Construction is booming in Canterbury – but what is the market doing?
Construction Analyst Mike Blackburn joined John MacDonald to delve into the current situation in the region, the areas that are seeing major work, and if they’re seeing an over-supply of multi-unit dwellings.
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Speaker 1 (00:06):
You're listening to the Canterbury Mornings podcast with John McDonald
from News Talk ZB Mike Blackburn.
Speaker 2 (00:13):
Morning again, a John, nice to be in studio.
Speaker 3 (00:16):
Now you do the Canterbury Construction Update. What's the purpose
of that?
Speaker 2 (00:21):
Well, look, I started getting the building consent data from
the Council about ten years ago just to sort of
see who was building what and what was going on
in the market. And that was about sort of the
time of the peak of the earthquake rebuild, and it
became really obvious to me quite quickly that we had
overbuilt following that the earthquake and that we were going
(00:43):
to sort of see a decline. And one of the
problems with the construction industry is that it's it's not
very good at reading the broader market. And so I
started providing some analysis to my clients and the and
the broader industry of what was actually going on, and
then the report came become a thing, and so I've
(01:04):
got I've got client it's right across New Zealand who
want to know what's going on in the construction industry.
And this is probably the most comprehensive analysis of the
market that's available.
Speaker 3 (01:17):
So how come, we're still building. If you think that
we've reached peak way back then.
Speaker 2 (01:23):
Well, obviously if you look at the graph, I mean,
obviously from twenty and fifteen through the twenty and eighteen
building content numbers did fall away quite substantially here in
christ Church. Then obviously sort of in twenty nineteen again
that the market took off through to a peak of
twenty one and twenty two, and that was largely driven
(01:43):
by low interest rates, lots of money around following sort
of post COVID, and then obviously the economies tightened and
building content numbers have fallen away quite substantially. Now where
we are at the moment with regard to multi unit
dwellings here in christ Church is a completely separate issue.
Again I started out by saying, is that that the
(02:05):
building industry will often just keep building a certain type
of product until all of a sudden they look around
and go, oh gosh, I can't sell them anymore. And
that's and that's kind of where we're at with the
multi units.
Speaker 3 (02:19):
Do you think Williams Court might be doing that with
the development on Manchester?
Speaker 2 (02:22):
Look, I think it's across the board, John, I really
do that without wanting to single anybody out.
Speaker 3 (02:27):
So why is Richard Peeble through diplomatic there? Why is
Richard Peebles getting involved in this development one hundred and
thirty billion dollars also on Manchester Street, bought land from
the Crown. What's the motivation there is he does not
listening to the to the to the advice that you're
putting out there.
Speaker 2 (02:46):
No, Richard's a really really smart guy. And if you
have a look at what he's proposing to build, it
is quite substantially different from everything else along here in
Manchester Street. So his development will have a real mixed
use of of retail, of commercial office space as well
as higher end are residential. So what he's doing, and
(03:08):
again if you have a look at and not to
be critical of of of anyone who's building in the
central city, but you know, certainly around where we are
today sort of east of Manchester Street, it's apartment block,
apartment block, apartment block. Now look you can you've got
one hundred meters walk to the church to cash or mall,
(03:28):
all those sort of things there. But what what we're
seeing with Richard's development is that he's actually bringing some
of those retail and some of those hospitality. Absolutely. Yeah,
so that's one of the and look his experience with
with the Riverside market. I think that's going to be
a standout development in this East frame.
Speaker 3 (03:50):
The land that he's bought off the Crown. Was that
always the intention or is this the Crown flogging land
off that it's realized it doesn't want to have anything
to look.
Speaker 2 (03:59):
Look, my understanding is is there's there's something like an
initially fifteen superlot. Now the original plan from Otakaro, going
back to the original lease frame development, was for a
total of nine hundred residential dwellings. Fabulous, absolutely great. Fletchers
have built on or will build on, twelve of those
(04:23):
fifteen superlots, and my understanding is that they made a decision,
along with discussions with the Crown, probably a couple of
years ago, that they would exit out after the ones
that we're sort of seeing under construction now, which is
where Williams Corporation were obviously given the opportunity to purchase
(04:45):
their lot. And the conversations that I've had without revealing
private information, is that Fletcher's that there was a lot
of criticism from a lot of developers about oh, you know,
Fletcher's got preferential treatment and and they're all building.
