Auckland house prices have peaked — Len Brown

Len Brown says signs that Auckland house prices have peaked as more apartments and affordable houses are built
 
However, he acknowledges the 8000 to 10,000 houses a year currently being built are short of the 13,000 to 15,000 a year needed in Auckland. Last month saw yet another net immigration record, with Auckland accounting for most arrivals.
 
Wellington Mayor Celia Wade-Brown is willing to tap into city’s economic fund to help keep the Phoenix football club in the capital.
 
She says Wellington is interested in “free pandas” and would pay for the bamboo if central government provided the pandas.

Ms Wade-Brown and Christchurch Mayor Lianne Dalziel says they will “probably” stand for re-election in Wellington and Christchurch.

Mr Brown promises a statement “soon” but hints he might not stand.

“I've been the mayor, by the end of this term, for nine years. And I mean, it's been brilliant, but it is hugely challenging, and also hugely challenging in your personal life," he says.

All three mayors reject a Productivity Commission recommendation that government should set price threshold at which councils would be forced to release more land.
 
Ms Dalziel calls on government to take the lead in preparing for sea level rises due to climate change. She asks why councils should have to do the research and have the “hard conversations with people”.
 
Mr Brown says only way he can see Auckland transport system improving “is through something like a motorway toll."
 
Ms Wade-Brown would like other ways to raise money beyond rates. "A wider tool box would be useful," she says.
 
Mr Brown says Auckland sells around $100m of surplus property each year, but he won’t sell strategic assets

RAW DATA: The Nation transcript: Lisa Owen talks to Auckland Mayor Len Brown, Wellington Mayor Celia Wade-Brown & Christchurch Mayor Lianne Dalziel

