Is it possible to build a house for under $220,000 in New Zealand?

We know that it is very expensive in Auckland to buy a home, even if you are to consider a starter home which is probably of most interest to first home buyers, unless you had just won Lotto. Contributors to the Making New Zealand forum have quotes from China on how much it would cost, and this article breaks it down at a high level, followed by some comments on what it take to bring this too reality.

Now, buying from China probably, for a lot of us, increases our skepticism. While of course I can't promise or guarantee anything, and am not promoting one particular company in China over another, the example I want to use today comes from a company that has been in the steel framing business since 1979, and their houses have been around for roughly 10 - 15 years.

The table below shows an actual quote, along with estimations for the non-materials aspects.

What this actually delivers is a 2 storey house of 120 square metres in total with 1 living area, 3 bedrooms and 2 bathrooms.

Here are the plans:

If you compare this to a starter home in the 1930s (shown below), it is not that far off what was typical back then. Now, living standards have improved since then which is reflected in this starter house, but it does make it realistic to achieve the build at a good price.

What I have called as "local charges" is the cost to get building consent, CCC and other related costs. It can be said that the risk of these houses, designed in New Zealand, steel framed with fiber-cement board with water proofing material, are lower risk, thus making it fairly straightforward to get the construction side completed. A variety of designs could be drawn up to avoid too much of a 'cookie-cutter' approach.

If buying from China makes you reluctant, it is worth pointing out that that a lot of our components (plumbing, electrical materials) are made in China anyway. The important thing to look at is the price. It pays to avoid going for the cheapest price which sounds attractive, but can cause problems. In addition, why don't we import from America. One example is Mobile Homes direct 4 Less where materials for a complete starter home range from US$11,000 - $US$110,000.

If we were to translate this to the New Zealand context, and select a house budget of around $40,000 then it would be virtually impossible to do it for less than $300,000 because the remaining components - land and fees - are not cheap. I am not advocating that these are the only types of homes that should be available for people to buy here, but because our homes have become so expensive we tend to think that they are not worth it. Who wants to spend $600,000 on something so simple? If we were to look at it from another perspective, those on median and minimum wages would find a $80,000 price tag quite attractive as it leads to a 25-year mortgage with monthly repayments of $498. That where we need to start at.

The reason we don't see more of this is because our here in New Zealand banks and government come up with an ingenious number of other ideas - cheaper structures, higher density building allowed, increased crowding within existing floor space, waiving/abolition of fees, subsidies, cheaper credit, tax breaks for housing. While all of these might be nice ideas, in practice what happens is, according to Phil Hayward, "land will always rise to take up any slack introduced anywhere else into the system with the “intention” of making housing cheaper". Now, "intention" has to be in quotes here because the cost of the land has trumped all of these for a while.

To bring this to reality, what I believe we need is a realization that our land prices are inflated and a willingness by land-owners, Council and Government to bring about the right environment in which the land is more in tune with the real economy. Of course land supply is part of this picture, and for those who want to have less land because they prefer to live closer to public transport options and amenities, then the price should reflect that, i.e. cheaper. It's about a both intensive and extensive scenario, not an either sprawl out or build up.

Thanks to Phil Hayward and others who contributed valuable information to this article.