Christchurch Section Development Canned

Saddened to read this article in the NBR this morning.  Subscription required.

Basically it states how Fulton Hogan have had to cancel a contract to buy some land they were going to develop into sections down Christchurch way because they can’t get any insurance.

And because they can’t get insurance, they can’t get funding to buy the land…. so they’ve had to cancel the contract.

Not sure what can be done about this.  This may be something the government needs to get involved with.

CERA to the Rescue?

It seems Roger Sutton of CERA is quickly seeing what a problem the Christchurch City Council’s planning processes could be.  Same as any other council of course. But CERA has the power to just bypass all their planning:

Land price issue of ‘real concern’

MARC GREENHILL

Planning costs may be slashed to ensure affordable land prices for residents in Christchurch’s red zone, Canterbury Earthquake Recovery Authority chief executive Roger Sutton says.

Speaking to about 50 mostly red and orange-zone residents yesterday at a community meeting in New Brighton, Sutton said the region’s land prices were a “real concern”.

The authority’s extraordinary powers could be used to reduce the cost of development land, he said.

A “common theme” from the meetings was that many properties in the red zone, where land cannot be rebuilt on, had a rateable value under $100,000.

“There’s very little land on the market for those prices at the moment,” Sutton said. “We have to move as quickly as possible to give an assurance that there is actually going to be land and house packages, or at least land packages, to begin with, at prices you feel you can afford.”

Residents told yesterday’s meeting that some developers had increased land prices after last week’s Government announcement.

Sutton said supply-and-demand problems were expected, but cutting red-tape costs, such as planning and resource consents, was possible.

Rest of Article

 

I wonder how long Roger et al will wait before using their extraordinary powers.  They’ll have to do it I reckon.  CCC won’t play ball on their own.

I reckon we’ll see this happen within the next 3 months.

 

 

 

Auckland Council Gets Another Revenue Stream

Courtesy of the dog walking public that is:

Dog officers accused of lurking

By Hayley Hannan

5:30 AM Tuesday Jun 28, 2011
Kate Bourke received a Council Infringement notice for having her dog off the lead. Photo / Paul Estcourt  

Kate Bourke received a Council Infringement notice for having her dog off the lead. Photo / Paul Estcourt

Dog control officers are hiding in bushes and lurking in cars in a covert surveillance tactic to gather more fines, dog owners claim.

The owners say the fines – which can be for infringements including failure to keep a dog under control and failing to remove faeces – have become about “revenue collecting”.

However, the Auckland Council said yesterday there was no incentive for dog control officers to issue a quota of tickets and the officers were not allowed to hide in bushes.

Rest of Article

What suprised me about this was the lady pictured was fined $1800! Not $100 or $200 but $1800 which she then had to fight to have reduced.

What didn’t surprise me about this article was the standard council response i.e. the animal control officers are acting appropriately, our survey says so and we don’t have quotas.

Remember the police saying the don’t have ticket quotas?  Same thing.

And also, the woman pictured looks like the complete opposite from a hardened criminal doesn’t she?  A kind, law abiding middle aged woman is how she appears to me.  But she gets turned into a criminal for having her dog off a leash on the way to the off-leash area.  Ridiculous.

 

Unnecessary Planning Costs from Down on the Farm

This article in the NZ Farmers Weekly:

RMA impeding economic growth: Brash

20-06-2011 | Hugh Stringleman

New ACT Party leader Don Brash says he is convinced that Resource Management Act (RMA) compliance is the biggest single obstacle to economic growth in New Zealand.

He was speaking after a tour of RMA and local government concerns in North Auckland after being invited by the Landowners and Contractors Protection Association, Lower North.

Chairman Brian Mason said his group had invited Brash to see and hear for himself the frustrations and costs on ratepayers, during visits to farms and small businesses in the Wellsford area.

Brash said the only way to tackle the growing compliance costs was to cut the growth of the bureaucracy.

Many angry residents claimed that the now Auckland Council system of permits, consents and inspections was a self-perpetuating employment and money-making system. Yet the RMA was devised and hailed in 1991 as an advance on the old Town and Country Planning Act.

“The growth in compliance costs and time now shows that good intentions are not enough,” Brash said.

The full article is here: http://www.nzfarmersweekly.co.nz/article/8915.html  shows just how much cost is added (unnecessarily) to farming costs these days.  Of course these same stupid hoops have to be jumped through by businesses in an urban setting too.

Kaipara District Council Suspend Development Contributions

Owen McShane of the Centre for Resource Management Studies sends out a regular digest containing information on planning, RMAand development issues.

The one I received today was really interesting.  Kaipara District Council have given up trying to collect their ridiculous taxes.  Here’s the relevant part of the digest:

5.       Kaipara District Council Dishes some of the DURT.

Congratulations to Kaipara District Council.

We must give credit where credit is due. At its May 19th Council meeting, the Kaipara District Council, as part of its approval of the Annual Plan, passed the following resolution, which was confirmed on the 8th June.

