Buy sections now or gamble on a glut?
More sections are becoming available and the question now is affordability. Michael Wright asks four developers what will happen.
Red-zoners are on the move. Cantabrians forced from their earthquake-damaged land are distorting an already stressed housing market and ramping up demand for low and mid-priced properties in Christchurch.
Subdivisions on the outskirts loom as the best option, but house-hunters on a tight budget are at once spoilt for and starved of choice.
Developers agree they will eventually produce more than enough properties to house nomadic red-zoners, quake-recovery workers moving in and the city's organic population growth, but whether all those people can afford to buy what is offered is another question.
Ngai Tahu Property chief executive Tony Sewell says pricing is the main issue, citing construction costs of about $1100 a square metre as a key problem.
"It's a ridiculous price to pay. In the US and Australia, it's a hell of a lot less.
"Somebody really needs to look at the monopolistic forces we're suffering from in this industry. The house-building sector is just not efficient enough."
Cost is also a concern on the consumer side, he says, as house builders - particularly red-zoners with a settlement cheque - are forced to lower their expectations.
"A 900 to 1000sqm [property] in the red zone is now a 350sqm [with a] three-bedroom home. That's just the market. I'm sad about it but that's the reality," Sewell says.
"If the Government would look at the cost of housing, we might be able to look at some housing in that $300,000 to 400,000 bracket."
Interest in the company's developments is high, Sewell says, especially at Wigram Skies in west Christchurch, but the scales of the demand and, crucially, how long it will last, are unknowns.
"The problem with the sector is it's quite uncertain about how many houses are required - 5000? 6000? 10,000? I don't know anybody who has that data."
Silverstream manager Tim Blake does not know either, but thinks the day will come soon.
"If we look out 12 to 18 months, I'm not sure you'd want to have too much left unsold. I think there are some people who are still trying to obtain consent approvals that may rethink."
Silverstream, in western Kaiapoi, is one of the bigger developments around Christchurch, with more than 1100 sections.
The total coming on line in and around the city limits will soon exceed demand, Blake says.
"I think there's going to be an oversupply in time - whether that's two years out [or] three years out. There are a lot of subdivisions south of the [Waimakariri] river in the pipeline and the big unknown is how many people will move to Christchurch and require new accommodation as a result of the rebuild."
"Price-point pressure" for red-zoners is still a problem, he says.
"I think we've got a lot of people on budgets of $300,000 to $400,000 who don't have a lot of options."
Suburban Estates manager Tracey Watson says many low and mid-range house-hunters in Christchurch will have to forgo city life.
"Do these people want to move to Kaiapoi and Rangiora? Because that may be their only choice, and I think that's the difficulty.
"The hard part for a lot of them is, because they have lived reasonably close to town, they expect they should be able to do so again, and the bottom line is they can't. Fair or unfair, it's not going to happen."
Suburban Estates has projects at Kaiapoi, Rangiora and Prebbleton. On those that are not sold out, the firm is cutting section sizes and house footprints to cater to for red-zoners.
"Our minimum build sizes are smaller than what they would have been pre-earthquake," Watson says.
"We brought those sizes down when we've done new stages."
Chris Jones of Bayleys Real Estate, which is managing sales for three Fulton Hogan developments, says developers are only "scratching the surface" of the red-zone market and, if anything, demand for land will outstrip supply.
"It's not been a land grab like we thought. It's been slow and consistent.
"There are a lot of developments out there that are proposed. There's going to be a supply issue of sections still in the next one to two years."
Jones estimates about a fifth of his customers are red-zoners, but "just about every buyer" has a quake-related reason for purchasing.
"I'm meeting a guy who wants to build 10 houses and rent them ... because there's such good rental demand in Christchurch.
"That guy has directly come along as a come along as a consequence of the rental demand in Christchurch."
- © Fairfax NZ News
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