KEY POINTS:
The cost of building a small house in parts of New Zealand is 85 per cent higher than in Australian cities, according to a new study.
And that figure climbs to 91 per cent for a large house. These figures are contained in a report commissioned by the Auckland City Council.
What do you think?
Send us your views
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Here is the latest selection of your views:
Sam
The council doesnt have to look far to see the real reason for the huge increases of house construction costs. They are to blame for most of it! I want to subdivide my land and build and the council fees for this are about $50,000. I could buy a section for that 10 years ago! Then their increases in consent fees and compliance costs, lengthy delays and the bureaucratic nightmare in obtaining a building consent (and they nearly always seem to want a resource consent, think more $$$) adds more and more cost and it is getting worse. When I built my first house the plans were only two pages, a draughtsperson I talked to said they often want up to 40 pages of details now, guess who gets to carry that cost? Then there is Development Contributions it just goes on and on.Its an absolute tragedy for NZ families.
Heather
How do they justify calling a 145 sq m house small? I live in a 3brm house that is 110 sq m. Perhaps if people didnt expect to live in 5-bedroom, 6-bathroom, 12-car garaging McMansions, with separate wings for the little masters and misses, they wouldnt need to pay so much. The average household size is decreasing yet the house sizes built seem to be increasing. Is this the obesity epidemic kicking in?
Richard John Wallis
It would appear that someone somewhere is making an exorbitant profit from the need for other people to have somewhere to live. A fair profit is one thing. Extortion is something entirely different. The difference in the cost of building a house here and in Australia needs to be thoroughly investigated and, if necessary controls put on mark-up. It is time government, both local and national, looked after the people who put them in: legislation that leads to leaky homes and refusal to remedy the mistake, apparent profiteering by house building industry allowed to go unchecked. It is government members did something to earn their pay and extravagant perks of office.
David N
Building costs have little impact on the stratospheric prices being asked for older houses. The proposed fixed mortgage levy is grossly unfair and the end result will be to push out of the market the first time buyers that the government is trying to help. However the government continues to shy away from measures that will actually make a difference - capital gains tax, rental income surtax or a rates surcharge for non-owner-occupied properties. One can only surmise that self interest and lobbying from well moneyed mates are factors.
Dayne Kells
This is a distorted story for a very basic reason. Why is Australian average compared to Auckland? Either compare Auckland to Sydney or New Zealand to Australia. I think that will give a lot truer comparison, and significantly different results.
Attila
The New Zealand economy is based on 3 pillars: Immigration, agricultural exports and tourism. Obviously, each of these work by increasing global demand for New Zealand products, and result in hugely inflated internal prices. And that would not be a problem, if the minimum and average wages followed these trends. You guessed it, as long as theres price fixing and monopolies in every primary sector (eg. building products) in New Zealand, only the profits will grow, but wages wont.
Gordon Hassett
While the Minister and other vested interests are explaining the indefensible, perhaps they could enlighten us as to why a Sydney builder can buy NZ grown and milled framing timber cheaper than a NZ builder? Or why a Vietnamese manufacturer can by NZ panel product at approximately a third of the cost available to a NZ manufacturer? If it werent vital to so many peoples lives and livelihoods, it would be a joke!
Neil
I can not believe readers are supporting calls for a capital gains tax on property investments as an answer to the soaring price of construction in Auckland. We pay enough tax to the government and their surpluses are a clear indicator of that fact. It is simple supply and demand and I am pleased that builders can now get $60 plus an hour - it was not too long ago (1990s) that they struggled to get $15 an hour. And complaining about building requirements being too tough is short term thinking. Our problem has been Kiwis being too cheap to build quality homes and as a result we have thousands of cheap boxes which leak and cause all sorts of problems for subsequent owners and their families through dampness, stress, cost of repairs etc. If you are going to build a home it should be built well, solid and weathertight and built to last - if the cost is too high do not build - it is that simple. One point I do agree on is the cost of materials - I struggle to understand how forestry returns seem so low yet timber has never been more expensive - would be interested to know the manufacturers explanation of that because the money surely isnt going into the pockets of mill workers!
