income Housing Costs 15 Government Social Housing Key Issues A Tale of Two Housing Markets. The vast majority of the current discussion around the state of the housing market focuses on two regions: and Greater Christchurch.While it makes sense to focus on the areas of the country with the most significant housing issues, there is a risk that focusing too much on a couple of markets can create a misleading picture of what is happening around the country. We explore this further on page 2. Christchurch House Values and Rents In this issue of the NZHCQ we continue to focus on differing growth rates for rents and house values,incorporating new graphs to explore this relationship in Christchurch. Christchurch rental growth leads the country while house value growth is significantly lower. We explore this further on pages 5 and 6. The NewZealand Housing and Construction Quarterly provides quarterly data and analysis on the housing market, construction and social housing. This publication is produced by the Ministry of Business, Innovation and Employment. The report is available at: http:// /sector-information New Zealand Housing and Construction Quarterly June 2014
Quarterly Highlights A Tale of Two Housing Markets The vast majority of the current discussion around the state of the housing market focuses on two regions: and Greater Christchurch (the combination of Christchurch, Selwyn and Waimakariri). While it makes sense to focus on the areas of the country with the most significant housing issues, there is a risk that focusing too much on a couple of markets can create a misleading picture of what is happening around the country. Even national statistics can paint a misleading picture as national figures are heavily influenced by. This can lead to people drawing conclusions about how the rest of New Zealand s housing market is performing based on a misleading picture. Looking at the price statistics for each Territorial Authority (TA) separately gives a better indication of what is happening across the country, and this analysis shows that the and Greater Christchurch housing markets are becoming increasingly separated from the rest of New Zealand. In April 2014, the top four TerritorialAuthorities (TAs) by annual price growth were (14%), Waimakariri (8%), Christchurch (8%) and Selwyn (8%). The fifth fastestgrowing TA was Queenstown-Lakes, which had a 6% annual growth rate. While the four and Greater Christchurch TAs aren t always the top four, they have consistently featured there over the last 12 months. This suggests that and Greater Christchurch have their own price dynamicthat is completely different from that of the rest of the country. Rather than just being the fastestgrowing part of a national market, they really need to be seen more as a market on their own, with their own dynamics. So long as this situation persists, national aggregate data will have to be treated with caution. Change in House Prices Across New Zealand Waimakariri Christchurch Selwyn Queenstown-Lakes Waimate Ashburton Hurunui New Plymouth South Wairarapa Central Otago Mackenzie Tauranga Hamilton Kaipara Timaru Waipa Western Bay of Plenty Westland Horowhenua Lower Hutt Whangarei Matamata-Piako Tasman Nelson Rotorua South Taranaki Gisborne Manawatu Kapiti Coast Thames-Coromandel Opotiki Dunedin Napier Marlborough Hastings Waitaki Hauraki Palmerston North Southland Ruapehu Waikato Grey Upper Hutt Porirua Gore South Waikato Ctrl. Hawke's Bay Masterton Whakatane Tararua Invercargill Stratford Far North Taupo Buller Carterton Clutha Wanganui Rangitikei Source: Property IQ -5% 0% 5% 10% 15% p2 New Zealand Housing and Construction Quarterly June 2014
House Values by Region Figure 1: Change in Values for the Three Months Ending April 2014 Value Change 10%+ 5%-10% 0%-5% -5%-0% -5%+ No Data Source: Property IQ Figure 1shows that the biggestchanges in house values occurredin region across the year (10%+). In contrast, the whole of Canterbury region experienced slightly lower growth (5-10%). Meanwhile, the Consumers Price Index (CPI ) rose 1.5% in the year between the March 2013 and March 2014 year. Figure 2 shows 's house values continuing their increase this quarter, recovering from a small dip in January 2014. 's average house values have grown 28% since the start of 2012 and are now between 50-56% higher than the other regions and nationally. By contrast, average house values in other regions are steady, their growth rates flattening off at the start of 2014. The below values are from Property IQ, estimating current market valuation of each property at any time. Figure 2: Average House Values to April 2014 Table 1: House Values February 2014 to April 2014 Christchurch Average Value $468,383 8.5% $705,867 13.5% $451,794 9.6% $455,214 2.8% Source: Property IQ $800,000 $700,000 $600,000 $500,000,000 $300,000,000,000 Christchurch p3 New Zealand Housing and Construction Quarterly February 2014