Resolved                      Geange/McEwing

That

the Development Contributions Policy requiring development contributions to road upgrading in the Otamatea and Mangawhai areas be suspended for new applications received from 1 July 2011 until such time as Council has completed a formal review of the Policy in accordance with the provisions of the Local Government Act 2002 and in association with the Long Term Plan process.

Reason for the Resolution

The Development Contributions Policy is predicated on certain assumptions about rates of growth, which are very different from actual rates of growth.  The contribution amounts themselves are considered to be a barrier to development at this time while such activities are at such a low ebb.  The Policy should be reviewed comprehensively along with the preparation of the next Long Term Plan, which may reveal that activity levels are too low to justify having a policy for roading.

From the time Development Contributions were first mooted the Centre has opposed them because they are a highly regressive tax (fine) on development. They have been a big enough burden during the good times but now that the construction and property sector is in such a slump they have proved a disaster. Most small developers simply do not have the cash in the bank to pay say $100,000 for an eight lot subdivision, or to pay $12,000 to put a sink into a sleepout to make it a granny flat for granny. The large companies cannot borrow the millions they may need.

The end result is that in many councils now find their revenue from Development Contributions is running at about 10% of the budget forecast. And of course the revenue has already been “spent”.

So the Kaipara District Council has done the right thing. (I am happy to send my submission to the Annual Plan to anyone interested. There were others in support of course.)

I already hear that several abandoned projects have now come back to life because the applicants can now claim their 224(c) certificate and advertise a genuine title.

This will provide KDC with a competitive advantage in the Northland territory and we can only hope it catches on and spreads. We might even get a few tradesmen returning from Australia.

Who knows?

Bayleys Auction Results

Here are the results for the Bayleys commercial auctin just held.  Firstly the results as the agent who forwarded them onto me wrote them down:

Which shows that 8 out of the 16 were sold, which is pretty good going in this market.  By the way, I think P/I means passed in.

And then the sanitised results, released by Bayleys corporate:

 

Which shows 7 out of 9 having been sold and the other 2 ‘under negotiation’.

So firstly, it looks like yields are still very low.  4.9% for a shop in Birkenhead?  That’s very low.  But then the 7.4% yield on the sale of the medical centre seems relatively high.  It’s a higher priced property of course and I don’t know the lease terms but I would have though a medical centre would have been in very strong demand.

And then of course there’s the issue of Bayleys ‘sanitising’ their auction results.  So it looks like they pretty much all sold, with just a couple of stragglers that will be mopped up in the next few days…  I guess they might use this when they are signing up their next lot of vendors…

 

Chrishtchurch Real Estate

There exists a Chinese curse – “May you live in interesting times”

Well it’s certainly ‘interesting’ times for people in Christchurch and it has been ‘interesting’ for some time.  I’m sure most people in Christchurch would rather live in times of much leass upheaval.

So the government has given some certainty to people who have a house in the Red zone of Christchurch.  And these people will apparently have an offer within 8 weeks.  Now what is going to happen then?  Where are these 5100 households going to spend their money?  What will this mean for real estate markets in and around Christchurch and indeed, the whole country?

The options for these people must be a) Buy a section (in a seizmic safe area) of Christchurch and build a new house or b) Buy elsewhere – and this could either be an existing home or necessitate the construction of a new house.

Now this is an interesting article from The Press this morning.  In it, the local real estate guy says there might be

“2600 vacant sections across Canterbury – and only 760 were available for immediate sale.”

But the mayor, Bob Parker says there are around 10,000 sections available now and another 5 or 6 thousand will be available shortly.

So this is a huge disparity.  And you know who I believe? The real estate guy.  Because he’s talking about what is actually there right now.  Bob Parker will have no idea how difficult, expensive and time consuming it is to bring a section to the market these days.  And the reason is that councils are very reluctant for this to happen.  And when it does, they have their hand out for large upfront payments.  So it’s ironic that the mayor, who leads the organisation which has been stalling the release of new sections since the first quake (and actually long before that) would be so naiive.  It’s his organisation that is the problem and he doesn’t even see this.

You know what the one saving grace in this situation may be? CERA.  The government has created a new agency to oversee the redevelopment of Christchurch.  Why did they do this?  Because the council would be totally inept at doing it that’s why.  So CERA is basically there to get things done – without having to wait for council consent to do so.  Which is very lucky for them, oh how many private individuals and companies would love to be able to circumvent the council in the development process!

Over at the NBR, I saw this article. Subscription required sorry (by the way, it’s well worth the $89 for 6 months of online reading I reckon).  It highlights how the government is having to fast track subdivisions by applying pressure etc.  But the really interesting bit about this article was the comments from people saying things like “It should only cost $30k to develop a section and so developers should be able to sell them for $50k and make a profit” which is just so unbelievably naiive.  You might have been able to do this in the 1960s!! But it’s a lot more costly and protracted process these days.

This was my reply:

You have no idea how much it costs to develop a section.The council costs alone are usually at least $30k per lot.

Reserve contributions, development contributions and other financial contributions demanded by councils and other utility providers are huge these days.

Add in to that the cost of engineering reports (who is going to sign off on these in Christchurch now?), the physical works etc. and you’re quickly up to $100,000 per lot. Now I admit, these are Auckland figures but they won’t be too different in Christchurch. Maybe $75k?

