Newsroom Pro's 8 things at 8 am: RSE for construction?; Auckland shortage over 50,000

Auckland Council Chief Economist David Norman's estimate of the Auckland housing supply shortfall out to 2028, assuming 1.5% population growth and 11,000 new builds per year.

In today's email for Newsroom Pro subscribers, we look at how the Recognised Seasonal Employer scheme could be expanded to include construction and tourism. We also include a fresh estimate that Auckland's housing shortage is headed over 50,000 and the latest on Auckland house prices from QV and Barfoot and Thompson, along with the usual quotes and numbers of the day and a couple of fun things.

1. Seasonal work scheme may grow

Having tweaked migration settings to try to slow the growth of lesser skilled temporary migrant workers, the Government is now considering expanding one scheme that brings in over 10,000 fruit-pickers a year to include other industries such as tourism, fisheries and construction.

The Government is facing heavy lobbying over its proposed changes announced in April that will make it much harder for the tourism, hospitality and aged care sectors to bring in temporary workers because of a new relatively high salary threshold system for deciding on whether a worker is skilled or not.

Restaurant and hotel operators in Auckland and Queenstown warned in April that the 'tweaks' to the rules were already hampering the tourist industry's efforts to welcome in an extra one million tourists over the next five years. See our article from then.

Expanding the Recognised Seasonal Employer (RSE) scheme to include tourism could soften the blow.

Newsroom's Foreign Affairs and Trade Editor Sam Sachdeva reported in depth yesterday on Immigration Minister Michael Woodhouse's announcement of a plan to spend $10 million to expand the scheme.

Sam reports the Government has been mulling changes to the scheme for some time.

A 2014 report prepared for the Ministry of Foreign Affairs and Trade by external consultants Sapere Research Group recommended expanding the sectors covered by the RSE scheme to include areas like fisheries, forestry, tourism, agriculture and construction.

MBIE appeared uninterested at the time, telling the report’s authors they did not believe there was much industry interest, while there were other “generic immigration policies” that could help those in need of overseas workers.

That view has changed, at least at a ministerial level, with Woodhouse pointing to the buoyancy of the economy as a sign that there is scope for expansion.

“We’ve got an economy now that’s growing at around 10,000 jobs a month and many of them are in the primary industries, seasonal industries, industries where demand for work fluctuates and so it’s an ideal response, an RSE-type scheme for that - certainly it's been extremely successful in horticulture and viticulture," he told Sam.

He cites construction, tourism and fisheries as three specific industries which could benefit from access to Pacific workers, although cautions there is still more work to be done.

Here's Sam's full report published on Newsroom Pro yesterday, including concerns about exploitation and Horticulture NZ's plans to ask for an increase in the RSE cap within weeks.

2. 'Shortage rising to at least 50,000'

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 below 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 that 11,000 houses per year would be built over that period and that population growth would be 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 two to three 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.

3. 'Build it by 2021'

The Greens ramped up the election campaign pressure on the Government over Auckland's transport infrastructure deficit yesterday, announcing it would fast-track a light rail line up Queen Street and Dominion Road to the airport by 2021, in time for the America's Cup and APEC.

Green Party transport spokesperson Julie Anne Genter said the $2.3 billion project would be designated a project of national significance and be funded from the Land Transport Fund and potentially rates from land value capture uplift. The trip from the CBD to the airport would take 43 minutes by light rail. The Greens had previously called for the route to be completed by 2025. Labour also supports a fast-tracked light rail route to the airport.

“It’s absurd that National still thinks this project isn’t needed for another 30 years. In that timeframe the number of passengers travelling to and from the airport will double and the number of people working near the airport will triple," Genter said.

“It took six years for National to realise the City Rail Link was a priority for Auckland. We can’t wait six years, let alone 30, for work on airport rail to start."

Genter challenged Transport Minister Simon Bridges on the plan in Parliamentary Question Time.

Bridges said the Government had an ambitious set of projects to improve commuting times in Auckland, including the Waterview Tunnel and the East-West link through Onehunga between the Southern Motorway and State Highway 20.

"It is going to make things much faster in Auckland—unlike the sorts of plans the Green Party have, where they actually want a slow train to the airport, which would be slower on her projections than actually what we can do right now through the Waterview tunnel," Bridges said.

4. Numbers of the day

Less than 3,000 - The number of foreign trusts which registered with the IRD as at the deadline of June 30 set under new rules aimed at making foreign trusts more accountable.

That is down from 11,645 registered in April last year shortly after the Panama Papers scandal forced the Government to bring in tougher rules. Another 3,000 trusts told the IRD they didn't want to be in the registration regime, with the remaining 5,000 trusts unaccounted for (and therefore unable to legally operate in New Zealand)

0.0 percent - The change in the average house value in Auckland to $1.045 million in the three months to June, as measured by QV. Auckland's annual inflation rate of 7.2 percent was the slowest since September 2012.