Ray Clarke
There is none of the major political parties in Parliament with the will or intestinal fortitude to introduce the Australian Capital Gains tax model put in place by the Hawke Labour Govt in the mid 1980 era. They apply it to all assets except the Family home. Futhermore it is reduced by the movement in the CPI. That is fair and in N.Z. has every chance to redress the prices being paid by non investors for housing. The non investor cannot compete and is being shut out of the market as rental figures portray.
Chris
We recently went through a process of designing a minor addition to our property, which basically meant adding approx. 35 sq. metres as a new addition, and some minor interior work to convert an existing bedroom into 2 bathrooms. Nothing flash, just something nice. We decided to not go ahead with the alterations when we were given an estimate of between $250,000 and $300,000 for the alterations, not too far off what we paid for the property 6 years. Maybe we just have no idea, but that to me seems exorbitant.
Ann Brown
We built a home with a well known Auckland company in 2002, sold at a good capital gain, then used the same company last year to build again for us. The difference between the first and second construction has been the amount of red tape the council and ARC building consent laws have become. We do not anticipate the same capital gain so quickly this time around, due to approximately an increase of around $200 per sq. metre. Australian requirement in Home Construction is very different, They are not an earthquake zone and the materials required are way less than NZ. I believe that we are paying excessive amounts for timber, bricks, concrete due to lack of competition and pumped up prices.
Andrew Atkin
The real reason why the government has done nothing about house prices is because their artificially-inflated economy is dependent on continuous capital gains on houses. This is because people have been borrowing on the backs of their houses and bringing in about an extra $10b into the country each year. The thing is when the housing market levels off owners will see that they have an asset delivering only about half what its capital value can justify, and they will therefore be wanting to sell-up (because the capital gains are no longer making up the difference). In turn, when the property market falls so will Michael Cullen's hot-air economy (which is based on debt as opposed to productivity gains!), and that, in turn, will spell the end of our Labour government in 2008.This is why the government tells lies about the relationship between land-supply and house prices, and why the government has boosted immigration even further (aggravating demand and therefore property inflation). They are desperately trying to preserve house-price inflation for at least until the next election.
George
Follow the money and there lies the answer. I recently bought a scooter and damaged the wheel. Called the dealer and they did not have one. Went to a second dealer and he did no have one but quoted me a price of several hundred dollars. When I returned to my original dealer, bits of the conversation I had with the second dealer were repeated (they obviously had shared information). 15-days later I had no wheel and could not get them to quote me a price. I was told that the part had been ordered, but blah, blah, blah... Being the resourceful person I am, I contacted the wholesaler in Australia and I discovered there is only 1 distributor in NZ and he was free to charge me what he liked. I also discovered that the part was in stock, but had not been ordered for 2-weeks after I requested it and that the part was only about $100 new. This is capitalism at its finest. The subject of the housing market has been a hot topic for years; yet, nothing has changed. Obviously, it is of little interest to those who have the power to change the situation. I suspect that nothing will change until the situation becomes dire. This will happen when there becomes a serious shortage of nurses, police, teachers, etc.
Vaughan
I am always amazed when I see the prices of houses in NZ, they are a joke. I can not believe the price of some houses in NZ, and the fact they have gone up so much in the last 4-5 years. I am currently overseas and intend to return to NZ to bring up my family but the way it is going I and seriously thinking Aussie might be a better bet. The Govt. needs to do something it is becoming impossible to buy a house and first home buyers are getting shafted! At least in Aussie they give you a first-home buyers grant about A$7000. The NZ Govt needs to do something!
William Shi
I strongly support possible option a capital gains tax on investment property only to control house price.
David
I agree with Mr Northey,(Auckland City Council report) a capital gains tax on investment property and a ban on house sales to foreigners who lived overseas and rarely come to New Zealand.