Watch the interview part 1 here and part 2 here

isa Owen: Good morning to Len Brown, Celia Wade-Brown and Lianne Dalziel. Do you need a name change for this morning, Lianne? You’re the only non-Brown mayor. I want to start by asking you all very briefly what you think the biggest challenge is that is facing your city. Lianne?
Lianne Dalziel: Well, I guess mine’s obvious, and the challenge facing Christchurch is how we continue the rebuild and recover after the series of earthquakes that we experienced. But, you know, as others have said, you never let a serious crisis go to waste, and it is an opportunity as well, and we are seeing some incredible opportunities emerge, and, of course, the latest conversation that we’ve been having with central government is how do we transition from recovery into a regeneration conversation, which I think is much more exciting for the city.
All right, we’ll talk about that a bit more. Celia, what’s your challenge?
Celia Wade-Brown: We want to increase our economic growth while making our wonderful, sustainable, compact city even better known globally. We are not a huge city. We’re 200,000 people living in Wellington; 500,000 in the greater region. But we still do things pretty well. We are number 12 on the Mercer Quality of Life, and it’s really good to see Auckland there at number three. I think we’re working really well as the cities together. We’ve been to China together. We’re collaborating on resilience. New Zealand’s too small to waste time competing with each other.
Len, where do you start? What’s your biggest challenge?
Len Brown: Well, we’re growing at 2.9% population at the moment, and so managing that population growth, which is about an extra 43,500, and over the last five years, so we’re just celebrating five years since the Supercity was established, we’ve grown a city the size of Dunedin. So that’s a challenge in itself. But in beside that, of course, the big challenge – sort the transport out. Get a full integrated transport system into place, really build a great public transport system and an active transport system in beside that with cycling. And I think we’re doing that, but there’s a lot of further action yet to go.
Because some people would say housing is one of your big problems, isn’t it? You’ve been dealing with a housing crisis. Are there signs that prices in Auckland have peaked?
Brown: Yeah, I think there are. And, yes, it is a challenge, because purely of that population growth, and in the fact that during the last GFC we were only building 1,000 houses a year, so basically, people stopped buying and the builders stopped building. So now we are at about 8,500 extra consents a year, half the houses we’re building are apartments, which is great, so we’ve got choice, and the fact that we’re building those apartments and the types of terraced houses means that we’re building in a more affordable range. So greater choice, more range, and that will help to moderate the prices.
So you think that price is stabilising?
Brown: I think so, yes.
But the thing is you’ve still got shortfall, haven’t you? Depending on whose estimates you take, up to 30,000 houses short.
Brown: Look, if you’re talking about a three to five year time frame, that would be right. But if you also listen to people like the Finance Minister, he’s talked about a surplus coming at us, so we have a bow wave.
No, but we’re talking about right now. If you look at even your own housing project office estimates, you’ve got a shortfall, and it’s big.
Brown: Yeah, and we are working off the base of very low build. So, as I say, we are building probably in the vicinity of 8,000 to 10,000 houses at the moment a year. We need 13,000 to 15,000. So ourselves and the government, under the Housing Accord, are doing everything we possibly can to provide the opportunity for the private sector to do those building.
All right, let’s bring Celia back in. Celia, the thing is you’ve actually got a kind of different sort of issue in some ways. Your house prices fell in the last quarter – just a little bit, but they did fall. How do you get people to move to your city? Because you talked about economic growth.
Wade-Brown: Well, we’ve got about 1% population growth per annum, and most of that is in the central city. So that makes it much easier. We’ve got many more apartments being built. We cheered up Victoria Street, so we’ve now got more apartment buildings there. We’ve agreed Special Housing Areas for some fabulous areas like Shelly Bay. And we’ve just won an award last night for the wonderful Clyde Quay Wharf. That’s a very much a top-end apartments, but we’ve been doing up the social housing as well. And we need that.
You need people to move in, and you’re encouraging Aucklanders.
Brown: Absolutely.
Wade-Brown: We’ll have some Aucklanders, that’s fine.
Brown: And to be fair, we are shedding population the same time that we’re taking it on, so two-thirds of our growth is from migrants. And in some of your recent television coverage, we’ve seen a number of Aucklanders turn up in places like Bay of Plenty and Tauranga.
So are you happy for Celia to be encouraging people to move out of your city?
Brown: In the end, the government’s trying to do it also with some of their policy settings around migration.
Wade-Brown: You get more points if you settle outside of Auckland. But we’ve all written and said that we can accept more refugees as well, so it’s not only the high-earning, high-skills people that are welcome.
Lianne, is Auckland’s size an issue, do you think?
