Published 23 October 2005
Seminars often present an array of views which aren’t easily joined together into a coherent article, so from 2 Property Council events in the past fortnight I’ve presented ideas & quotes which would be lost if I waited to complete more definitive articles.
This page is from 2 of the speakers at the Property Council’s annual multi-unit dinner on 12 October. The other is from the Property Council’s investment seminar on 20 October.
Chris Aiken, chief executive of Kitchener Group Ltd:
Big Australian trusts will enter the apartment market
We think there’s demand for 1800 units/year
Immigration is down, but so is supply
Supply is about to fall off a cliff â€“ 600 were lost in the last few weeks
Investors’ love affair with yields continues
The Australians love our low-cost apartments, so do the English & Americans.
There’s plenty of primary & secondary funding.
We thought the apartment size controls (introduced by Auckland City Council) were timely, but there are hundreds of units in the city which are problems, not thousands.
Mr Aiken highlighted the 7 Cs from the Urban Design Protocol â€“ 7 essential design qualities that create quality urban design: Context, character, choice, connections, creativity, custodianship & collaboration. The Ministry for the Environment’s website says they’re a combination of design processes & outcomes which:
provide a checklist of qualities that contribute to quality urban design
are based on sound urban design principles recognised & demonstrated throughout the world
explain these qualities in simple language, providing a common basis for discussing urban issues & objectives
provide core concepts to use in urban design projects & policies, and
can be adapted for use in towns & cities throughout New Zealand.
We think there will be significantly more multi-unit development in the next 5 years. We see a dramatic reduction in supply of affordable units and you will see shortages drive up rents.
Good-quality existing apartments will increase in value.
The cbd will become unaffordable for lower-paid service workers.
We’re responsible for up to 10% of the middle market, and we wouldn’t have built any under the new rules.
The focus has shifted away from the investor to the owner-occupier, $750,000-plus.
Early-stage planning is critical. We now make our margin pretty much only when we buy land.
We’ve learned a lot about our craft by getting involved in the urban design process.
We need to build our balance sheet because this is a capital-intensive environment. Where it used to cost $60,000 to get through a resource consent, it costs 10 times that now.
Jonathan Woodhams, Blue Chip NZ Ltd general manager:
Underpinning the residential investment market, the country is moving away from state subsidies, and the growing affluence of societies wanting to look after themselves is a key driver for the industry.
We’re seeing growing professionalism in design, whether a project is viable. We will manage and participate in all aspects, before resource consent if we can. We’re now planners, we’re developers from the start, we’re responsible for seeing that the investment people make is well managed.
People are taking cuts at all stages. You will see commercial project managers turn into residential project managers, and funders come in demanding a lot more say in the industry.
This year we’re predicting we will sell 800 residential units, and probably 500 apartments will be in that mix.
The market is highly stratified, not well reported on. One thing the industry has cottoned on to is what tenants do want.
An extra half million people coming into Auckland aren’t going to be able to be housed in single-storey dwellings. There is a realisation that what people 2 generations ago didn’t consider accommodation (apartments) is going to be the means of keeping Auckland inside its boundaries.
About 2 thirds of Aucklanders will be renting in 25 years. If you are looking to rent your requirements will be different â€“ we look for an entirely different property when we look for a tenant. For security, multi-unit development is very attractive.
How we meet that demand is a significant challenge to us â€“ about making housing liveable, not necessarily affordable, and there will have to be a balance struck. You will see project managers checking for weathertightness guarantees, guarantees that last beyond settlement, and in 10 years there will be 2-3 managers (apart from Housing NZ) who will be responsible for 3-5000 units.
Yes, our love affair with yields will continue and apartments will form a significant part of residential accommodation.
We see retirees, farmers, people wanting to get ahead investing in the market. They’re not fly-by-nighters, they’re looking to create long-term investments. They are a growing, affluent investment group that will be looking for returns, and returns of 100% over 8 years. They’re looking for yield, and that’s based on having a property people want to rent.
In terms of growth, Auckland remains one of the largest centres in Australasia. There is still significant demand for new properties to be built.
There’s a question of what councils are going to allow to be rezoned, and how. The other key trend is urbanisation â€“ the way Aucklanders live is going to be different.
Website: Ministry for the Environment, 7 Cs