Introduction:
As we head into a new year, a number of recently released policies and market trends will influence the affordability and availability of housing. Below is our prediction of the key factors that will have the most effect on residential construction and housing in 2024.
1 – Availability of land.
As we head in 2024, there is still a shortage of build ready land. Increases in council-imposed costs, complications related to land classification and increases in costs to service new sections is having a major impact on the number of available sections. Developers are finding they cannot obtain the prices needed to cover the increases in cost and are therefore holding off from developing land. The sections that are available are selling at premium prices due to demand. The resulting shortage in land and increases in cost will make build projects more costly.
2 – Bright line test and interest deductibility revised.
The new government policy around the length of the bright line test will impact the feasibility of investment properties. We can expect to see more investors looking to re-enter the market as the new government legislation states that secondary homes sold 2 years after they are purchased will not be subject to a capital gains tax. Along with this, interest deductibility rules are set to change, meaning landlords will be able to claim interest as an expense, thus increasing profitability. These changes should translate into more rentals becoming available and increased demand for new builds and existing housing stock.
3 - Promotion of immigration
Immigration is steadily increasing in NZ. Partly due to the new government’s efforts to attract skilled labor and address labor shortages. As a result, rental and housing demand will increase, pushing up local prices. See here for further information from Stats https://www.stats.govt.nz/information-releases/international-migration-july-2023/
4 – Affordability of construction.
As the world over seems to be fighting inflation, the cost of goods and services is increasing on every front. This translates into an effect on the price of materials and labour. While it appears that inflation has stabilized in NZ, the cost of materials and labour has increased significantly since last year. Ultimately, this will increase the cost to construct a house in 2024. https://www.qv.co.nz/news/rapidly-rising-building-costs-have-slowed-2023/ https://arcline.co.nz/why-is-building-in-new-zealand-so-expensive/
5 – Increase in compliance.
Recent changes to the building code have meant all new homes have to be constructed to accommodate climate change and also become more energy efficient. Every home requires further insulation, higher performing joinery and increased thermal performance. On top of this, increases in bracing and strengthening to accommodate potential climate changes (increased wind loading and earthquake strengthening). Click here for more information on recent changes https://www.unowindows.co.nz/blog/building-code-changes
As we approach 2024, these 4 factors will have a major influence on the cost, time fames and affordability of building a new home. We expect to see more people exploring pre-fab or transportable construction as factory-built housing has a standardized approach which mitigates the affect that increased compliance normally has on time frames and cost.
Manor Build provide homes that exceed the minimum thermal performance required by the building code by 35%. https://www.manorbuild.co.nz/blog/what-is-a-high-performance-home
