Archive for May, 2013

Auckland’s 39,000 Homes Target ‘Hard to Believe’ – Tim Manning

Auckland has almost no chance of reaching a housing accord’s target of 39,000 new houses in the next three years, a property developer says.

The accord, announced on Friday by the government and the Auckland Council, allows for the fast -tracking of certain developments while the city waits for its unitary plan to take effect in three years.

It has set “aspirational” of 9000 new homes next year, 13,000 the year after that and 17,000 in 2016.

Building consents in the city remain in the doldrums, with fewer than 5000 being issued in the year to March, equating to only three new houses per 1000 people.

Building boom unlikely

And developer Tim Manning of Norwich Properties says it is extremely unlikely the city will be able to reach the lofty targets included in the housing accord.

He says the accord is a good one and will give a boost to property development in the city, particularly by speeding up the consenting process.

But whether the industry can achieve a big increase in new building activity will come down to factors beyond the control of the government or the council.

“I find it hard to believe it can be realistic. Where on earth is this going to come from?

“The lack of supply is so entrenched with so many reasons, that to say all those will go away and they’ll build 39,000 houses in the next three years is hard to figure out.

Mr Manning says a new build rate of about 6000 houses a year in Auckland is more likely.

One of the major roadblocks is the ability to source finance for big residential property developments.

“The banks have got money and they’re happy to lend but the ratio they’re willing to lend to is not where it was so you still need a big chunk after the bank. The number of places you can get it from has declined,” he says.

“With most of the finance companies gone there aren’t many options for getting $10 million to 20 million. You can try private individuals but they are buying land to land bank and doing their own thing. This is one of the key handbrakes to new supply.”

Limited capacity

Another issue is whether the construction industry has enough capacity to lift the building rate in such a short time, Mr Manning says.

“I don’t think so. All the labourers are heading to Christchurch. You’ve got Mainzeal missing and two or three more you hear are a bit wobbly. The sector needs to build up its resources again.

“A lot of those big contractors are just buying low-margin work to keep their staff going. They only have to have a couple of jobs go pear-shaped and they have no slack in their balance sheets. It’s precarious.”

Although the market is difficult, Mr Manning has high praise for Auckland mayor Len Brown, who negotiated the accord with Housing Minister Nick Smith.

“The Auckland Council has been most proactive and helpful, more than I’ve seen in 25 years. There’s absolutely been a change in attitude, it’s really positive.”

“When you ring them and say you’ve got this idea they’re responsive to that. It’s obviously come from Len Brown, who’s told them ‘you have to work with developers rather than against them’.”

 

 
Source: http://www.nbr.co.nz/article/aucklands-39000-homes-target-hard-believe-developer-nk-p-140059

May 19 2013 | Property Development | No Comments »

Tim Manning Recognizes Property Values Still Climbing – Especially in Auckland

New Zealand property values continued to rise in April to be 4 percent above their peak of late 2007 as Auckland again recorded strong gains, according to state valuer Quotable Value.

National property values increased 1.3 percent in the three months ended April 30 to $431,967, the same pace as in the three months through March. Values have gained 7.1 percent over the past year.

Property values in greater Auckland climbed 12 percent to $628,205 in the latest 12 months and in Christchurch they rose 9.4 percent to $418,829, though growth across all main urban areas was relatively strong, rising 8.8 percent to $495,488.

“The increase in nationwide values is now being driven by all the main centres, not just Auckland and Canterbury,” Kerry Stewart, QV operations manager, says.

“Buyers are showing more optimism and confidence, although are still being careful in their decision making. The exception to this is in parts of Auckland, where demand is so high that there is little opportunity to delay making offers.”

The figures come a day after the Reserve Bank said in its financial stability report that it is preparing to impose limits on high loan-to-value home mortgages, which could pose a significant risk to country’s financial stability.

“Further price escalation will worsen the potential damage that could result from a housing downturn following an economic or financial shock,” governor Graeme Wheeler said yesterday.

The QV figures show Wellington house values were 2 percent higher than a year earlier, and Dunedin property values rose an annual 4.8 percent.

Source: http://www.nbr.co.nz/article/property-values-still-climbing-%E2%80%93-especially-auckland-wb-139889#.UYs1OweCpD8.email

May 13 2013 | Tim Manning | No Comments »

Auckland Council “Loot Sharing” Plan Slammed

A property developer has spoken out against Auckland Council’s plan to tax increases in the value of land from rezoning or redevelopment. The council’s proposal for “shared land value uplift,” buried in an addendum to the mammoth Auckland unitary plan, is a tool the council is considering for “enabling affordable neighbourhoods,” the document says.