Rents by Region Figure 3: Change in Rents for the Three Months Ending April 2014 Rental Change 10%+ 5%-10% 0%-5% -5%-0% -5%+ No Data Source: MBIE Figure 3 showsnationalrent pattern changes, with Christchurch City continuing to attract large rental increases (10+%). Meanwhile, over the March year, the CPI grew by 1.5%. Rental growth in Christchurch City have slowed substantially compared to last quarter, including Selwyn and South Canterbury. Figure 4 shows 's rents growing at a similar rate to the national average and remaining well below the Christchurch and levels. Christchurch had the biggest annual growth of all the regions. Meanwhile, between December 2013 and March 2014,Christchurch rents increased by 3%, and will reach levels by the end of 2014 if this trend continues. In contrast, rents appear relatively steady between the two quarters. Table 2: Rent Profile April 2014 Average Rent $374 4.6% $451 3.8% $431 10.8% $387 2.2% Figure 4: Average Weekly Private Rents to April 2014 $500 Source: MBIE $300 p4 New Zealand Housing and Construction Quarterly June 2014
Rents by Bedroom and Price by TA Figure 5: Average Private Rent by Bedroom to April 2014 $700 5+ bedrooms 4 bedrooms $600 3 bedrooms 2 bedrooms $500 1 bedroom Source: MBIE $300 As depicted by Figure 5, rents for properties with five plus Table 4: Average Rent by Bedrooms bedrooms increased slightly this quarter, as did four Average bedroom properties. Both the larger properties (four and Rent five plus bedrooms) appear to be breaking away from the $261 growth trends of the smaller properties. $337 This is particularly true of the rents for properties with five or more bedrooms, which are increasing faster than any other properties. April 2014 1 bedroom 2 bedrooms 3 bedrooms 4 bedrooms 5+ bedrooms 3.4% 4.2% $388 4.8% $501 5.2% $643 4.0% Figure 6 is a new addition to our publication where the annual growth in average rents is compared across major areas around the country. A similar graph for house values appears on page 2. Canterbury had the highest growth in average rents in New Zealand in the year to April 2014. This rental growth potentially reflects the post-earthquake rebuild activity. Interestingly, 's rental growth is about a quarter of Christchurch's growth, meanwhile 's rental growth is negligible. Waikato's average rents grew by 5% in the year ending April 2014, this was the second highest growth over that period. Figure 6: Growth in Average Rents for the year ending April 2014 15% 10% Canterbury Other Source: MBIE 5% 0% -5% -10% Gisborne Taranaki West Coast Nelson Northland Bay of Plenty Marlborough Southland Hawke's Bay Tasman Otago Manawatu-Wanganui Waikato Canterbury p5 New Zealand Housing and Construction Quarterly June 2014
Price and Rent Comparisons Figure 7: House Values vs. Private Weekly Rents: January 2004 to April 2014 $500 $450 Housing Boom Recession Recovery Source: MBIE and PropertyIQ $750,000 $675,000 $350 $300 $250 $150 $50 Rents (LHS) House Values (RHS) $600,000 $525,000 $450,000 $375,000 $300,000 $225,000 $150,000 $75,000 Figure 7 depicts the relationship between house values and private weekly rents in. This quarter, rents have decreased compared to the December 2013 quarter. Meanwhile, house values continue to rise after levelling off at the end of 2013 (house values grew rapidly from the start of 2013, more so than in any of the designated periods previously). Figure 8 is the Christchurch house values vs. private rents graph. The Christchurch pattern of growth is quite similar to 's during the housing boom and the recession, albeit at a lower level. However, Christchurch's growth is concentrated in the post-earthquake period, with significant rental growth that is almost at levels. Interestingly, Christchurch's rents and house values are clearly diverging. Figure 8: Christchurch House Values vs. Private Weekly Rents: January 2004 to April 2014 Source: MBIE and PropertyIQ $500 $450 $350 $300 $250 $150 Housing Boom Recession Post-Earthquake $750,000 $675,000 $600,000 $525,000 $450,000 $375,000 $300,000 $225,000 Rents (LHS) $50 House Values (RHS) $150,000 $75,000 p6 New Zealand Housing and Construction Quarterly June 2014