Average values rose 1.2 percent nationwide in the last three months and were up 8.1 percent from a year ago, which was the slowest annual rate since March 2015. Wellington values rose 2.4 percent in the last three months and were up 18 percent from a year ago, while Christchurch were down 0.1 percent over the last three months and up 1.1 percent from a year ago.

$840,000 - The median Auckland sale price reported by Barfoot and Thompson in June. This was down from $846,000 in May and down from a record-high $900,000 set in March, although this is a raw median and can be skewed by changes in the composition of houses sold (ie more expensive or cheaper homes sold).

However, sales volumes actually rose 5.2 percent on a seasonally adjusted basis in June, although they remain down 27 percent from a year ago and the volumes sold in June were the lowest for a June in seven years. There were almost two new listings for every one sale during the month, and there were five listings on Barfoot's books for every sale at the end of June. That remains below the long-term average of around seven.

Up 1.4 percent - The number of job advertisements listed on Seek and Trade Me in June, as measured on a seasonally adjusted basis by ANZ in its monthly job ads series. This more than made up for a small fall in May and took job ads to a new record high.

Job ads nationally were up 14.1 percent on average over the last three months from a year ago, which is down from the annualised growth rates of 20 percent earlier in the year. Auckland's job ads fell 0.9 percent in June and are up 13.2 percent on an annualised basis. Job ads growth was strongest in the regions, with West Coast, Nelson/Marlborough, Northland Gisborne, Waikato and Hawkes Bay experiencing annualised job ads growth of 20 percent to 45 percent.

Up 2.6 percent - Wholemilk powder prices, which are the main determinant of Fonterra's milk price, rose for the first time since mid May in yesterday's Globaldairytrade auction.

5. Quotes of the day:

Barfoot and Thompson Managing Director Peter Thompson after reporting a 3.1 percent fall in the average sales price ($913,606) by Auckland's largest real estate agency chain in June from the average in the previous three months:

"While prices invariably fall as we head into winter, June’s results confirm that prices are definitely falling. Monthly sales numbers have been below the previous year’s numbers for nine consecutive months, and that is finally having an effect on prices."

Tertiary Education Union campaigns and communications officer Danny Stevens submitting to the Education Select Committee about the Education (Tertiary Education and Other Matters) Amendment Bill:

“This Bill takes the market experiment and sets it at an entirely new level and risks undermining tertiary education as a public service. Staff conditions will also be squeezed.”

See Shane Cowlishaw's full report from yesterday on Newsroom Pro on the submissions to the Select Committee.

Edward Snowden on the aerial photo of New Jersey Governor Chris Christie lounging with his family on a beach he had closed for the public. The Governor's mansion is on the beach.

"Rarely does a photographer capture the politics of an era in one frame."

Christie on the criticism:

"The governor is allowed to go to his residences, and I'm at my residences. Run for governor, and you can have a residence there."

An unnamed US State Department official talking about the Trump Administration's management of the department so far, as quoted in a reported leaked to the Wall St Journal:

"I am concerned that the dramatic reduction in budget, paired with extended staffing gaps at the most senior level, will result in the loss of not only an exceptionally talented group of people from our ranks, but will hamper our impact to fulfill our mission for decades to come."

6. While you were sleeping...

North Korea announced that its just-tested Intercontinental Ballistic Missile can carry a large nuclear warhead. The UN Security Council called an emergency meeting overnight and US Secretary of State Rex Tillerson warned that any country that hosted North Korean workers, provided economic or military aid to Pyongyang, or failed to implement U.N. sanctions was "aiding and abetting a dangerous regime."

US and South Korean forces conducted missile tests late on Wednesday in a show of force which South Korea said showcased its ability strike at North Korea's leaders if necessary. South Korea's President Moon Jae-in said: "The situation was no longer sufficient to respond to the North's provocation by making statements."

Volvo announced all its models would have some form of electric motor by 2019, either as vehicles that were full plug-in electric or were hybrid electric diesel or petrol. "This announcement marks the end of the solely combustion engine-powered car," Volvo Cars CEO Hakan Samuelsson said.

7. Coming up...

Justice Minister Amy Adams will formally move a motion during the first reading of the Criminal Records (Expungement of Convictions for Historical Homosexual Offences) Bill to apologise to men who were convicted for homosexual offences decriminalised by the Homosexual Law Reform Act 1986.

The motion due this afternoon will read: "I move that this House apologise to those homosexual New Zealanders who were convicted for consensual adult activity, and recognise the tremendous hurt and suffering those men and their families have gone through, and the continued effects the convictions have had on them."

The America's Cup parade will proceed to the Viaduct early this afternoon. Politicians will be in attendance. There will be a parade in Wellington on July 11. Some of the same politicians will be in attendance.

President Donald Trump will meet Russian President Vladimir Putin for the first time on the fringes of the G20 meeting in Germany on Friday.

8. Two fun things

Sharon Murdoch's cartoon depicting Winston Peters and Shane Jones as kissing frogs and princes is spot on, as is David Rowe's cartoon of Emperor Trump tweeting nakedly at a screen.

Have a great day and look out tomorrow for a bumper crop of Weekend Reads.

cheers

Bernard