Professor Guenther Mueller-Heumann
The extreme price inflation in the housing market in Auckland was historically driven by the "Auckland home-investment mentality: "I buy the most expensive house I can afford; with house prices increasing about 10 per cent per annum, this is my retirement fund". The problem is that house prices have been driven up so far in Auckland that mortgages are more and more difficult to service with the low NZ (compared to Australia) household incomes. The Labour Government points to the "wealth" that has been created with property values. That is absolute rubbish: Who has really benefited from the house price inflation: Not house owners unless they sell and live in a lower-priced market outside Auckland. In Auckland itself, the City Council has benefited because rates have automatically increased with house values increasing. The banks have benefited because mortgages have followed the house price inflation. Real estate agents have benefited because their fees go up with inflated house prices. Young families and the younger generation generally has not benefited at all: They cannot afford to get into property ownership because of the huge initial capital required to join the housing circus!
Charli
With regard to the cost of building a house in NZ compared to Australia, could it also have to do with the fact that Australia does not require homes to be insulated. The structure of most buildings leaves a lot to be desired (our 2 storey home has no nogs in any wall!) and most are done on the cheap and start to fall apart after a couple of years. Yet a house & land package in a new estate will still only cost around AU$500k! What a bargain!
Wendy
I found, when living in Australia in the late 80s that the cost of renovation was remarkably cheap compared with NZ. I couldnt credit the difference. This is something I have pondered for many years and the only conclusion that I could reach is there is a large degree of price hijacking by the big corporates and building companies. Yes, I accept that a smaller population makes things more expensive but not to the degree that is evident. Dont blame leaky homes for the costs or even higher building standards due to earthquake. That is too easy and only a part of the conversation. The total costs don't pass the scratch test when compared with overseas and NZers have paid dearly so that others (businesses) can profit.
Phil Sinclair
Firstly, it is disheartening to see so many people charged with protecting the NZ consumer denigrating this study, the substance of which has been apparent to anyone who studies the housing market in Australia and NZ for a long time. The impetus for the rise in NZ has been provided by the ridiculous increases in property values over the last decade. Naturally prices will rise for new homes as older homes command higher prices. No one would pay the high price for an established home if they could build one substantially cheaper. Mr Smiths invisible hand slaps us down again. The labour costs in the Australian construction industry are much greater than here. Compliance costs would be similar maybe even higher in Oz as there is another tier of government (state government as well as local and central) with its hand out for a piece of the pie. That leaves two potential causes of this unconscionable disparity. The first has been covered in the article. That is the monopoly on the sale and distribution of building supplies. Hop on the net and check the difference in cost. Both sides of the Tasman have near monopolies on the production and supply of plasterboard. It is virtually impossible to get a listed price for sheets of gib (NZ) or gyp rock (Aust). The only way to find out the cost of this very simple to produce product is to submit details to the manufacturers and they will then provide a quote. This is a recipe for rip-offs. However Australia has been rather more lenient in allowing the import and sale of foreign manufactured plasterboard which has been pretty much banned in NZ (alleged dumping). So lack of competition in NZs building supply industry has caused a price blow out. The other major cost difference is builders. Australian builders dont seek to make nearly as big a profit from their developments, whereas in NZ builders have become millionaires within a few years of residential building work. Regulation in the NZ industry failed to protect the home buyer from shonky and defective building practices but it did succeed in keeping the building costs up. A virtual price fix has been in held in place by the suppliers seeking to manipulate the playing field by way of 'trade discounts' for the favoured. It is ludicrous to suggest that the earthquake requirements mean a house costs more in NZ than Oz. One could just as easily argue that termite prevention which limits the range of materials while increasing the cost of the footings, slab and preparation of the site has made the cost of house construction in Australia more onerous.
Rob
Having arrived in Auckland from Adelaide in 1998, I have always been conscious of the housing cost comparisons between Australian cities and Auckland. The cost of land should also be factored into the equation. The cost of land in Auckland (by that I mean Auckland Region) is also extraordinarily high by comparison, which inevitably means that a more expensive type of housing is built. It appears that there are a few large land holding companies, which in concert with local authorities, are constraining the supply of land creating this abnormal phenomenon. i.e. a small piece of land on the Region's fringe should cost $150k not $350k.
