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The challenge of building cheaply: Market Cove

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But it's not been easy given the shortage of builders and high cost of building materials, the project's leader says.

Market Cove's general manager Guy Taylor says he came back to New Zealand from years in Australia and other countries to find construction costs were "astronomical".

"I was talking to some old work colleagues who are working for constructors and I said to them, this is crazy. And they just said, well, that's the market at the moment.

"Having not worked here for a really long time and coming back to this market, from what I see, there's not the trade-based coverage, not the manpower to do the work."

In Australia, he had seen construction costs spike in a similar fashion.

"As the supply comes on, hopefully the pricing of construction will start to plateau with it because the supply and demand will start to level out."

Unveiled earlier this month, Market Cove will be built on the site of an old Favona market garden.

The 14-hectare site will ultimately house about 4000 people, in 1200 to 1400 townhouses and apartments.

The site was bought three years ago by developer John Sax but the cost of the subdivision's original plans rose so much that the prices were deemed too high.

Sax wanted to have a reasonable percentage of the subdivision to be within reach for the average person.

So Taylor says the plans were ripped up and they started again.

Direct deals with suppliers were made, and "everything's going to be pretty much pre-made".

"Not only will we get time savings on site ... but it also means that we remove a lot of the delays with that supply chain.

"So the guys actually know when things are coming, know what the pricing is straight away, we're not dealing with the guy who buys the power packs for $10 and charges it for $15 and then has his margin. We're trying to remove some of that."

New Zealand's building materials are a "tightly held" market, Taylor observes. "That's not going to change for a very long time."

The cheapest dwelling in the subdivision will be about $425,000, for a one-bedroom 50 square metre apartment.

The hope is to have at least 20 per cent of the dwellings in the "affordable" price range, under $600,000 and 70 per cent under $750,000.

Construction costs, Taylor estimates, will be half a billion dollars, and the project's overall worth is expected to be $900m-$1b.

"John keeps challenging us to get it done in five years ... I'd anticipate it will be a five to eight year project."

A big focus of the plan is sports and leisure. A central park is planned, alongside a community centre and the project will unlock access to the harbour for a proposed esplanade.

"We're really excited about what this will do for this area," Taylor says.

His concerns about rising costs were echoed recently by BNZ's chief economist Tony Alexander in his weekly newsletter.

Alexander has warned for years about Auckland's housing supply problems.

"I'll only seriously start changing view on the Auckland housing market and its continuing potential for further price rises if something comes along to radically boost supplies of materials, cut material prices, boost builder numbers, and rein in credit supply much more than has already happened."
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