Monday, March 28, 2016

Maximising Urban Limitation

Update - revised more accurate figures.

Auckland is a city.  Auckland has a centre, inner suburbs, outer suburbs (which contain the peripheral and hubs of Manukau, Waitakere and Takapuna) and eventually an extremity of its suburban development.  This extremity of its suburban development is called the Metro Urban Limit (MUL).  Outside of the MUL are some low density Auckland exurb towns.

Auckland was a growing city expanding upwards more and outwards less. Then we merged the governance of Auckland and all its surrounding areas to form a Super City.  Elections were held - Len Brown became mayor, along with Penny Hulse as deputy mayor.  After the merger the whole of Australasia entered a construction boom with a multitude of apartments being built everywhere - except Auckland.

Len Brown and Penny Hulse killed development in Auckland by doing one simple thing - constricting expansion of the city way below that required for growth.  Implementing this Auckland Plan they restrict the greenfield expansion of Auckland City to less than 10%, whilst expanding the surrounding exurb towns by adding 80% - 200% greenfield to each of those areas.

The natural rate of expansion Auckland had been 25 - 35% greenfield and 65 - 75% intensification for about 25 years prior to 2010.  The Auckland Plan states that the council wanted this to continue with Auckland population expected to rise by 2/3rds - 2/3 x 30% = 20%.  However the Auckland Unitary Plan then cuts off the land supply required to sustain the growth, slashing new land supply from the required 20% to a meagre 9%. 

The unitary plan takes that greenfield development away from Auckland City and spreads it across the Auckland exurbs, then adds on more room to sprawl.  The Auckland City Council treats the city and the exurbs as one continuous entity.  Which is a very weird position to take. 

The Auckland Plan states that it expects the city to develop 70% intensively and 30% greenfield.  Then the Auckland Unitary Plan slashes the greenfield land supply. 

The historical natural market has intensification 70% to greenfield (largely single dwelling) 30%.  Any movement away from this will be reflected in relative expected future dwelling value.  The Auckland Unitary Plan restriction of land supply to the city means that city growth is now planned to be 85% intensification and 15% greenfield. 

The result is obvious - there is anticipated over supply of intensification and a shortage of low intensity greenfield. 

This has two easily observable effects:
- Prices of single dwelling will increase.   As single dwelling is highly land inefficient, but highly valued - land prices will rise.
- Prices of apartments will be suppressed on expectations of over demand.  As the cost of land increases, but price remains suppressed, the rate of apartment construction becomes very slow. 


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