Auckland Council's Chief Economist David Norman has estimated Auckland's housing shortage is headed for at least 50,000 because of strong population growth and a shortfall in the amount of house building.
Norman prepared a presentation for a RIMU Insights session in Auckland this week where he presented the chart above showing an estimate of the number of people per dwelling (PPD) and the size of the shortfall.
He described the estimated rise in the shortfall from around 35,000 in mid 2016 to almost 50,000 by 2023 as "fairly conservative" as it assumed 11,000 houses per year would be built over that period and that population growth would in line with Statistics New Zealand's medium growth projections for an average growth of 1.5 percent per year. Auckland's population has been growing at a rate of 2-3 percent in the last three years.
"At present we are growing much faster than even the high projections, and it will probably take at least a couple of years for us to fall in line with medium projections, so this makes us conservative again on the shortfall," Norman said.
Auckland's population grew 121,100 or 8.1 percent in the three years to the end of June 2016, Statistics New Zealand has estimated. There was further net migration to Auckland of 36,000 in the year to the end of May, and there was further natural population growth of around 15,000, implying population growth of 3.0 percent in the last year.
Around 10,400 consents were granted in the last year and just over 7,000 new homes were certified as built last year. The trend for building consents have been falling since September last year after banks restricted lending to developers and rental property investors.
Norman told me the passing of the Unitary Plan meant there was land zoned for more than 422,000 new homes to be built in the coming decades, but that building had yet to reach the required pace to get to that level.
"Other factors appear to be holding back the pace at which projects are coming in to Council to be consented (and then built), or the pace at which they are actually built after consent," he said.
Norman's role as Chief Economist is an an advisor to the Council, rather than representing the Council's view.
He said he did not expect Auckland's house prices to "bust", given strong population growth and the rising supply shortage. Prices have fallen around two percent from their peak in October and he saw prices falling no more than 5-7 percent from that peak by the end of this year.
"The underlying supply shortage, supportive interest rates (even if they are up a little) and the slow pace of growth in supply just don’t support a big decline," he said.