From neighbouring one house to four, how intensification affects values

Thursday, 7 July 2022

Lenore Bullock’s property is next to a section that has been subdivided and will soon have four new townhouses built on it in Auckland’s North Shore.

For 23 years North Shore resident Lenore Bullock lived next door to a four bed-room family home, but two months ago it was demolished and work is underway to put four houses on the same plot.

One of the new houses’ balconies will overlook her garden, and Bullock says what sunshine her garden gets will be gone.

“The council no longer care about houses losing sun, privacy or anything else,” she says.

Bullock says she and a number of neighbours around the East Coast Rd develop are also worried their houses will be devalued, but a local property mogul says owners can’t have their cake and eat it.

Martin Cooper of Harcourts says home owners can't have it both ways with intensification.

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Lenore Bullock says she understands there is no stopping the development next door, but says she would have liked to have been consulted.

Martin Cooper owns 19 Harcourts offices in north-west Auckland and the North Shore. He says in the past few years homeowners have been able to sell at much higher prices to developers because of a property’s development potential, than if they had sold to another resident owner.

“You enjoy the capital gains because the location is in demand, but then you don’t want what’s creating the demand to be implemented in your suburb. You can’t have your cake and eat it in this life,” he says.

Exactly how prices will change as intensification takes hold is still a big question mark, even among those who study the market full-time.

A recent rating valuation of Bullock’s home put the property just shy of $2.1 million.

Lenore Bullock’s home is in the suburb of Forest Hill, and this map shows how the surrounding areas have been rezoned to allow for greater intensification.

Auckland Council’s interactive map shows areas up-zoned to medium density in light orange and areas up-zoned to allow for apartments in dark orange.

Having a well-kept five-bedroom home, Bullock doubts any bump in her land value from the ability to develop will outweigh the price fall caused by the loss of sun and crowding.

She may be feeling the early sting of intensification, but with huge swathes of the city now earmarked for medium or high density housing, many more will face the same situation.

Nick Goodall says there is no simple rule for property values going up or down because they can be developed.

Intensification is a central theme of Auckland’s current Unitary Plan, and an interactive map has been produced and placed on the council’s website to show the new zoning.

The Government’s Medium Density Residential Standards (MDRS) allows the development of up to three dwellings of three storeys without resource consent in most urban centres.

These standards cover most of suburban Auckland.

At the same time, councils are being pressed to comply with the Government’s National Policy Statement on Urban development, which will allow apartment buildings of at least six storeys within 10-minutes walk of a train station.

When completed, one of the homes will have a balcony close to Bullock’s garden fence.

Auckland Council is also on the Government’s radar for being too liberal with measures to protect affluent neighbourhoods, with Housing Minister Megan Woods advising the council to reconsider the number of special character areas it is trying to retain.

A council spokesperson says the local authority has now completed a region-wide, site-specific review of these areas, and where character has not been retained, it is proposing to remove protections.

How intensification will hit prices

CoreLogic head of research Nick Goodall says properties are valued to their highest and best use, which means properties with development potential will probably see a bump in price.

But the option to intensify is not always a boon. Properties unsuited for development, or with an attractive family home already on the site may attract a regular buyer willing to spend more than a developer.

In these cases the property is unlikely to get much of a boost, and may be devalued if there’s a lot of high density housing nearby.

Then there is the sheer amount of the country’s urban centres that have been freed up for intensification. More choice for developers is likely to reduce the amount they are willing to pay.

Martin Cooper of Harcourts Cooper & Co at his company’s headquarters in Albany.

“There’s actually an interesting example recently which Auckland Council ‘recategorising’ some properties as being able to have two properties on them,” Goodall says.

There is already anecdotal evidence buyers paid top-dollar for these sites, sat on them, and now with abundant developable land and a limited number of developers, they are likely to find they overpaid.

Fruits of intensification policies appearing

CoreLogic recorded 13,059 code compliance certificates issued by Auckland Council in the year to the end of April. A code compliance certificate generally means a new property is ready for living in.

“This has trended lower from the recent peak of 14,421 for the year to the end of June 2021, but is still well up on the long run five-year average of about 10,600,” Goodall says.

With every additional home added, the shortage is reduced, and the attractiveness of land to developers falls.

Goodall says in the last two years, with periods of negative migration and a building boom in full swing, Auckland has taken a big chunk out of its shortage.

Housing Minister Megan Woods has announced funding of $1.4 billion for infrastructure projects in Auckland.

CoreLogic estimated between 2015 and 2020 the shortfall of properties in Auckland worsened by 17,000 properties, which could be reversed in a few years if high rates of building continued.

As the shortage eases, prices are likely to drop.

At the same time, 50,000 consents are in the pipeline nationally. Goodall says the industry does not have the capacity to complete that many, but the figure indicated Kiwis can expect many more new builds in the near future.

To give a measure of how quickly consents became buildings, Goodall says in the year to April, 85% of dwellings consented in Auckland had a code compliance certificate issued within two years.

Bullock’s response to accusations of nimbyism (the not-in-my-backyard mentality) is that she worked hard to afford her home, and she says it is frustrating not to have been consulted before the development next door was approved.

“It is what it is, and you just have to live with it, but I think it’s just gone are the days of a house with a little backyard on a nice little street,” she says.

A council spokesperson says the resource consent was granted on a non-notified basis and did not require consultation with neighbours.

Neil Zent has complained to Auckland Council about the height of the southern retaining wall being constructed, alongside his neighbour Angelina Intsupova.

Infrastructure key to success

Cooper says homeowners always had the choice to sell up and move to an outer suburb, such as Millwater or Silverdale, where they could find fewer homes and larger plots.

But they should be conscious of the zoning of an area they want to buy in, he says.

Cooper says the success of medium and high density zones depends on making sure roads, piping and schools all grow in tandem with housing.

The resource consent plan, shows how much shade will be cast on Bullocks home during the summer (light grey) and winter solstice (dark grey).

In April Woods announced $1.4 billion to be spent across Auckland on infrastructure such as pipes, and to prepare land for construction.

Project consented despite infringements

The council’s decision document highlights a number of infringements in the development’s design, including relating to the height of retaining walls and fences and a failure to satisfy parking and access standards.

Three of the new houses only have one parking, and Bullock wonders where residents will park, given the busyness of East Coast Rd.

The decision states the use of fencing and landscaping ensure the new homes do not look straight onto neighbouring properties.

It also states the additional shade cast on surrounding properties will only be present during winter, and is therefore acceptable.

“The site will continue to appear as a spacious site with sufficient landscaping in between the dwellings,” the decision notes.

The three additional homes for the market are also noted as a positive, and in keeping with statutory requirements to intensify.

The development is one of many in the area. Bullock says another site a little way down East Coast Rd has five homes going into it, and the southern boundary neighbour of the site, Neil Zent, says a property on his western side has also sold up to developers.

“They’re just everywhere, it’s crazy,” says Bullock.

Zent has complained to the council about the height of the southern retaining wall, alongside his neighbour Angelina Intsupova.