Design centre future where timber construction leads the way

from Property & Build: April - May 2022

What good is safety without health?

april- maY 2022 Design centre future where timber construction leads the way

Envisioning a future where timber is used more widely in mid to high rise buildings and contributes to carbon neutral targets, is an exciting opportunity

The tools to make this a reality are now coming together with the launch of the Timber Design Centre.

Te Uru Rākau – New Zealand Forest Service deputy director general Jason Wilson announced the launch at the WoodWorks conference, explaining that the Timber Design Centre aims to increase the use of timber, particularly in structures such as offices, hotels and multi-storey apartments.

The Centre will provide expert advice, research, information and educational resources for those in building design and construction. The services are being shaped directly by industry and the timberdesigncentre.co.nz website has been created to support this from day one.

The Centre’s work programme will be co-designed with a wide range of people involved in the building construction process including developers, designers, council planners and consenters, architects, engineers, builders, building owners, students and researchers.

The Centre is an initiative between Te Uru Rākau – New Zealand Forest Service and a consortium comprising Scion (Crown Research Institute), the Wood Processors and Manufacturers Association (WPMA), New Zealand Timber Design Society and BRANZ.

The consortium explains that the greater use of timber in construction provides an opportunity for the sector to support the Government’s commitment to be carbon-neutral by 2050, whilst realising the broader economic and wellbeing benefits of including wood products in multi-storied buildings.

Scion sustainability architect Andrea Stocchero says the world is on a quest to decarbonise and many people don’t realise New Zealand’s built environment is responsible for about 20 percent of the country’s carbon footprint due to the emission of greenhouse gasses over the full life cycle of buildings. This includes embodied emissions of building materials and products.

“New Zealand can maximise the use of sustainably sourced, locally grown and manufactured wood products.

“Trees sequester carbon from the atmosphere while they’re growing, and as long as the wood is in use, that carbon is stored so

it’s not going back into the atmosphere. If the timber is sustainably certified it means that the forests are re-growing after each harvest, and the carbon sequestration cycle continues,” he explains.

Timber Design Society president Dr Daniel Moroder says the time is right for New Zealand to have a dedicated timber knowledge centre which provides advice and guidance on timber construction.

“Over recent years, the interest in engineered timber construction has increased significantly and we now need to ensure that clients, designers, contractors and authorities have all the information they need to build efficiently in timber.

“The centre aims to bring the timber industry together and to provide answers to all current obstacles we encounter during the design and consenting process of timber buildings,” he explains.

WPMA chief executive Stephen Macaulay says technological advancements in wood manufacturing provides an opportunity to accelerate the use of engineered mass timber products in medium to high rise buildings across New Zealand.

“The Centre has a key role to play in promoting greater use of an expanding range of timber products available to the construction industry. Greater use of locally harvested timber products in apartments and offices not only significantly reduce the carbon footprint of these building structures, it also offers the natural characteristic of comfort and warmth to occupants that are rarely found in other building materials.”

BRANZ General Manager of Research Dr Chris Litten says the development of the centre has been a true collaboration between Government, industry and the research community.

“We are excited by the role the Timber Design Centre will play in challenging the construction sector to produce healthier and more sustainable buildings. BRANZ is proud to support the work of the Timber Design Centre in providing evidence-based information for low-emissions construction.”

The Government is funding the Timber Design Centre as part of its Fit for a Better World roadmap and is one of several key initiatives under way this year to help transform the forest and wood processing sector.

Te Uru Rākau New Zealand Forest Service programme delivery forest science lead Emily Telfer showcases the new timberdesigncentre.co.nz website

The Timber Design Centre encourages and facilitates greater use of timber in the design and construction of all building projects. It has a particular focus on non-residential buildings and multi-story residential buildings. Visit www.timberdesigncentre.co.nz

After an initial four to five month period of housing uncertainty, the policy changes that were aimed at supporting the real economy – e.g. official cash rate cuts, quantitative easing, wage subsidies – also indirectly boosted the property market.

Of course, direct measures such as the removal of loan to value ratio speed limits also played a key role, and since August 2020 the average national property value has risen by 41.6%, or $307,245.

