Greenfield builds fuel Tauranga’s housing appetite

Tauranga’s housing is being squeezed by the city’s fast growing population and its small district by land area, even though it is the country’s fifth largest urban area.

Population growth is one of the fastest in the country as people stream into the region for a lifestyle hard to match elsewhere in New Zealand.

In 1945 Tauranga was a fishing village of 4000 people. The number of people calling the city home grew from 66,731 in 1991 to 121,700 late last year and is expected to mushroom to nearly 200,000 by 2063.

Accommodating the burgeoning population needs the rezoning of swathes of greenfields land for housing development and millions of dollars spent on infrastructure.

Like Auckland Council, Tauranga City Council has a number of housing accords and special housing areas with the government.These have been beneficial based on the council’s predictions the city has between 10 and 11 years of zoned greenfields land supply, most of it serviced and ready for development. However, the council says it needs to
look ahead because of the four to 10 years it takes to rezone land under the Resource Management Act.

Under the SmartGrowth partnership between the council, Western Bay of Plenty District Council, Bay of Plenty Regional Council and tangata whenua, a start has been made on rezoning two new greenfields areas for development to provide between 6000 and 8000 new houses.

This will give the city enough land supply for another five years and meet its goal of always having 10 years of greenfields land available for housing. Unlike Auckland, intensification is not an option for Tauranga, the council says.

The development economics are poor and new housing in greenfields areas is more affordable. Much of this has to do with the high cost of aggregating enough land to redevelop in the older parts of the city as well as the additional building costs and project risks associated with building apartments and terraced houses rather than single-level homes.

The council says it is far too simplistic to just talk about increasing land supply. It says this will not achieve housing affordability unless the land can actually be developed, smaller more affordable houses are allowed to be built in new subdivisions and they are actually delivered.

Infrastructure financing and funding is also a major issue in terms of land release. While the government could legislate to remove urban limits and compel councils to rezone additional land for residential development, this will have no effect on the amount of land available because, without infrastructure, land cannot be developed.

The city says there are few large developers that can afford ,and have balance sheet capacity, to step in and build infrastructure in place of a council. Water, wastewater and roads are expensive lead infrastructure required before development revenues begin to accrue.

In an ideal world councils would like to offload the cost to developers and in one Tauranga housing project this has been done. Developers took the plunge and paid for infrastructure at the 254ha The Lakes subdivision on the western outskirts of the city.

The new suburb will include 2081 sections housing more than 7000 people as well as a 2500sq m commercial hub with a café/restaurant, convenience shops and,possibly, offices. The subdivision includes an 8ha fresh water lake, 20km of walkways and cycleways, professional orienteering courses, playgrounds, parks and reserves.

The Lakes managing director Scott Adams says building infrastructure in lieu of development contributions is an alternative mechanism to free up more land for development without local authority delays.

Carrus Corporation took over The Lakes after the global financial crisis-hit Bank of Scotland International called in its loan to the original developer, Grasshopper Farms, and the company went into receivership and liquidation.

“When we took control of the assets, 500 sections had been developed and another 140 lots had titles but not sold,” Mr Adams says.

“Before Carrus took over, the receivers were restrictive and refused to provide terms for house builders wanting to buy sections, which had halted sales. We were just also coming out of the global financial crisis (GFC) and the city’s housing market was static.”

To stimulate the market Carrus introduced 12-month interest-free terms to house builders and sales immediately picked up. On purchase and payment of a deposit, clients can opt to take the 12-month interest-free terms or a $5000 discount for a cash sale. Carrus had budgeted to sell 50 lots a year over three years but in three months it sold 150 lots with 80% on deferred terms and 20% cash sales.

Mr Adams says deferred terms have thrust The Lakes out of the GFC. “Many land developers use terms to help buyers’ cashflow and we have provided this in all our developments. After 25 years in this business we found numerous builders following us to various subdivisions relying on our terms, which help them free up their cashflow for building.

“If we give builders the opportunity to buy on terms, it gives them time to obtain a building consent and finish the house within a year. They can settle on the day the client moves in and it takes away the issue of borrowing to fund the entire house and land package.”

The Lakes is one of several big new subdivisions in Tauranga. Coast Papamoa Beach has sold more new homes in five
months than the previous five years at its 24ha development.

Frasers Property has sold 23 lots since January. At the end of last year it had sold just 18 sections, since opening at the beginning of 2010. Land sales to date total $13.9 million.

Coast Papamoa Beach director Steve Short says this time last year the average time for designing a house and land package was 90-120 days. Now they are selling within 30 days.

Although the market has mainly been local buyers for The Lakes until recently, Aucklanders are now targeting Tauranga for affordable housing and Frasers Property says its sales are dominated by buyers from the country’s biggest city.

“They are drawn here because the city can offer luxury living by the sea at about two-thirds of Auckland prices,” Mr Short says.

A lack of available properties on the market is also fuelling the popularity of new builds.

– The National Business Review

(Published Friday, May 29, 2015)

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