Havelock has run out of sections

Published HBT 18 July 2016

Recently the Hastings District Council arranged a “building industries forum on residential land supply”. It seemed mostly to be a PR exercise by council officers to mollify the concerns of the local building industry over the perceived shortage of building sites especially Havelock North. The council maintains there is no shortage, but nearly 100 industry representatives surely can’t be wrong. 

Residential land development is a long convoluted process made more difficult by the Heretaunga Plains Urban Development Strategy or HPUDS which attempts to control the erosion of productive land by urban development.  Because of the time it takes to get bare land to the stage of being available for housing, wise and timely planning is essential, and its clear council has scored an own goal by failing to take the industry’s views seriously when the issue was bought to Council’s Economic Development Committee over 18 months ago. 

The problems are two fold. Council predictions are based on past averages but the market is cyclical so when demand accelerates as is now happening, supply may be inadiquite. Additionally in Havelock North the odour coming from the mushroom farm has resulted in the Arataki Extension being put on hold though the problem has also been known about for a long time. 

One solution is to develop Brookvale Road but unfortunately there is currently no structure plan so it will be at least a couple of years before anything happens, assuming landowners are interested. A second area is to the south of Havelock North between Te Aute and Middle Roads is more promising but will also be subject to a delay of at least 12 months and probably longer. 

Effectively Havelock North has run out of sections and there are also delays in bring more sections to market in both Northwood and Lyndhurst.

Council seems to think if no building consent has been issued then an empty section is available for someone to buy, but this is quite wrong. It’s possible the section owner has purchased the block with the intention of building at some undefined time in the future. Alternatively an empty section could be part of a builders supply chain to ensure as work on each dwelling comes to an end construction can commence on the next dwelling. This means builders must have a continuing supply of subdivided and serviced residential land. Larger building companies may be committed to buying a significant number of sections even though it may be some time before they are all built on. The reality is an empty section can only be assumed to be available for sale if council approaches the owner and confirms its availability. 

Nor is it realistic to assume that if a handful of sections are unsold there are still sections available for everyone. We live in a market economy not some Eastern European controlled economy. Not every section will appeal to every buyer. Yet it is important there are enough sections so all buyers can be satisfied. 

It is essential there is a good supply of sections. Single dwelling residential construction is a hugely important economic driver here in Hawke’s Bay as elsewhere with many individuals and businesses involved. If council does not ensure enough land is available, and  in the right areas, then millions of dollars of privately funded spending will be denied to the local economy. Shortages will also result in less competition and both higher section prices and land banking is likely to occur. Conversely if a developer thinks prices will be stable because of adequate supply they will be keen to move their sections to market. 

Council seems concerned  it will be left owing the money it has borrowed for infrastructure if it does not collect the development contributions. This must have happened in parts of Flaxmere where council owned sections have been unsold for decades but record low interest rates at present minimises the risks. The proposed 260 sections in Howard St will require $3.3 million for infrastructure, and the interest on this money at say 5% is just $165 000 a year.  When compared to the $750 000 cost of the free Hastings CBD parking trials, or the million dollars already spent on Civic Square, neither of which has provided any economic benefit, the risk on residential development seems affordable.  

Hawke’s Bay is a great place to live but in terms of population we are nearly the slowest growing region in the country. One of the reasons for this is a lack of well paid permanent jobs.The Hastings District Council invests heavily in economic development so clearly believes it has an important role to play yet seems willing to permit a damaging shortage of residential sections to happen.

At last weeks Horticultural Field Days in Hastings BNZ economics guru Tony Alexander suggested Hawke’s Bay will not share in New Zealand’s rapidly growing economy. He also predicted the current housing boom would run out of steam by the end of next year, as interest rates started to increase again. It would be a great shame if lack of timely action on residential development by the HDC further impacted on our well being.