Dalziel: Well, no, I think this is a global issue. I’ve just returned from a conference in London, and that was the City Lab conference, and what they identified there is that this is an issue in all major cities throughout the world, and it’s an issue in Christchurch as well. And we may not be the same size and scale as Auckland, but we actually do have the same issues. But with the challenges that we face, we actually also face an incredible opportunity. Something that our region had actually worked on prior to the earthquakes happening was an urban development strategy which actually looked at land use across ourselves, the Waimakariri District Council and the Selwyn District Council as well. So in many respects, the work that we had done in the years before the earthquakes occurred actually enabled the government to move quite quickly in terms of land use recovery plan. We’ve had an ambition to increase the size of our CBD area – the four avenues, as it were – within Christchurch by over 20,000 people out to 2041. What we’re going to have to do is hit the fast-forward button. We need people living in our central city. We need people living there because it will activate the city. It will make it a vibrant and exciting place to be. And it’s the central city that really has been the focus of the growth. You have to remember that we’ve lost over 7,000 properties through the residential red zone since the earthquakes.
You’re talking about land use there, and I just want to ask you all before we move on from housing – the Productivity Commission reckons that when land prices hit a certain level, the government should be able to step in and make you guys open up more land. So are you happy to give up control of city planning?
Brown: No. Otherwise, what are we doing in it? I mean, I think it’s quite clear, and, you know, the Productivity Commission actually made some quite good recommendations, but that was not one of them.
That’s not one you want a bar of?
Brown: No. Look, and the way for us to do it, and it’s worked well for us given the special challenges that we have around the issue of growth and trying to get upward growth in particular to deal with some of the issues that Lianne has been talking about where you have concentrations of population to enable better movement of transport. We’re doing that under a Housing Accord. And even if there are disagreements, we do them within the accord and do them in a way that’s much more mature than slagging each other off on TV.
Let’s see what the other two think.
Wade-Brown: I do think you have to have the dense urban centre, and our Special Housing Areas…
Are you happy to give up that right, though?
Wade-Brown: Not at all. We need to have a really good planning. It’s far too expensive to build a cheap house on the outskirts. It’s expensive for infrastructure. It’s expensive for transport. It’s short-term thinking.
Lianne? Would you be happy to turn that power over to the government?
Dalziel: No, and I don’t think that it needs to be. I actually think that we can work in a far more collaborative model around finding the solutions. Because you cannot create new subdivisions miles away from hubs, from transport centres, shopping centres, services. All you do is you create isolated areas. They’re not even communities. If they haven’t got a place where they can come together, where they can have recreation, shopping, those sort of things… If you have to jump in your car to go and get a Sunday paper at the dairy, there is something fundamentally wrong with the planning rules.
Let’s talk about rates, then, because everybody likes to talk about rates, and we’re always having a furious debate about the rates rising. So are rates just not enough anymore to pay for what you need to? Why aren’t they?
Brown: So, let’s talk about the problem with rates, because I think this is critical. The problem with rates is that there’s no connect between or very good connect between what you are charged and your ability to pay that, and so rates is a regressive tax where you pay according to how much your land value is. And that works for some people, but for the elderly in particular, where their income has flatlined once they get past 65, generally, and their property values continue to go up, they’re paying more rates against a flatline…
I get that, and lots of people at home will, but I’m wondering why you keep needing more and more money. Why is it that you’re not able to cover your costs?
Brown: And by and large, you do. So I think most of us sitting around the table here operate their rates increases or they increase their rating revenue under 5%, but for example, for us to deal with the specific challenge of underinvestment in transport and the massive infrastructure spend that we’ve got to make to deal with our challenges of getting the city better moving, the only way that I can see forward, and my colleagues might disagree with me, is through something like a motorway toll.
Yeah, well, so do you think – the other two mayors – do you think that you need other taxes, other forms of revenue like motorway tolls, like levies, that you can get your ratepayers to pay?
Wade-Brown: I think a wider tool box would be useful. I think it’s not—you wouldn’t necessarily use all of them. One of the things that we have a challenge with is getting our share of the economic growth that’s come from city council investment. So if we put in the airport runway extension, if we put in the Film Museum, if we put in the convention centre, to recoup that purely from rates is quite a challenge.
Lianne?
