WELLINGTON (Reuters) - Builders in New Zealand, such as the Stevenson Group, have ambitious plans to house some of the tens of thousands of people swelling the population of Auckland, the country’s biggest city.
Eight years ago, Stevenson set into motion plans to build 700 homes on an empty paddock. Despite signing up for a fast-track approvals scheme, the company only started to clear the site for building work in recent weeks, said Chief Executive Mark Franklin.
The experience illustrates New Zealand’s struggle to supply housing for a population growing at one of the fastest rates in the developed world, largely thanks to record immigration.
The housing crunch has pushed prices nationally up more than 50 percent in the last decade and in Auckland they have almost doubled - putting housing affordability at the center of campaigning for national elections on Saturday.
The central bank sees fast-rising prices as a major economic risk. While New Zealand’s economy is relatively small, the country’s currency is popular with international investors so how the government handles the housing squeeze will influence foreign exchange markets.
“It’s quite glib for politicians to say there’ll be another thousand homes or whatever,” Franklin said in a phone interview.
“It is a very, very, very complex issue… it takes a while, you’ve got to get water, you’ve got to get road, you’ve got to get planning consent - you don’t just start building on day one.”
While demand is strong, builders say they are held back from supplying more homes by a labor shortage and the failure of local authorities to keep up with the infrastructure needed to support new communities. That leaves many skeptical that the National Party, in power for nine years, or the rival Labour Party have the solution.
The National Party has sought to cut red tape and open up new land for development, while paying a subsidy to first-time homebuyers to cushion price rises.
The opposition Labour Party promises one of the largest public works schemes in recent memory, with government cash to bankroll building 100,000 low-cost homes.
The latest opinion poll showed the National Party with a clear lead, although polls in recent weeks have been volatile suggesting the race is too close to call.
“Everyone talks about building more and that’s fine. Nobody talks about how they are going to increase capacity in the building sector,” said John Tookey, professor of construction management at AUT University, saying he saw no change in sight which ever party wins.
“They just wave their hands at the big picture and say: we’re going to have 100,000 houses.”
House prices in Auckland have risen to an average of more than NZ$1 million ($728,300), almost double a decade earlier, property valuer QV said.
Authorities estimate Auckland needs 14,000 new homes built every a year for three decades to house its expected influx of new residents. Lawmakers fast-tracked building approvals and re-zoned swathes of the harbor city in 2013 as “Special Housing Areas” (SHAs), hoping to get development moving.
But Auckland Council data shows only 3,105 houses were built under the scheme in three and a half years.
More re-zoning followed to unwind decades of restrictive land classification but developers and construction experts say that has left other problems unresolved, such as the need for more infrastructure.
“That step really has just brought to the fore the other constraints which are still being addressed,” said Stuart Shepherd, an economist at Sapere Research Group.
Labour also plans to restrict immigration, which builders worry will exacerbate a shortage of skilled construction workers.
“The cost of building materials has escalated, the cost of buying in skills has massively escalated,” said Connal Townsend, chief executive of the Property Council, a body representing developers.
Even with election promises, construction firms doubt the housing crunch can be resolved anytime soon.
“We’re not going to fix it overnight,” said Franklin. “It didn’t come about over the last five years, it came about over the last 30 years.”
Reporting by Charlotte Greenfield in WELLINGTON and Tom Westbrook in SYDNEY: Editing by Neil Fullick.