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A Perfect Time For Development

The country is trending towards being an increasingly beneficial space for developers, writes Anthony Corin.

By: Anthony Corin

20 April 2024

A developer is always considering when’s the right time to start a project that will yield healthy returns and encounter minimal risk. And it is a complex environment that does experience fluctuations.

Economic conditions play a critical role in the state of property development and the success of projects. Currently, New Zealand finds itself in the midst of a significant phase of growth. The economic landscape shows it’s trending towards being an increasingly beneficial space for developers, making this an advantageous time to explore residential property development projects.

Supply And Demand

New Zealand is experiencing a surge in demand for housing. This is driven by factors such as population growth and increased immigration. With a steady influx of residents, an expanding need for housing becomes apparent, and we unfortunately are not keeping up with this growth rate.

This increase in housing demand and shortage of supply is a situation emphasised by paused projects that have disrupted the typical time frames of housing construction, which means less completed new homes reach the market.

With this supply and demand imbalance, property prices are on an upward trajectory. There is insufficient housing supply and increased competition for housing. This is where property developers need to intervene.

Cost Changes

Cost changes are influenced by the current development landscape. In this case, costs are being influenced by an increase in paused projects. The temporary suspension of many construction projects across the country, or in some cases completely cancelled projects, have created a unique situation; suppliers and contractors that were once scarce to come by, are now readily available.

This increased availability of contractors and less disruption to the supply chain creates an environment of increased competition between themselves, which leads to contractors submitting much more competitive prices, which reduces overall development costs.

For developers, this presents the perfect opportunity to take action and pursue their investments. The lowered costs, coupled with a market desperate for more housing supply, has created a scenario where well-timed development projects can now yield not only maximised returns, but also contribute to alleviating the housing shortage.

Immigration’s Impact

Immigration is playing a significant role in influencing New Zealand’s property landscape. According to Stats NZ, the country’s immigration boom reached heights of 249,500 new migrant arrivals in 2023 alone. This is an increase of 135 per cent from 2022. In 2023, migrant departure from New Zealand reached 122,100, resulting in an annual net migration of 127,400 - the highest
on record.

New Zealand is an attractive place to live that many seek to make their home, and this increases pressure to accommodate a growing population.

For property developers, this surge in demand increases the importance of their intervention to meet this housing need.

By staying informed of the current and projected economic environment and having a good grasp on the supply and demand principle, developers will position themselves to be able to identify the ideal time to pursue projects.

The current soaring demand, economic upward turn, and reduced development costs creates an opportune moment in this country’s property development landscape.

Anthony Corin and his team specialise in property development and construction using ICFs and operating through a relational contract, open-book system. Shorcom Ltd, 0800 SHORCOM, www.shorcom.co.nz

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