Speaker 3 (05:03):
Which has probably got some validity to it, didn't they
They were in the city for a while there they're
doing all that stuff and all the home repair program.
Speaker 2 (05:12):
Look look, look absolutely, but that hasn't stopped other developers.
We've got sort of Mike Greer with his Manchester Square development.
So there's certainly plenty of other people, but Fletcher's made
the opportunity that they would step away from those last
remaining three lots and provide for other people to sort
of come and build. But bear in mind, you know,
Fletchers have been very, very busy also here in Canterbury.
(05:35):
They've got a development out in Hallswell and another development
out in Lincoln where they're they're building individual standalone family houses.
Speaker 3 (05:43):
For one of a better term. How protected or safe
is that east frame that so where the grasses and
all around there? Do you see that being sold off?
Speaker 2 (05:53):
Well? No, look that the original plan and I sort
of in preparation for today, I went back and had
a look at some of the original plans and I
can't think of the name of the park that's up there,
but that's that sort of entrench so that will always
be part of the green space, and that's central to
central city living. What they want to have is they
want to have lots of open spaces where you can
(06:18):
have some green space on your doorstep. I mean, Margaret Mayhe,
you know, over the road from here, the Avon River Precinct.
All of those things are make it absolutely fabulous. But
one of the things that again my commentary with regard
to this multi unit development across the whole of the
city is I think we've overbuilt. And I'm not just
(06:40):
talking here in the central city. I think across the
wider city there's only so much capacity for one and
two bedroom units. And let's have a look at Selwyn
for example. Why is Selwyn the fastest growing region in
New Zealand, And what are the type of houses that
we're building out there now. Yes, we are starting to
see some level of multi unit construction come into Selwyn,
(07:03):
but the vast majority, you know, seventy eighty percent of
all the houses a single story individual, standalone family houses
with a backyard, and there is a large percentage of
the population who actually want to live in that type
of house.
Speaker 3 (07:17):
So you say that a lot of stuff that we
have been building that we are currently building the stuff
that the market doesn't want.
Speaker 2 (07:23):
Well, look, one of the things we were going to
talk about was the recent data from core Logic and
about house price values and.
Speaker 3 (07:31):
About it will come back to Okay.
Speaker 2 (07:33):
So, one of the things one of the pieces of
data that core Logic does provide, and a big shout
out to to my good friends Calvin and Nick at
core Logic, is who's actually buying these things? And if
we specifically look at the multi unit market here in
christ Church, their data suggests that sixty to sixty five
(07:54):
percent of all these multi unit dwellings are being sold
to investors. Now, I believe that for some developers that
percentage could be eighty or ninety percent. So, and one
of the things that's been in the news just recently,
even this this this week, is the is there we're
at a ten or eleven year high for rental properties
(08:17):
right across the countries, and so so of course, and
so here here's here's the here's the maths, here's the equation.
So let's say you bought a unit, and originally you
bought it as an Airbnb unit. Now there's been a
twenty four percent increase in the number of Airbnb units
in christ Church in the last couple of years, and
that's not been matched by an increase in night's night's
(08:38):
stay accommodation. So therefore you're going to go, look, I'm
not making as much money as I was. Maybe I'll
shift from short term rental to long term rental. You
shift into that long term rental market, and then you go,
holy cow, you know we've got we've got the highest
number of rental properties and so so supply and demand
that has an impact on rental property prices. And then
eventually some people will go, look, maybe I'll maybe I'll
(09:02):
just get out and I'll sell it. Now, all of
a sudden, you're having read estate agents and this is
the data that you've got sitting in front of you, going, well, look,
I either can't sell it, or if I can sell it,
I'm going to sell it for less than what you
paid for it.
Speaker 3 (09:16):
What about this warning this week that if you're going
to sell the house within three years, be prepared to
make a lost You believe.
Speaker 2 (09:21):
That absolutely, John, And if you look at the data
from the last couple of years. In twenty twenty one
and twenty twenty two, we saw house price values skyrocket.
