In my last post, statistics pointed out that investors made up of more than 40% of purchasers within the Auckland region. As we all know, investors typically do not pay as much as the average home buyer would as the numbers must stake up and so forth. So what is the driving force behind these record high asking prices in Auckland then?
Andrew Bruce, president of the Auckland Property Investors' Association feels that one such pressure point is the suppression of building work in this city as the result of the skyrocketing cost of doing business with council. As we know Auckland has a short supply of housing so it may be that the cost to build could be a significant factor here.
Andrew recently subdivided a section and the project took a year to complete. The physical work took only three weeks, the paperwork took 49.
Costs to complete a subdivision
Direct council costs (including consents and development contribution) 46%
LINZ and lawyer 2%
Andrew has calculated from this experience, the council costs to the value of the section were 20% of the actual sale price of the section (including installation and connection of the water meter).
In many cases, a proposed building project is not economically viable by financiers, investors, and developers, and this is the cause of our housing supply being unable to keep up with the growing demand.