By territorial authority area, three have seen postCovid growth in average values in excess of 60% (Wairoa, South Wairarapa and Tararua), another 16 have had increases of at least 50%, and only one has been less than 25% (MacKenzie at 16.4%). In other words, it’s been a large and synchronised boom, reflecting common drivers, including low mortgage rates and tight listings.

That upswing is now quickly giving way to a sharp slowdown, and as affordability constraints bite, mortgage interest rates rise, and credit availability tightens, outright falls in property values in some parts of the country could well be on the cards in the coming months. In other words, we now seem to be quickly shifting into a ‘buy-

What have two years of Covid taught us about property?

It’s been a bizarre period for the housing market ever since New Zealand entered its first lockdown on 25 March 2020, with predictions of large falls in property values turning out to be way off track, CoreLogic Chief Economist Kelvin Davidson observes

er’s market’.

What do the figures show?

If we start with a simple comparison of apartments to flats, flats (think townhouses or terraced dwellings) have seen stronger growth in values.

In fact, apartments in Auckland City, and the North Shore too, have been relatively subdued, only seeing growth in median values of 5-10% over the past two years. That’s likely to have reflected the particular pressures in those areas from the absence of foreign students and the weak short-stay accommodation market (without tourists).

But in dollar terms, the levels are still pretty high – a budget of $700,000 would get you an apartment in Auckland City, but none of these other property types/ locations. Indeed, a flat on the North Shore is now pushing $1m.

Apartments vs flats postCOVID % change in median values

Switching to a comparison of flats to houses, it’s generally the case across the main centres that houses have seen stronger growth – and also that Christchurch, Tauranga, and Wellington have been the most buoyant locations in absolute terms.

However, that’s not universal, with flats in Christchurch and Dunedin actually seeing slightly

larger increases in median values than houses.

Switching to values themselves, for any given budget, a flat is going to be more attainable than a house, with the smallest value gap (Dunedin) still standing at more than $170,000. It’s the only main centre where the median house value is still less than $700,000 (at $657,323), but flats are lower still, at $484,461. By contrast, in Auckland City, the increase (or value gap) to go from a flat to a house is far larger, at $747,684.

Around the main urban areas (i.e. the next tier of towns/cities outside the main centres), all have seen strong growth in values, regardless of property type – e.g. even Queenstown flats have gone up 23% – but there’s been a more mixed post-Covid experience in terms of the relative growth for flats versus houses.

In Whangarei and Queenstown, and to a lesser extent Invercargill, houses have outperformed flats. But the opposite has been true in Hastings, Napier, Kapiti Coast, New Plymouth, Palmerston North and Nelson.

So what has been learnt (or re-learnt)?

• Apartments often tend to lag behind the other property types, seeing smaller rises in value than houses (and flats) during upswings, and sometimes bigger falls in downswings. The reasons for this differ from cycle to cycle, but the end result is typically the same. In the post-COVID world, excluding apartments in

Auckland City and North

Shore, all other property types and locations have seen large increases. • Housing market booms aren’t necessarily always

‘good’ for many owner occupiers, in particular those looking to trade up to a bigger property. For example, over the past two years, many would-be movers have been stuck where they are, either because they’ve had little suitable stock to choose from (listings low), or the financial/equity gap that needs to be closed in order to make the move has been too great, as the

‘next homes’ have sometimes risen faster in value than theirs. • Credit availability and cost matter more for the market over shorter horizons than other ‘fundamentals’ like population growth or housing stock changes – indeed, without net migration in the past year or two, and with new housing supply also strong, property values have still soared.

Why? We’ve had low interest rates and mortgages have been relatively easy to get, especially while the

LVR limits were temporarily removed from April 2020 to March 2021. • Low interest rates have a two-pronged influence on housing – making it cheap to borrow, but also reducing the incentive to hold cash in the bank. The post-COVID outflow of money from term deposits and into property highlights once again that kiwis need more ‘trusted’ investment options, and perhaps carrots to look at them rather than sticks for property. For example, tax breaks on KiwiSaver deposits could be an option. • Housing affordability measures help to tell us where the market currently sits (relative to history, and certain regions against others) and unaffordability is clearly a handbrake on price growth over time.