Dalziel: Well, obviously, we have the additional challenge of rebuilding the city, and the conversation that we had with Central Government – obviously the council did before I was elected to this position – tried to look at what was a fair share that could be transmitted to the taxpayer as opposed to the ratepayer. But I have to say that I’m the only one that’s sitting at this table that’s had the experience of being in central government and in local government, and I have to say I almost wish I knew back then what I know now. And that is that central government does put some obligations on local government, and they don’t consider the impact that that has on how that’s paid for. So quite often, you know, Parliament will debate an issue, and they’ll say, ‘Well, actually, the local council should determine that issue in consultation with their community.’ But they don’t take into account how much it costs us to put in place a by-law, how much it costs to enforce it, and actually the impact that that has on the rate-paying base of these smaller areas. I’m faced with the challenge of coastal hazards at the moment, as are everyone else, so…
We’re going to talk about coastal hazards after the break, but this is an opportunity for us to take a quick break.
Welcome back. I'm talking with the mayors of our three largest cities: Auckland's Len Brown, Wellington's Celia Wade-Brown and Lianne Dalziel from Christchurch. Before we went to the break, we were talking about climate change. The reality is, all of your cities may partly be covered by water in the years to come. What are you going to do about it?
Dalziel: Well, this is why I wrote to the Minister of the Environment after he was elected to this position last year, and I said, 'I think this is crazy that Christchurch leads the way on this. You know, we actually have been through a significant event and people are seriously challenged, particularly in these lower-lying areas of our city that are more exposed than they were before. Because our land did drop, and in some areas by 1.3 metres. That's significant. I mean, we've probably mimicked in a short period of time, a matter of seconds, the impacts of potential climate change.'
But house owners are stopping you dealing with that, aren't they? In terms of the LIMs. Marking up LIMs. There was a resistance to that because, of course, it's going to lower house prices.
Dalziel: No, no. I think that the real issue here is that in terms of the scientific research, and this is the point I was making before the break, the Government really should be leading the way in terms of this. Why should individual councils have to get their own independent reports? Why should they have to get them peer reviewed? Why should they then have to have the hard conversations with people about what the potential future might bring? And when we're talking about advice that goes on LIMs, it's simply notifying the information that we have available to people. And I would rather that central government took a leadership role in this area and got the information that we could all rely on. I understand that the Parliamentary Commissioner for the Environment is not far off her next report, and I'd say let's wait until we have that.
Wade-Brown: But I think there's the other issue is not just reacting to sea-level rise, but all of us doing what we can to reduce the emissions. And cities are showing incredible leadership in that. Our greenhouse gas emissions have gone down despite population increase, and economic growth. We've got one of the biggest, the most productive wind farms, and our buildings — we're working together with about 25 different building owners to reduce energy.
Yeah, but people are worried about their house prices now, aren't they, and it's political dynamite, or political suicide, depending on what decisions you make. Would you want to hand it off to—
Wade-Brown:  We need to have shared scientific advice, but the decisions about how best to deal with different beaches, whether you plant them, whether you put back a sea wall, whether you have a bigger sea wall, they are going to be specific to different communities.
Dalziel: It's democratic decision-making because it's not just about identifying the hazards, it's actually identifying the nature of the risk. And you don't have to respond to risk by retreat. You don't have to respond to risk by mitigation. You don't have to respond to risk by adaptation. But you will have to respond, and it will be one of those three options. You'll mitigate in some way. So we have higher floor levels for our houses in areas that are exposed to flood risk. There are adaptations. There are different ways that we can put in place. There are different types of buildings that are able to be moved if they need to be. You know, there are all sorts of things that we can have a deeper conversation about, but if we don't have an agreed position on the science, then that makes it extremely challenging for individuals who live in our coastal suburbs, and they live in all of our cities—
Wade-Brown: Which is why they choose to live— but it's not just the sea-level rise, it's the increased storms and the amount of rainfall, so we actually have to manage our storm-water systems.
We need to move on. Sorry, cos we've got a few things I need to cover.
Wade-Brown: Storm water and sewage are interesting to mayors. I'm very sorry.
We are going to cover off some other issues. Lianne, the Government's pushing ahead with the Christchurch Regeneration Bill. Your old party says it gives too much power to Gerry Brownlee. He keeps that power for the next five years. Doesn't that stick in your craw?
Dalziel: No, it doesn't because what this is doing is enabling a conversation to occur around what happens after a recovery situation in a city faced with what we've been through, and so—
But he decides how that conversation ends, surely.