We saw annual year on year property value increases of
up to thirty percent in some cases. And I was
(09:45):
in my monthly commentary, was warning people that this was
a bubble. This was totally artificial, driven by low interest
rates increasing plenty of cash available, and of course that
drove price increases. And of course the reality is that
if you bought a property, especially one of these multi
units at the peak of the market, off the plans
(10:09):
where they weren't completed for another twelve months again, and
then using the scenario that I said before, where well, actually,
look we might just look to get out of it.
Then yeah, price values have come back a lot. Look
we're sort of on par with long term trends. But
if you bought at the peak of the market and
you're looking at selling now, I've heard stories where people
(10:32):
are facing the loss of one hundred thousand dollars on
a particular unit. And in Canterbury here in Canterbury, Wow,
it's tough. It really is tough. But look, it's situational
and not across the board. That depends what you bought
and when you bought, and whether or not you can
(10:52):
afford to sit this out the market will come right,
but right now if you're in a situation where you're
forced to sell, unfortunately, not a great time.
Speaker 3 (11:02):
Right. So we've got about a minute. But do you
think there needs to be some sort of intervention? For example,
does it need to be a pause on giving up
consents for these.
Speaker 2 (11:10):
No development looks? It's the market, John, it's the timing
of the market. People make decisions to buy. If more
people subscribed to my monthly report, they might be better informed.
Speaker 3 (11:21):
John, Do you think that the developers need to be
rained in let stop stop flooding the market?
Speaker 2 (11:26):
Look, it's entirely over to them. They make the decisions
on what they think they can sell. And again, as
I said, you know, I like to try and provide
some some overarching commentary to the market. And look, I
haven't got a crystal ball. I'm just sort of reading
the tea leaves as they come. But look, I've been
saying for probably two years that the multi unit market
(11:49):
is oversupplied and it's roosters are coming home to roosts.
Speaker 3 (11:51):
And the developers need to read your updates as well.
Brilliant to see you, Mike, that's coming.
Speaker 2 (11:55):
Thank you, John.
Speaker 1 (11:56):
Mike Blackburn For more from Category Mornings with John McDonald,
listen live to news talks It'd Be christ Church from
nine am weekdays, or follow the podcast on iHeartRadio
You're listening to the Canterbury Mornings podcast with John McDonald
from News Talk ZB Mike Blackburn.
Speaker 2 (00:13):
Morning again, a John, nice to be in studio.
Speaker 3 (00:16):
Now you do the Canterbury Construction Update. What's the purpose
of that?
Speaker 2 (00:21):
Well, look, I started getting the building consent data from
the Council about ten years ago just to sort of
see who was building what and what was going on
in the market. And that was about sort of the
time of the peak of the earthquake rebuild, and it
became really obvious to me quite quickly that we had
overbuilt following that the earthquake and that we were going
(00:43):
to sort of see a decline. And one of the
problems with the construction industry is that it's it's not
very good at reading the broader market. And so I
started providing some analysis to my clients and the and
the broader industry of what was actually going on, and
then the report came become a thing, and so I've
(01:04):
got I've got client it's right across New Zealand who
want to know what's going on in the construction industry.
And this is probably the most comprehensive analysis of the
market that's available.
Speaker 3 (01:17):
So how come, we're still building. If you think that
we've reached peak way back then.
Speaker 2 (01:23):
Well, obviously if you look at the graph, I mean,
obviously from twenty and fifteen through the twenty and eighteen
building content numbers did fall away quite substantially here in
christ Church. Then obviously sort of in twenty nineteen again
that the market took off through to a peak of
twenty one and twenty two, and that was largely driven
(01:43):
by low interest rates, lots of money around following sort
of post COVID, and then obviously the economies tightened and
building content numbers have fallen away quite substantially. Now where
we are at the moment with regard to multi unit
dwellings here in christ Church is a completely separate issue.
Again I started out by saying, is that that the
(02:05):
building industry will often just keep building a certain type
of product until all of a sudden they look around
and go, oh gosh, I can't sell them anymore. And
that's and that's kind of where we're at with the
multi units.
Speaker 3 (02:19):
Do you think Williams Court might be doing that with
the development on Manchester?