But these measures don’t necessarily tell us that the upswing will end when the house price to income ratio reaches X or years to save a deposit hits Y – nor how the adjustment back to ‘normal’ will play out. Take years to save a deposit for example. It peaked at 9.4 in Q4 2016, a mark reached again in late 2020/early 2021. But the latest upswing then rolled on through 2021, simply extending that measure ever higher.

Soaring inflation to stunt housing construction

Building consent numbers will likely peak in the first half of 2022 – if left unchecked, the issues of housing supply and housing unaffordability could worsen significantly this year, Brad Olsen from Infometrics warns

Annual inflation in the year to the December 2021 quarter was 5.9%, well outside the Reserve Bank of New Zealand’s target of keeping inflation between 1 and 3% on average over the medium term.

Statistics New Zealand advises the main driver for this high annual inflation rate was the housing and household utilities group, with prices for construction and rentals for housing increasing. Prices for construction of new dwellings increased 16 percent in the December 2021 quarter compared with the December 2020 quarter.

The Infrastructure Commission’s latest Infrastructure Quarterly report shows that construction costs jumped by more than 10% in 2021, and similar increases are forecast for 2022. The increase represents the most rapid growth in prices since the Global Financial Crisis. The Infrastructure Commission’s report is available here.

While the Organisation for Economic Co-operation and Development (OECD) has projected inflation would fall back to within the Reserve Bank’s target band by 2023 in its 2022 Economic Survey of New Zealand, that will come at the cost of higher interest rates.

The high inflation and rising interest rates mean that already high construction costs will rise even further, forcing developers to put some projects on hold as commercial feasibility evaporates.

This combined with factors including skills shortages, supply-chain bottlenecks, Covid-19related shutdowns and reduced ability to secure a residential mortgage create a perfect storm for a slump in the supply of new residential dwellings and general construction activity.

Study explores climate change’s effects on property

Exacerbated flood risks associated with climate change will affect future property values in vulnerable areas as the intensity and frequency of flooding increase

University of Otago researchers have launched a vital study into climate change that will leverage CoreLogic NZ’s property database to learn how future coastal flooding could impact residential property values.

CoreLogic joins the Reserve Bank of New Zealand as key partners on the three-year inter-disciplinary Strand Marsden Fund Project, which will help the top-tier research institute fill a knowledge gap around geographical information systems, geology, climate change, real estate and potential banking losses.

Since both property and financial markets are forward-looking, understanding the interplay between increasing flooding hazard, related financial losses, and when those losses will occur, has profound implications for homeowners, banks, insurers, and the stability of financial systems.

The associated risks are long-term and susceptible to the ‘tragedy of the horizon’ in that current decision makers fail to fully account for future risks.

The research framework learns from Māori traditions of considering multiple generations in decision-making and Māori investment principles where environment and people are integral to a systemic view of investment decisions.

Accordingly, this research will explore to what extent, and when, increasing flood frequencies will impact property values in New Zealand’s coastal cities given that markets are forward looking and have imperfect information.

Further, they will examine if there are flow-on effects of these losses on the stability of domestic banking system. New approaches to answering these questions will be adopted by an interdisciplinary team of experts in geographical information systems, geology, climate change, real-estate and banking.

CoreLogic NZ Country Manager Simone Moors says the partnership provided University of Otago academics with access to approximately 30 years’ worth of housing data, providing researchers with extensive and timely property information.

“By supporting such critical fields of academic study, we’re acknowledging the important role this partnership plays in supporting climate change research,” she says.

“Through study, academics have the potential to implement change, inform property and policy decisions and potentially improve climate-related risk management practices.”

CoreLogic NZ Head of Research Nick Goodall says it was critical to support research into property and peripheral sectors such as banking and finance, property development and valuations, and public sector policy.

“Our strength lies in the power of our data – we bring together hundreds of diverse data assets, which we clean, match and synthesise. We offer our clients the most comprehensive property-level insights available in New Zealand,” he says.

“Providing academics with access to one of New Zealand’s most authoritative sources of housing statistics and housing-related data provides an opportunity for innovative research that will explore new methodologies, test theories and investigate the relationship between housing markets and other factors such as climate change.”

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The system has a standard AOC (Advanced Overpressure Control) unit fitted in cab, with an optional PPM (Particles Per Million) readout function for hydrocarbons.

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View the case study here