And that is with a zero dollar land value, and zero dollar profit. So those who think cheap sections can be created quickly and easily are dreaming. The CCC are still opposing subdivisions in the environment court!

Add into those costs things like holding costs, interest costs and the situation looks even harder.

So what does all of this mean?  Well I think it’s going to be very hard for people to rebuild in Christchurch – or in fact anywhere in the country. Why? Because of the cost and the lack of labour, that’s why.

I would say you might be able to pick up a section for say $180k, and then if you can find a builder, you could build a house for how much? Maybe another $250k?  So already you’re up to $430,000 and many people won’t be getting that much money from their payout.  Now I guess they might be able to bridge the gap with a bigger mortgage. And the banks are certainly coming to the party on that score with their offers of cheap loans.  See here and here.

But what about materials and labour?  Both of these things are not cheap right now.  I recently undertook a development project and couldn’t believe the cost of materials.  Bulk things like timber, concrete, steel etc. are all dear.  It’s all going to China (and even to Aussie where they are doing a lot of rebuilding after their floods).  And the smaller specialist items like bolts, hinges, door handles are dear also.  And so is everything else like paint, windows, insulation etc.

Builders are probably rubbing their hands together with glee!  They will do very nicely out of all this.  But there is a shortage of them and so the punters are going to have to pay dearly for their services.

And compounding this are the recent changes to the building code.  So this means that any new houses built will have to be built to much higher standards than the old houses these people are walking away from.  And this all just adds to time and cost…

So what does all of that mean? Well I think we’re going to see a lot of people with money in the bank – after their payouts, who can’t afford to rebuild.  And so they are going to be looking to buy existing houses in other parts of the country.  And I think this is going to lead to quite a substantial surge house (and apartment) prices – over the whole country.

So I feel sorry for these people, they are going to be in for a shock I reckon.  But as an investor, who recently built 3 apartments and endured the nightmare that that entails, I say bring on the price rises!

 

Wellington Council Ups the Anti

Wellington buildings put on earthquake notice

HANK SCHOUTEN

Last updated 05:00 23/06/2011
FINAL NOTICE:  Ernesto cafe staffer Marie Groenendijk is unconcerned that she works in a building deemed earthquake-prone.

CRAIG SIMCOX/ The Dominion Post
FINAL NOTICE: Ernesto cafe staffer Marie Groenendijk is unconcerned that she works in a building deemed earthquake-prone.

Wellington City Council has begun stickering earthquake-prone buildings in the heart of the city, ordering buildings to be vacated or giving owners just a few months to strengthen or demolish them.

Final notices have been taped, or are about to be taped, to the front of nine buildings and the council is threatening to serve notices on a further 11 in a move prompted in part by the devastation and deaths caused by the Christchurch quakes.

Council building compliance manager Stephen Cody said the move followed years of inaction by building owners, who had been under notice for up to 30 years that their buildings would have to be strengthened or demolished.

Notices setting a date for properties to be vacated were being posted on buildings where the council had not seen reasonable progress. One of the most prominent and well-patronised is tenanted by Ernesto cafe on the corner of Cuba and Ghuznee streets.

Its notice, posted next to the cafe door last Friday, gives warning that, unless the building is strengthened or demolished, it will have to be vacated by October 30. If that deadline is not met, a red sticker barring entry to the building can be issued.

Rest of Article is here

 

Pretty strong stuff from the council.  I doubt they would have done it if the Christchurch earthquakes hadn’t happened.

Unit Titling Update

The process of unit titling is going along fairly well.

The thing that has been holding it up is the new right of way (ROW) at the rear of the property.  This had to be redone because the existing ROW agreement is not bounded by height and my building goes over it:

So when the unit title plan is drawn, showing the individual units, there would have been a ROW going through the lounge and kitchen area of one of the apartments! Which is obviously no good.  So  a new ROW agreement had to be done.  And the owner next door had to agree to this.  Which he has done now. Phew!  So those documents are being signed right now.

And the resource consent for the subdivision (unit titling is a subdivision) has been lodged yesterday.  The council have 20 working days to process this and no doubt they’ll take all of that and a bit more!  I have my fingers crossed that the consent I get from them will be sensible i.e. not filled up with dozens of unnecessary conditions.

Mirrors Updated

The council have added another mirror (at their cost) to my building.  So it now looks like this:

Phew, this dangerous situation has been fixed! Actually, to be fair, it does improve the situation slightly, but only slightly.  And they made such a huge deal out of it. Also, when the sun is in the wrong position, you can’t look towards it anyway!

The funny thing about it was the team leader from the council rang me up and asked for a favour!  Could the tradesman who was putting up the mirror please have access to my carparking garage? she asked.  So that he didn’t have to carry his tools across the road?  I started to tell her how this could be arranged when I thought to myself “Hold on, you guys have been doing nothing but hold me up for 18 months to 2 years and now you want me to do you a favour???”  So I told her sorry, but the council have never helped me so I am not going to help you.

I hate being hard nosed about things, but really, they just don’t have any understanding at all of what they have put me through over the last 2 years.