Dalziel: No, no. Things have changed. So I think that there is a bill that has been introduced, and we are still talking to central government about it, and there will be changes, I think, made to the bill as it goes through. But it's who initiates the regeneration planning process that has fundamentally changed. It is initiated by Regenerate Christchurch, which is jointly appointed by government, and the fact that it has an independent board that then is reporting to the government but is not... and reporting to council in equal terms, I think has changed the landscape, and offers the potential for other cities to enter into a collaborative relationship with central government.
All right. Len, I want to ask you about the review of Auckland assets, which is currently underway. You've previously promised that you will not sell off strategic assets. But is it time? Has it come to the point where you do need to sell a few things?
Brown: Look, I absolutely am committed to those promises - that's particularly the airport shares and the port shares. We own our port one 100%, and we own our port about 22%.
But what about some other stuff that you could afford to sell off?
Brown: Hang on. We've seen 100% increase, really, in the last five years in the capital value of those two shareholdings, so that's the first thing. And last year, we received, as ratepayers, $95 million worth of dividends. So for me, as a commercial benefit alone, they're great as an investment for our community. Secondly—
What about things that you don't think are strategic assets? Could you afford to sell some of them?
Brown: We're doing that already. Every year, we sell down about $100 million worth of property that's surplus to requirements. We have a property portfolio, Aucklanders, of around $2 billion. And so we are selling in a strategic way about $100 million of that every year to off-set our need to borrow. And so that $100 million goes into buying other assets — libraries, pools, footpaths, whatever.
It's something you're doing. Celia, are you keen on pandas in Wellington or not?
Wade-Brown: (LAUGHS)
Because the messages seem to be a little mixed.
Brown: I'd like some pandas.
Wade-Brown: We're very keen on free pandas. If the Government was going to provide pandas, we'd be delighted, I'm sure. The question is — who would pay and how much? We've just opened the most amazing exhibit, the 'meet the locals' at the zoo.
So you're not prepared to kick in any money for the pandas, but you'll take them if they're on the Government's ticket?
Wade-Brown: We'd be very happy. We would provide the bamboo, I'm sure.
Brown: (LAUGHS)
All right. Well,—
Brown: That sounds like a good deal — bamboo for pandas.
On another subject. Sorry, Celia, I just want to ask—
Wade-Brown: We have had conversations—
I just want to ask whether you'd kick money in to help the Phoenix survive.
Wade-Brown: We already work very closely with the Phoenix. We're looking at some high performance facilities, and I have got my little Phoenix shirt. Sorry, I put the other side first.
Brown: Excellent.
But no money for them?
Wade-Brown: We've got an economic development fund that, if it stacks up, we will support. And I am expecting both Mayor Brown and Mayor Dalziel to support keeping the Phoenix in the A-league.
All right. Very quick question, Len — transport. Phil Goff reckons that Transport Accord, all that's going to do is stop something for another year. Is he right? Have you played into the Government's hands with that one?
Brown: Oh, look, there's a number of views on this. But if there was one thing that we needed to do after five years, was really get very clear understanding with the Government, sit with them and all of the agencies to stop the argument, and be very clear on a line — what we want to do in terms of investment into Auckland transport. So for me, putting aside the city rail tunnel, the Waterview tunnel, the second harbour crossing, all that, this will actually be the deal that will open up all of the investment. A very clear message from the Government and the Council to the business sector in our community, we are united in the way in which we're going forward to deal with the problem of transport in Auckland. It is exactly the right thing to be doing.
All right. Very quickly before we go, who is standing at the next election? Lianne?
Dalziel: I haven't quite made up my mind yet. Obviously, when you take on the role of mayor in a city like Christchurch in the situation that it's in, you do want to see things through. And I guess, in many respects, it will depend on where we're up to, the Regeneration Bill will be passed in April next year.
So probably yes? So probably yes? You're leaning on the side of yes?
Dalziel: Probably leaning on the side of yes.
Celia?
Wade-Brown: Probably yes. There's lots of great projects I want to see through — film museum, making the war museum permanent, seeing that jolly plane land direct from Asia.
Len Brown, are you standing next— ?
Brown: I'll probably make a statement soon.
Okay, well, what would stop you from standing? Phil Goff?
Brown: Look— (LAUGHS) I've been the mayor, by the end of this term, for nine years. And I mean, it's been brilliant, but it is hugely challenging, and also hugely challenging in your personal life. And so I will be making a decision and a statement soon.
Could you beat Phil Goff?
Brown: Oh, I'm not going to get into that. I mean, the one thing I will say, and my colleagues will agree with me here, is that these roles are challenging and to anyone who wants to put their hand up for this job, I say the very best to you, whether I'm competing against you or not.
All right. Thank you all very much for joining us this morning.