Speaker 2 (02:22):
Look, I think it's across the board, John, I really
do that without wanting to single anybody out.
Speaker 3 (02:27):
So why is Richard Peeble through diplomatic there? Why is
Richard Peebles getting involved in this development one hundred and
thirty billion dollars also on Manchester Street, bought land from
the Crown. What's the motivation there is he does not
listening to the to the to the advice that you're
putting out there.
Speaker 2 (02:46):
No, Richard's a really really smart guy. And if you
have a look at what he's proposing to build, it
is quite substantially different from everything else along here in
Manchester Street. So his development will have a real mixed
use of of retail, of commercial office space as well
as higher end are residential. So what he's doing, and
(03:08):
again if you have a look at and not to
be critical of of of anyone who's building in the
central city, but you know, certainly around where we are
today sort of east of Manchester Street, it's apartment block,
apartment block, apartment block. Now look you can you've got
one hundred meters walk to the church to cash or mall,
(03:28):
all those sort of things there. But what what we're
seeing with Richard's development is that he's actually bringing some
of those retail and some of those hospitality. Absolutely. Yeah,
so that's one of the and look his experience with
with the Riverside market. I think that's going to be
a standout development in this East frame.
Speaker 3 (03:50):
The land that he's bought off the Crown. Was that
always the intention or is this the Crown flogging land
off that it's realized it doesn't want to have anything
to look.
Speaker 2 (03:59):
Look, my understanding is is there's there's something like an
initially fifteen superlot. Now the original plan from Otakaro, going
back to the original lease frame development, was for a
total of nine hundred residential dwellings. Fabulous, absolutely great. Fletchers
have built on or will build on, twelve of those
(04:23):
fifteen superlots, and my understanding is that they made a decision,
along with discussions with the Crown, probably a couple of
years ago, that they would exit out after the ones
that we're sort of seeing under construction now, which is
where Williams Corporation were obviously given the opportunity to purchase
(04:45):
their lot. And the conversations that I've had without revealing
private information, is that Fletcher's that there was a lot
of criticism from a lot of developers about oh, you know,
Fletcher's got preferential treatment and and they're all building.
Speaker 3 (05:03):
Which has probably got some validity to it, didn't they
They were in the city for a while there they're
doing all that stuff and all the home repair program.
Speaker 2 (05:12):
Look look, look absolutely, but that hasn't stopped other developers.
We've got sort of Mike Greer with his Manchester Square development.
So there's certainly plenty of other people, but Fletcher's made
the opportunity that they would step away from those last
remaining three lots and provide for other people to sort
of come and build. But bear in mind, you know,
Fletchers have been very, very busy also here in Canterbury.
(05:35):
They've got a development out in Hallswell and another development
out in Lincoln where they're they're building individual standalone family houses.
Speaker 3 (05:43):
For one of a better term. How protected or safe
is that east frame that so where the grasses and
all around there? Do you see that being sold off?
Speaker 2 (05:53):
Well? No, look that the original plan and I sort
of in preparation for today, I went back and had
a look at some of the original plans and I
can't think of the name of the park that's up there,
but that's that sort of entrench so that will always
be part of the green space, and that's central to
central city living. What they want to have is they
want to have lots of open spaces where you can
(06:18):
have some green space on your doorstep. I mean, Margaret Mayhe,
you know, over the road from here, the Avon River Precinct.
All of those things are make it absolutely fabulous. But
one of the things that again my commentary with regard
to this multi unit development across the whole of the
city is I think we've overbuilt. And I'm not just
(06:40):
talking here in the central city. I think across the
wider city there's only so much capacity for one and
two bedroom units. And let's have a look at Selwyn
for example. Why is Selwyn the fastest growing region in
New Zealand, And what are the type of houses that
we're building out there now. Yes, we are starting to
see some level of multi unit construction come into Selwyn,
(07:03):
but the vast majority, you know, seventy eighty percent of
all the houses a single story individual, standalone family houses
with a backyard, and there is a large percentage of
the population who actually want to live in that type
of house.
Speaker 3 (07:17):
So you say that a lot of stuff that we
have been building that we are currently building the stuff
that the market doesn't want.