Housing Affordability Figure 9: Massey University Housing Affordability Index March Quarter 2013 45 Source: Massey University, trends by MBIE 40 35 30 25 20 15 10 Canterbury 5 Note: The index gets higher as housing gets less affordable 0 Figure 9 shows housing affordability indicators across the major regionsand nationally. The Massey University Home Affordability report for the December 2013 quarter stated that housing affordability improved slightly at the start of 2014, mainly due to a decrease in the national median house price. They suggest that the change in house prices is being driven in part by the introduction of Loan-Value Ratio restrictions in late 2013. As depicted by Figure 10, rental affordability in Canterbury has worsened and is now quickly approaching 's affordability levels. The start of 2012 saw the initial large deterioration in rental affordability in Christchurch, which slowed down slightly in mid-2013, but is now continuing to increase towards rent levels. Table 5: Housing Affordability Massey Affordability 3-month March 2014 Canterbury Rental Affordability March 2014 Canterbury 0.3% -0.1% 2.0% 0.0% 3-month 0.4% 0.7% 1.2% -0.1% 12-month 3.1% 4.7% 4.1% -3.0% 12-month 1.0% 0.6% 5.8% -0.9% Figure 10: Rental Affordability Index March Quarter 2014 45 Source: MBIE, MSD (MBIE calculations) 40 35 30 25 20 15 10 Canterbury 5 Note: The index gets higher as housing gets less affordable 0 p7 New Zealand Housing and Construction Quarterly June 2014
Construction Sector Performance Figure 11: Change in Real GDP (%): March Quarter 2014 20% Source: Statistics New Zealand, Trends by MBIE 15% 10% 5% 0% -5% -10% All Industries -15% Construction -20% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 The December 2013 gross domestic product (GDP) data stayed relatively similar to the previous quarter, with growth for all industries returning to approximately 2007 levels. Construction GDP growth returned to prerecession levels after growing rapidly during 2012. These figures have now largely recovered from their post-recession slump, and are now in a similar place, relative to total GDP. The decrease across 2013 highlights the return of the industry to more stable growth levels. Figure 12shows that construction employment figures increased slightly this quarter and are at around 2008 levels. Employment across all industries also increased slightly. The construction employment growth patterns are expected to stabilise, in line with GDP for this industry. Table 6: Gross Domestic Product December 2013 All Industries $39.9 3.1% Construction $2.1 6.5% Figure 12: Change in People Employed (%) 20% 15% 10% 5% 0% -5% -10% All Industries $b March 2014 Table 7: Employment All Industries Construction people employed 1,397,700 2.7% 105,700 Source: Statistics New Zealand, trends by MBIE Construction -15% p8 New Zealand Housing and Construction Quarterly June 2014 5.3%
Residential Construction Figure 13: Dwellings Consented: March 2014 4,000 3,500 3,000 2,500 Source: Statistics New Zealand, trends by MBIE 2,000 1,500 1,000 500 0 Figure 13shows that residentialconstruction has increased markedly across all the major regions, with Greater Christchurch's residential construction activity now at levels. This increase reflects the increased activity due to the post-earthquake rebuild. Figure 14 shows that residential alterations and additions levels are continuing to increase in Christchurch, though not as significantly as new builds. Similarly, levels increased slightly, while remained steady. Overall, national levels have increased this quarter, potentially due to more alterations and additions occurring in regions outside the major three pictured. Figure 14: Residen al Altera ons and Addi ons ($m): March 2014 $180 $160 Table 8: Residential Construction Dwellings Consented: Dwelling March 2014 Consents Alterations & Additions: March 2014 1,999 12.9% 561 19.4% 542 47.6% 108 26.1% $m $157 27.9% $68 16.4% $30 101.1% $14 9.1% Source: Statistics New Zealand, trends by MBIE $140 $120 $80 $60 $40 $20 p9 New Zealand Housing and Construction Quarterly June 2014
Non-Residential Construction Figure 15: Non-Residen al Consents ($m) to March 2014 $500 $450 $350 Source: Statistics New Zealand; trends by MBIE $300 $250 $150 $50 Figure 15 shows that non-residential consents have levelled off in Christchurch this quarter as have national levels. Non-residential construction data are highly volatile. levels appear to have slightly decreased, and are now at similar levels to those in 2012 before the recession. construction has increased slightly this quarter. Additions and alterations consents are largely unchanged, apart from, where there has been an upward trend since mid-2013. This means non-residential alterations and additions are the one type of building consent that is growing in. Table 9: Non-Residential Construction New Consents: March 2014 $m Alterations & Additions: March 2014 $296 11.9% $108 9.5% $114 43.8% $3-4.3% $m $126 7.3% $32-3.4% $12 9.5% $39 25.2% Figure 16: Non-Residen al Altera ons & Addi ons($m) March 2014 $180 Source: Statistics New Zealand, trends by MBIE $160 $140 $120 $80 $60 $40 $20 p10 New Zealand Housing and Construction Quarterly June 2014
