We’re pleased over the past 18 months to have provided Alex Harper with development and project management services, to assist with the completion of a 5-unit, terrace housing project in Pt Chevalier, Auckland.
As with all development projects in the last few years, it’s been a challenge to deliver on time and budget. Like Alex, we’re proud of the finished product and hope that the purchaser’s enjoy their new homes. Thanks to all involved.
We’re currently operating in a much tougher residential development market than we all enjoyed up to late 2021. Land prices remain high, although we are starting to see some distressed sales. We expect to see more going forward as interest rates continue to pinch.
Construction costs remain stubbornly high, and we don’t expect these to reduce dramatically. Unlike previous years there are a number of contractors and subcontractors now chasing work, however we are not seeing any significant sign of a reduction in either labour or material costs.
Pre-sales and development finance remain among the greatest challenges to overcome. About the only positive light on the dashboard at present is the uplift in the net immigration numbers. Data from Stats NZ for the year ending February 2023 shows there were 152,900 migrant arrivals (up 195 percent on a year ago) and 100,900 migrant departures (up 41 percent) resulting in a net gain of 52,000 migrants, which compares with a loss of 19,900 in the year to February 2022.
Without any real transparency as to the composition of this uplift, we suspect that some of this will clearly relate to a post-Covid-19 re-balancing, whilst the balance will most likely reflect shorter stay visitors, including overseas students. While these people contribute to our economy (and the demand to rental property) they are unlikely in the short to medium term to drive growth in demand for residential property.
The good news that comes with this cyclical downturn, is the opportunities it will create for smart and well capitalised developers to secure their next projects. Good luck with that and be careful out there!