Speaker 2 (07:23):
Well, look, one of the things we were going to
talk about was the recent data from core Logic and
about house price values and.
Speaker 3 (07:31):
About it will come back to Okay.
Speaker 2 (07:33):
So, one of the things one of the pieces of
data that core Logic does provide, and a big shout
out to to my good friends Calvin and Nick at
core Logic, is who's actually buying these things? And if
we specifically look at the multi unit market here in
christ Church, their data suggests that sixty to sixty five
(07:54):
percent of all these multi unit dwellings are being sold
to investors. Now, I believe that for some developers that
percentage could be eighty or ninety percent. So, and one
of the things that's been in the news just recently,
even this this this week, is the is there we're
at a ten or eleven year high for rental properties
(08:17):
right across the countries, and so so of course, and
so here here's here's the here's the maths, here's the equation.
So let's say you bought a unit, and originally you
bought it as an Airbnb unit. Now there's been a
twenty four percent increase in the number of Airbnb units
in christ Church in the last couple of years, and
that's not been matched by an increase in night's night's
(08:38):
stay accommodation. So therefore you're going to go, look, I'm
not making as much money as I was. Maybe I'll
shift from short term rental to long term rental. You
shift into that long term rental market, and then you go,
holy cow, you know we've got we've got the highest
number of rental properties and so so supply and demand
that has an impact on rental property prices. And then
eventually some people will go, look, maybe I'll maybe I'll
(09:02):
just get out and I'll sell it. Now, all of
a sudden, you're having read estate agents and this is
the data that you've got sitting in front of you, going, well, look,
I either can't sell it, or if I can sell it,
I'm going to sell it for less than what you
paid for it.
Speaker 3 (09:16):
What about this warning this week that if you're going
to sell the house within three years, be prepared to
make a lost You believe.
Speaker 2 (09:21):
That absolutely, John, And if you look at the data
from the last couple of years. In twenty twenty one
and twenty twenty two, we saw house price values skyrocket.
We saw annual year on year property value increases of
up to thirty percent in some cases. And I was
(09:45):
in my monthly commentary, was warning people that this was
a bubble. This was totally artificial, driven by low interest
rates increasing plenty of cash available, and of course that
drove price increases. And of course the reality is that
if you bought a property, especially one of these multi
units at the peak of the market, off the plans
(10:09):
where they weren't completed for another twelve months again, and
then using the scenario that I said before, where well, actually,
look we might just look to get out of it.
Then yeah, price values have come back a lot. Look
we're sort of on par with long term trends. But
if you bought at the peak of the market and
you're looking at selling now, I've heard stories where people
(10:32):
are facing the loss of one hundred thousand dollars on
a particular unit. And in Canterbury here in Canterbury, Wow,
it's tough. It really is tough. But look, it's situational
and not across the board. That depends what you bought
and when you bought, and whether or not you can
(10:52):
afford to sit this out the market will come right,
but right now if you're in a situation where you're
forced to sell, unfortunately, not a great time.
Speaker 3 (11:02):
Right. So we've got about a minute. But do you
think there needs to be some sort of intervention? For example,
does it need to be a pause on giving up
consents for these.
Speaker 2 (11:10):
No development looks? It's the market, John, it's the timing
of the market. People make decisions to buy. If more
people subscribed to my monthly report, they might be better informed.
Speaker 3 (11:21):
John, Do you think that the developers need to be
rained in let stop stop flooding the market?
Speaker 2 (11:26):
Look, it's entirely over to them. They make the decisions
on what they think they can sell. And again, as
I said, you know, I like to try and provide
some some overarching commentary to the market. And look, I
haven't got a crystal ball. I'm just sort of reading
the tea leaves as they come. But look, I've been
saying for probably two years that the multi unit market
(11:49):
is oversupplied and it's roosters are coming home to roosts.
Speaker 3 (11:51):
And the developers need to read your updates as well.
Brilliant to see you, Mike, that's coming.
Speaker 2 (11:55):
Thank you, John.
Speaker 1 (11:56):
Mike Blackburn For more from Category Mornings with John McDonald,
listen live to news talks It'd Be christ Church from
nine am weekdays, or follow the podcast on iHeartRadio
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