“A number of countries provide scope for local councils to obtain part of the land value uplift from landowners when land is rezoned for more intensive use for example, rezoning from rural to urban land use or rezoning from a low to a higher density).” The revenue generated could be used to develop affordable housing or to fund infrastructure and amenities, the document says.

But Auckland-based property developer “Tim Manning says taxing land value increases would make development more expensive and drive it out of the city to other regions. The proposal ignores that getting land rezoned can be an expensive process, including holding costs such as interest payments if there is debt, he says. “You have really got to work at this; you need to hire planners and planning barristers, do traffic reports and impact assessment reports to show this land is better off residential than commercial or rural.”

The real problems are the small number of large developers, the lack of land available for residential subdivision and the tight supply of funding, Mr Tim Manning says.

Councillor Cameron Brewer says there would be “enormous contestability and difficulty” in accurately calculating a property’s new value after rezoning has taken place.

Source: http://www.nbr.co.nz/article/auckland-council-%E2%80%98loot-sharing-plan-slammed-nk-p-138395

May 06 2013 | Tim Manning | No Comments »

Tim Manning Views on Council Accused of Capital Gains Bid by Stealth

Auckland Council is eyeing taking another slice out of rising property values and may seek a change in the law to do so.

The council is calling the proposal “shared land value uplift” but its critics are blasting it as a thinly disguised capital gains tax.

And if Auckland proceeds with the plan, it could open the door for other councils to follow and broaden their revenue bases.

The proposal is contained within an addendum to the council’s draft Auckland Unitary Plan, which is likely to result in zoning changes that would allow higher-density housing in many parts of the city and possibly also extend the city’s urban limits.

Properties that have their zoning changed from low density to high density housing, or rural properties on the city’s fringes that are rezoned as urban, allowing housing or commercial development, would almost certainly benefit from a significant increase in value.

“At the moment in New Zealand, any increase in land value resulting from the rezoning decision remains with the landowner,” the council’s draft plan states.

But under its “shared land value uplift” proposal, the council would be able to take a slice of those capital gains. It outlines several possible ways the council could obtain money from owners or developers whose properties were rezoned.

These could involve the council negotiating with developers on a case-by-case base over the size of a fee they would pay, or introducing a uniform across-the- board levy.

Alternatively the council could estimate the likely profit a development would produce and how much of that was due to zoning changes, and then negotiate with the developer to retain a portion of the profit.

The council could also directly acquire land that was to be rezoned, and on-sell it to developers at a profit once rezoning had taken place.

Possible uses of the money raised could include spending on infrastructure projects or providing affordable housing.

However, Property Council NZ chief executive Connal Townsend sees it as a tax grab.

“This is a capital gains tax,” he said. “One needs to be very cautious about arguments that this would have benefits for housing affordability. I don’t buy that for a minute.

“I think this has been dressed up in housing affordability arguments without any real analysis. I think really what it is, is an attempt by the council to tap into another revenue stream. It’s a capital gains tax and I expect it would be very inefficient.”

Townsend believes that instead of making housing more affordable, it will ultimately make it more expensive, because it would add an extra cost to each development.

Property developer Tim Manning also said the proposal would push up housing costs.

Manning’s company, Norwich Property, has built around 2000 homes throughout the country, many of them the types of higher- density developments such as terraced housing and apartment blocks which the Auckland Council is trying to encourage.

“It’s another layer of costs and those costs have to be worn by someone and eventually it’s the end purchaser,” he said.

“They [the council] think turning a bit of farmland into a residential development is easy. But you’ve got to get umpteen dozen reports, you’ve got to consult neighbours and often pay them money.”

Often developers had to hold land for five or six years and pay interest costs and other expenses, sometimes millions of dollars, with no certainty, he said.

“You could get to the end and the Environment Court says no, and then it’s goodbye. You are left with a bit of land that’s worth half as much as you’ve already spent.

“So if you can get it over the line you’ve got to be rewarded for that because it’s so bloody hard to do. For such a high risk there has to be an upside for the developer. Otherwise why would they do it?”

Auckland Council’s manager of financial policy, Andrew Duncan, said the council was still preparing a financial assessment of the proposal, to help decide whether to proceed.

“I think the council would want to think about how such a mechanism would affect the housing market and land market and developers and what sort of revenue might be involved. And then, if it wanted to think about it further, it would want to think about how it [the money raised] could be used,” he said.

However, before the policy could be put into in to effect the Local Government Act would need to be changed and if that happens, it would allow other councils to adopt similar policies, potentially opening the door to a capital gains cash grab throughout the country.

Townsend believes the current Government is unlikely to support the necessary law change. “We know this Government has no appetite for a capital gains tax.”

Source: http://www.stuff.co.nz/business/industries/8580431/Council-accused-of-capital-gains-bid-by-stealth

May 01 2013 | Tim Manning | No Comments »