Building Activity Figure 17: Earthquake-Related Building Consents ($m): March 2014 $120 Residential Non-Residential Source: Statistics New Zealand $80 $60 $40 $20 2010 2011 2012 2013 2014 Figure18 shows that buildingwork for non-residential construction has decreased in the last two quarters, but continues to follow a largely static overall trend. As depicted in Figure 17, earthquake-related building activity has shown a shift from non-residential construction to residential over the past quarter. There has been a spike in residential consents in the first quarter of 2014, the highest it has been since mid- 2013. Note that building consents are defined as "earthquakerelated" based on whether the applicant notes them as such on the consent application. Therefore, these figures should be seen as indicative. Residential construction increased at the end of 2013, after growing steadily over the past year, and has nearly reached pre-recession levels. Table 10: Total Earthquake Consents Table 11: Building Work Completed Since Sep December 2013 March 2014 $m 2010 Quarter $b Residential $70.1 $848 Residential $2.1 22.7% Non-Residential $25.4 $794 Non-Residential $1.2-8.0% Figure 18: Na onal Building Work Put in Place ($m) December 2013 $2.5 Source: Statistics New Zealand $2.0 $1.5 $1.0.5 Residential Non-Residential.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 p11 New Zealand Housing and Construction Quarterly June 2014
Construction Costs Figure 19: Cost of Building a Standard House ($/m 2 ) March 2014 Source: New Zealand Building Economist $1,600 $1,400 $1,200 Christchurch $1,000 $800 $600 Figure 19shows that Christchurch construction costs are unchanged from the previous quarter,a pattern that is common for these data, where an increase is followed by one or more quarters of no activity. Christchurch has the second-highest construction costs of the regions we monitor. This is a change from a longestablished historical trend, highlighting the pressure Christchurch's construction industry is under. Construction earnings increased slightly this quarter compared with the end of 2013, decreasing the gap between construction and all industries. Earnings for all industries increased slightly this quarter, as did construction industry earnings. Table 12: Cost of a Standard House Table 13: Hourly Earnings March 2014 $/m 2 Change March 2014 $/hour $1,416 4.3% All Industries $28 2.6% Christchurch $1,350 11.3% Construction $26 5.3% $1,331 4.6% Figure 20: Hourly Earnings March 2014 Source: Statistics New Zealand, trends by MBIE $30 $25 $20 $15 $10 $5 All Industries Construction p12 New Zealand Housing and Construction Quarterly June 2014
Affordability for Low Income Households Figure 21: LIHA for Three Months Ending December 2013 Affordability Issues per Capita Minimal Low Moderate High Very High Source: MSD (MBIE calculations) The Low Income Housing Affordability (LIHA) measure is created using Accommodation Supplement data. The degree of affordability issues is calculated by looking at the proportion of households spending more than 30% of their income on housing and how much more than 30% those households are spending. Figure 21 shows that Greater Christchurch leads the country with the highest rates of affordability issues. Christchurch City meanwhile, has fewer affordability issues than Selwyn or Waimakariri, suggesting a move away from the centre of Christchurch toward outlying areas. Note that Figure 22 and Table 16 have not been updated this quarter, as new data were not available. Figure 22 shows January 2014 saw record numbers for the Housing New Zealand Corporation (HNZC) A priority waiting list, while there has been a 13% decrease in the B priority list levels since the end of November 2013. Table 14: HNZC Waiting List January 2014 A Priority B Priority Waiting List Change 1,522 31.1% 2,672 36.9% Figure 22: HNZC Wai ng List as at January 2014 6,000 5,000 Source: HNZC A Priority B Priority 4,000 3,000 2,000 1,000 0 p13 New Zealand Housing and Construction Quarterly June 2014
