Prices for development land set to skyrocket

Land values are expected to rise even further when councils accelerate housing intensification under the Government’s National Policy Statement on Urban Design (NPS-UD).

Wednesday, May 18th 2022, 12:13PM

The NPS-US and medium density residential standards (MDRS) have be in place by August in the nation’s tier one cities - Auckland, Hamilton, Tauranga, Christchurch and Rotorua.

The legislation enables the development of up to three dwellings of up to three storeys per site as a permitted activity without the need for resource consent.

The MDRS will apply in all residential zones (except large lot residential and settlement zones), including areas that are being rezoned as residential.

As the country’s largest and most populated city the impact of the legislation will be particularly significant to Auckland. Auckland Council’s initial response to the new legislation has been set out in proposed changes to the Unitary Plan.

Intensification is to be encouraged within walkable catchments of metropolitan and town centres and adjacent to public transport routes.

The walkable catchments and heights of development proposed are:

A 15-minute walk (1,200m) from the city centre (enabling at least six-storey development)
Auckland’s 10 large metropolitan centres: Newmarket, Manukau, New Lynn, Sylvia Park, Botany, Papakura, Takapuna, Henderson, Albany and Westgate (enabling at least six-storey development)
A 10-minute walk (800m) around the metropolitan centres (enabling at least six-storey development)
A 10-minute walk (800m) around train stations and rapid busway stops - such as the stations for the Northern Busway (enabling at least six-storey development)
A 5-minute or less walk (400m) around large town centres with high accessibility (enabling five-storey development)
A 3-minute or less walk (200m) around small town centres or large local centres with high accessibility (enabling five-storey development)

Land within the proposed light rail corridor through Dominion Road, has not yet been zoned for intensification, however the Council signalled potential changes by designating the corridor a precinct under investigation. Other precincts also remain under investigation.

The MDRS has resulted in a majority of land previously zoned as residential single house and mixed housing suburban being changed to mixed housing urban. Another significant change being made by council, in order to meet its statutory requirements, is the removal of minimum requirements for onsite car parking.

There are concerns the widespread nature of changes will result in the character of suburbs being adversely affected through the loss of heritage properties. The position regarding heritage properties is a complex one, says Chris Dibble Colliers International head of research.

Auckland Council, for example, is taking steps to address these concerns through confirmation that it is proposing to include identified Special Character Areas (SCA) as a qualifying matter.

The council says this will ensure the continued protection of many of the city’s older built character areas. What constitutes ‘special’ along with a number of other contributing factors are up for discussion.

Rising prices

Whatever the council decides, the impact of the new legislation on land values will vary across cities and suburbs, says Colliers International’s latest research report.

Land values have been rising in the country’s growth cities driven by high demand for housing which has led to increasing development.

The introduction of greater intensity, and development potential in areas of Wellington, Hamilton, Christchurch and Tauranga will likely mean higher prices.

Dibble says in Auckland, there will probably be greater variation because the Unitary Plan has been operative for some time.

“Higher density development has been permitted within areas close to the city centre, metropolitan centres and adjacent to public transport hubs. Scope for further increases in land values within these areas is likely to be more reserved, capped by development feasibility, particularly given the rapid escalation in building costs.”

He says scope for increased land values seems greater in areas in which the MDRS is permitting increased development of sites for the first time.

A difficulty, says Dibble, is the scale of land which falls within this category and the necessary infrastructure to support high levels of growth. This will probably mean property owners facing tough competition when selling their property.

Multi-unit development to be bolstered

The new rules will bolster the trend towards multi-unit development which has been increasingly apparent over recent years, says Dibble.

Figures released by Stats New Zealand show in the year to March a record 50,828 new homes were consented across the country and this is the first 12-month period where there have been more multi-unit homes consented than stand-alone houses.

Multi-unit consents numbered 25,475 comprising 50.1% of total residential consents up from 18.8% in 2012.

In Auckland the influence of higher intensity development is more significant. In the year to March 2022, 15,007 multi-unit dwelling units were approved, a new record number, up by about 38% on the 2021 figure.

Multi-unit development comprised 70% of residential dwelling consents across Auckland in the year to March, a figure which stood at 22% a decade prior.

Where to from here?

Scrutiny over the processes that enable this government directed level of intensification will be the next key consideration.

Auckland’s public consultation has closed, and some changes and alterations are expected as a result of the process, says Dibble. “But how much change is unknown given the intense desire to enable faster change.

“While some short-term uncertainty is evident in residential market conditions that could stall the outcomes. While ongoing challenges will continue to arise from high building costs and suitable levels of infrastructure, it is certain that greater intensification will form a key role in the future development of our tier on cities,” he says.

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