Monday 4th November 2013 1 Comment
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The biggest increases in the cost of building a house have come from increased local government resource consent fees and higher land development costs caused in part by inconsistent local authority approaches to provision of infrastructure, according to new research.
A 2013 update of a 2008 report by BRANZ, an independent research organisation serving the building industry, show a 25 percent increase in land development costs - covering infrastructure, professional and council fees - and a 75 percent increase in building consent fees over the last six years.
While lower interest rates had offset these changes and improved housing affordability in most parts of the country, "Auckland median priced housing, new and existing, is unaffordable for a median income household unless they have a large deposit."
Conducted for the Construction Strategy Group, an ad hoc body pulled together by the Building Industry Federation, the BRANZ study shows that new housing costs rose about 8 percent over the period from 2008 to 2013.
Of that, 12 percent came from higher material costs, there was a 12.5 percent increase in labour costs, and that profit margins had fallen by 2 percent in an industry characterised by small construction firms building mainly one-off houses, with both these factors adding to the relatively high cost of building a house in New Zealand.
The study did not include comparisons of construction materials in other countries, and an accompanying report of nationwide workshops held by the CSG suggests there are divisions of opinion within the industry about the truth of claims that New Zealand building materials are consistently higher than in Australia.
However, the workshops involving a wide cross-section of the building industry identified the release of larger land areas to allow more cost-effective development of new housing as a key issue, along with a call for the use of local government-owned development authority vehicles, such as are seen in Australia, the UK, and some parts of the US.
The CSG also suggests examining a role for central and local government "in the aggregation of brownfields and possibly greenfields land for development."
Inconsistent approaches across the country by local councils and planners were also a major theme in recommendations from the workshops, which urged adopting of an "affordable homes" policy by planners, which would drive behaviour likely to encourage low cost housing.
Lengthy and delayed processes, in particular, were cited as major reasons for developers to target higher value homes and for difficulties experienced by the industry as a whole in making acceptable returns on capital employed. The fragmented nature of the industry was also affecting the ability to raise and aggregate the capital required for more cost-effective housing land development.
There should be a central government "over-ride" available "where it is considered that local government practices are at odds with affordable home development," the CSG says, while suggesting some planners have a poor understanding of the commercial pressures involved in housing development.
The CSG also supports a "productivity partnership" approach that seeks to reduce materials and labour costs by a minimum of 20 percent through increased standardisation of componentry to reduce material and design costs, house designs targeting less materials wastage, and better coordinated of tradespeople.
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