Low-Income Housing Costs Figure 23: Synthe c Lower Quar le (SLQ) Private Rents to April 2014 Source: MBIE $300 GreaterChristchurch synthetic lower quartile (SLQ) rents have increased again this quarter (figure 23), further decreasing the gap between it and. Christchurch SLQ rents have grown steadily since the start of 2013. Meanwhile, the CPI rose 1.5% between March 2013 and March 2014. Figure 24 shows that rents for properties with five or more bedrooms appear to be growing faster than those for any other properties at the lower end of the rental spectrum. They have, however, decreased slightly at the end of the March quarter. Other property growth remains steady. Like the average rents, Christchurch SLQ rent levels are growing faster than any other region, however, the gap between Christchurch and SLQ rent levels is much larger than the gap at the median rents level. Similarly, at the SLQ level rents for larger properties are also breaking away from the trend and are growing faster than rents for smaller properties. Figure 24: SLQ Private Rents by Bedrooms to April 2014 $600 5+ bedrooms 4 bedrooms $500 3 bedrooms 2 bedrooms 1 bedroom Table 15: Synthetic Lower Quartile Rent April 2014 1 bedroom 2 bedrooms 3 bedrooms 4 bedrooms 5+ bedrooms SLQ Rent $253 3.8% $327 3.2% $303 13.8% $256 3.6% $182 4.0% $249 3.8% $288 4.1% $357 5.0% $436 3.5% Source: MBIE $300 p14 New Zealand Housing and Construction Quarterly June 2014
Government Social Housing Figure 25: Central Government Housing Spending ($m) March 2014 $180 Income-Related Rent (IRRS) $160 Accommodation Supplement (AS) Source: MBIE, MSD $140 $120 $80 $60 $40 $20 Note that the Accommodation Supplement (AS) is paid out fortnightly, which means that the expenditure will vary from month to month, depending on how many payments are being made that month. Government spending grew significantly throughout the 2008-2009 period during the recession but flattened off in 2010. AS spending appears to be trending downwards since 2010, with the March quarter following this trend. Income Related Rent (IRR) figures have increased across the past year potentially due to a change in HNZC's portfolio to include higher cost areas. Figure 26 shows that local government rents increased slightly in this quarter, as well as nationally. However, Greater Christchurch rents have continued to stabilise this quarter since the highs seen at the start of 2013. Data variation for local government rents is quite high; the Greater Christchurch line may break the trend and lead to a decrease if further data points congregate below current levels. Table 16: Social Housing Spending Table 17: Local Government Rents Monthly Average March 2014 $m April 2014 Rent IRRS $57.4 7.1% $168-9.1% AS $96.1-3.0% $194-12.6% $193 4.6% Figure 26: Local Government Housing Rents to April 2014 Source: MBIE $300 p15 New Zealand Housing and Construction Quarterly June 2014
The Modelling and Sector Trends Team The Modelling and Sector Trends team is part of the Infrastructure and Resource Markets (IRM) group of MBIE. The purpose of the team is to provide data, modelling and analysis services to support the IRM policy development in the areas of: 1 Energy and Resources, 2 Building and Housing, 3 Communications and IT Your feedback is important to us. Please let us know what you think by emailing HousingInfo@mbie.govt.nz Website The New Zealand Housing Quarterly is available in PDF format through the Ministry's Building and Housing website: http://dbh.govt.nz/nz-housing-and-construction-quarterly For more detailed rental information, please refer to the Open Data Tables: http://dbh.govt.nz/nz-housing-and-construction-quarterly-open-data Technical Notes on our definitions and calculations can be found on the above pages. Data Sources Data for this report have been sourced from: Ministry of Social Development (MSD) Housing New Zealand Corporation (HNZC) Statistics New Zealand Property IQ Massey University New Zealand Building Economist The Ministry's internal data have also been used. Next Release The next edition of the New Zealand Housing Quarterly will be released in the first week of September 2014. Interpreting Our Graphs In any line graphs with points and lines, the points represent actual data and the lines represent a smoothed trend line estimated by MBIE. Contact Us HousingInfo@mbie.govt.nz This publication is shared under a Creative Commons Attribution licence: http://creativecommons.org/licenses/by/3.0/ You may copy all or part of this publication, as long as you reference the source as the Ministry of Business, Innovation and Employment. ISSN 2350-3327 p16 New Zealand Housing and Construction Quarterly June 2014